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Herbalife stock falls 6% on report of law-enforcement investigation

February 04, 2013|By Andrew Tangel | This post has been updated. See below for details
  • Herbalife shares were hammered in early trading Monday after the New York Post reported an unspecified law-enforcement investigation into the company.
Herbalife shares were hammered in early trading Monday after the New York… (Patrick Fallon / Bloomberg )

NEW YORK -- Herbalife stock fell more than 6% after the New York Post reported the company was subject to an unspecified law-enforcement investigation.

In early trading on Wall Street, Herbalife shares lost $2.25, or 6.42%, to $32.82. Herbalife's stock is off 44% from where it was a year ago.

The Post cited documents the newspaper obtained through a Freedom of Information Act request from the Federal Trade Commission.

According to the Post, the FTC cited "pending law-enforcement action" and withheld some information the Post requested about Herbalife. The newspaper said the FTC released 729 pages of complaints against Herbalife.

An FTC spokesman did not immediately return a request for comment early Monday.

[Updated, 10:31 a.m. Feb. 4: An FTC spokesman would neither confirm nor deny the agency was investigating Herbalife.

The FTC said Monday it cited the wrong boilerplate legal language when replying to the New York Post’s FOIA request.

Instead of referring to a “law enforcement investigation” as an exemption used to justify withholding some information, the FTC says it should have cited an exemption involving complaints from a “foreign source,” meaning outside of the United States.

Herbalife, meanwhile, issued a statement complaining of “misleading and inaccurate” information.

The company’s statement read:

“Other than the voluntary dialogue with regulators, which we communicated on our January investor day, we are unaware of any other regulatory interest and/or investigation. We are demanding a correction from the NY Post.

"Since its founding in 1980, Herbalife has positively impacted the lives and health of consumers. For a direct selling company of our size, we have had a relatively low number of complaints to the FTC. However, we take every one of them seriously and stand by our record of doing right by our distributors and all consumers of our products.”]

Herbalife has been on the defensive ever since New York hedge fund manager Bill Ackman declared the company a pyramid scheme in late December.

Ackman announced a $1 billion short position against the company, a so-called multi-level marketing firm that sells vitamins and nutritional supplements and foods.

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