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Politics

Bitter Herbalife Battle Pits Antonio Villaraigosa Against An Old Friend

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Tue, Sep 17, 2013 at 8:38 AM
click to enlarge Antonio Villaraigosa has signed on as a senior adviser to Herbalife
  • Antonio Villaraigosa has signed on as a senior adviser to Herbalife

The bitter fight over Herbalife is shaping up to be a major opportunity for termed-out Latino politicians. First it was former Mayor Antonio Villaraigosa, who signed on two weeks ago as a "senior adviser" to the embattled multi-level marketing firm.


Now it turns out that Fabian Núñez, the former speaker of the state Assembly, has agreed to work for Bill Ackman, the hedge fund manager who is trying to drive Herbalife out of business. Núñez, now a partner in the lobbying firm Mercury Public Affairs, said he has been hired to "put a spotlight" on Herbalife's business practices.

"We want to put some public pressure on Herbalife to change their ways," Núñez told the Weekly. "The days of slave work are long gone."


Villaraigosa and Núñez are old friends. But they now find themselves on opposite sides of a high-stakes Wall Street battle. Ackman's Pershing Square hedge fund has taken a $1 billion bet against Herbalife's stock. He is attempting to get regulators to investigate whether Herbalife's multi-level marketing model amounts to an illegal pyramid scheme.

Herbalife distributors buy the nutritional products at wholesale prices and then re-sell them. A large share of distributors are Latino. Núñez alleges that Herbalife is taking advantage of its Latino distributors with exaggerated promises of wealth.

click to enlarge Fabian Núñez
  • Fabian Núñez
"Like any other pyramid scheme, it's only the people who pull the strings at the top who do well," Núñez said. "A lot of these are immigrants who come to this country looking for the American dream. But this is not the American dream. It turns out to be a real nightmare."

Des Walsh, Herbalife's president, said that the latest charges are further proof that Ackman is growing "desperate." Herbalife's stock price has gone up since Ackman bet against it. So far, Ackman is down several hundred million dollars.

"I believe Speaker Núñez is misinformed and is completely mischaracterizing the Herbalife business opportunity," Walsh said. "No one would suggest the Avon lady or the Mary Kay saleswoman is in any way associated with slavery... There's no requirement to make a purchase. There's no requirement to spend any hours whatsoever... To associate this with slavery is frankly offensive."

Núñez said he would try to get state attorneys general to look into the abuse of Herbalife distributors.

Meanwhile, Herbalife has hired lobbyists to do battle with Ackman in the halls of Congress, where some members have urged the Federal Trade Commission to investigate its business model.

"On a daily basis, Pershing Square is releasing a torrent of misinformation to various regulators and lawmakers in order to support their reckless $1 billion bet that they can bring down Herbalife," Walsh told the Weekly. "We have engaged certain individuals that we feel can get out the truth about Herbalife."

Walsh said that Villaraigosa would help Herbalife identify "opinion leaders and decision makers" and would help "educate and inform" them about the company. Barbara Henderson, Herbalife's spokeswoman, later clarified that Villaraigosa will not be lobbying for Herbalife.

Núñez said that he, too, will not be lobbying for Ackman. "It's basically helping to develop a strategy on how to get attorney generals and others to pay attention to Herbalife's practices," Núñez said. "We call it public affairs."

Núñez said he continues to have "a lot of love and respect" for Villaraigosa.

"Maybe he'll force them to make some of these changes," Núñez said. "If they don't make these changes they'll get run over."

Villaraigosa was unavailable for comment.

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