Tuesday, 25 October 2016
Last updated 18 hours ago
Apr 25 2014 | 12:34pm ET
Pershing Square Capital Management is paying a Herbalife whistleblower $240,000—but says that future whistleblowers will only have their legal bills covered.
As part of a deal with Giovanni Bohorquez, the hedge fund agreed to pay the former Herbalife executive $20,000 per month for up to 10 years if he lost his job, in addition to any legal costs. To date, Pershing Square has paid Bohorquez $80,000.
Pershing Square and Bohorquez reached a secret agreement in June. It was revealed in December during an interview with ABC, but Bohorquez at the time denied receiving any “benefit” other than his legal costs. Bohorquez says he didn’t reveal the payment agreement because he had yet to tap it.
“I didn’t tell you because I was not looking at using it,” he told ABC last week.
Pershing Square founder William Ackman has said that Herbalife is a pyramid scheme and has a $1 billion short bet against the nutritional supplements company. In recent weeks, a number of state and federal authorities have opened investigations into the company, and Bohorquez has provided information in those probes.
Ackman defended the arrangement, calling Bohorquez “an honest and good man” who he would “be delighted to serve as a reference for.” The hedge fund manager said his deal with Bohorquez requires him to be truthful about Herbalife.
“You should judge for yourself whether Giovanni is an honest man or not,” Ackman said. “I think Giovanni will be viewed as a hero.” Paying him, Ackman added, was “the right thing to do.”
“Who else has Mr. Ackman or his team of agents and consultants made payments to directly or indirectly, or made future contingency payment offers to?” Herbalife asked.
Ackman said he would continue to cover legal fees and any damages incurred by Herbalife whistleblowers, noting the company’s “track record of attacking its critics through litigation and other forms of intimidation.” But he said no others would be paid outright as Bohorquez has been.
"With respect to indemnities provided by Pershing Square to other whistleblowers, including those cooperating with government agencies, these indemnities are limited to legal fees and damages incurred in the event that these individuals are sued by Herbalife, and do not provide for recoveries for lost wages,” the firm said.
ABC also had some bad news for Herbalife this week, with a report showing that some Herbalife distributors had lied about the medical benefits of the company’s products. One Staten Island, N.Y., distributor was caught on camera telling an ABC reporter that one woman was cured of a brain tumor with the products.
Herbalife President Des Walsh told ABC that such claims are “a complete and absolute violation of our rules.” He admitted that almost 600 distributors were disciplined last year for making unsubstantiated claims about Herbalife products, and a dozen were stripped of their distributorships.