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Daniel B. Ravicher
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Daniel B. Ravicher is a registered patent attorney who frequently consults with investment banks, hedge funds, and individual investors on legal issues that may materially affect the value of publicly traded companies. In addition to private consulting, Mr. Ravicher also regularly publishes... More
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  • Carl Icahn, Banks Sued For Aiding And Abetting Herbalife 1 comment
    Mar 13, 2013 11:28 AM | about stocks: HLF, BAC, JPM, WFC

    My February 5 article discussed how parties providing substantial assistance to Herbalife (NYSE:HLF) may be liable for aiding and abetting a fraud if Herbalife is a fraud and they were aware of that at the time they provided the assistance. I also stated:

    Recent purchasers of HLF shares may be especially exposed to personal liability if they purchased shares after becoming aware of the facts that suggest Herbalife may be a fraud.

    This morning, I filed two lawsuits in the United States District Court for the Southern District of New York in Manhattan against parties who are aiding and abetting Herbalife.

    First, I filed a complaint as a shareholder of Bank of America (NYSE:BAC), JPMorgan Chase (NYSE:JPM) and Wells Fargo (NYSE:WFC), bringing a claim on their behalf against their directors and officers for breaching their fiduciary duty by failing to cease aiding and abetting Herbalife. Specifically, these banks are continuing to provide Herbalife with a critical line of credit that is material to its operations. I ask the court to order the directors and officers to cease all aiding and abetting of Herbalife, including by withdrawing their line of credit thereto. The case of Ravicher v. Moynihan et al. is number 13-cv-1665 and assigned to Judge Stanton.

    Second, I filed a complaint against Mr. Carl Icahn for aiding and abetting Herbalife by publicly promoting and propping up the share price of HLF. Mr. Icahn's actions have injured me by negatively impacting the value of my short position in HLF. I ask the court for financial damages to compensate me for that injury and an injunction barring Mr. Icahn from continuing to aid and abet HLF in any way, including by publicly promoting HLF or purchasing more shares therein. I also ask the court to order Mr. Icahn to divest all of the shares he purchased in HLF on or after December 20, 2012, the date on which his aiding and abetting began, at a price no higher than he paid, because he should not be entitled to profit from his conduct. The case of Ravicher v. Icahn is number 13-cv-1666 and assigned to Judge Griesa.

    Disclosure: I am short HLF. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

    Additional disclosure: I am long BAC, JPM and WFC. I may change my position in any of the discussed stocks at any time for any reason.

    Stocks: HLF, BAC, JPM, WFC
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  • Jesse San Nicolas™
    , contributor
    Comments (5) | Send Message
    I always presumed Herbalife was a pyramid scheme many, many years ago, akin to the MLM/pyramid scheme letters sent out to people in the mail. Just that instead of sending $1 in an envelope and receiving a "spaghetti recipe" in return, Herbalife has raised the stakes and said, pay us $60, and we will give you "a batch of Super Vitamins". In the former example, that "spaghetti recipe" cost about $0.01-$0.02 to make, whereas these Herbalife "vitamins" cost $1-$2 to make make.


    Alas the same concept still arises from both pyramids. In order to make money, the "vitamins" are not the main focus of profit, but rather the "ABILITY TO RECRUIT NEW CUSTOMERS," to buy the so called vitamins is.


    Thus the new customers main motivation $$$, is not to sell product, but rather for them to recruit new customers just as they were recruited, and so on and so on...


    Having read your lawsuit, everything seems sound and has merit. The only problem I could potentially see is that it could be immensely expensive to take this case all the way, maybe 3,5 even 10 years, and in that case I assume you are aware and have the means to see this to fruition.


    Good luck, but even more so, I am sure this lawsuit will more or less test your skills as an attorney.
    14 Mar 2013, 09:11 AM Reply Like
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