November 5, 2015

Why the Tea Party and Occupy Wall Street Movements Should Meet on Main Street

Little common ground exists between the left wing and right wing these days. One exception found in the emergence of the tea party and Occupy Wall Street movements is a healthy distrust in the motives of politicians and government regulators. These concerns are vindicated when officials are caught teaming up with the super rich to abuse political power.

Little common ground exists between the left wing and right wing these days. One exception found in the emergence of the tea party and Occupy Wall Street movements is a healthy distrust in the motives of politicians and government regulators. These concerns are vindicated when officials are caught teaming up with the super rich to abuse political power.

Case in point: hedge fund manager William Ackman’s attempt to salvage his so-far losing bet by using the power of government agencies to sink the stock of the nutritional supplement company, Herbalife. Why? Because in 2012, the activist billionaire made a $1 billion bet on the collapse of the company by shorting its stock. He then took the rare step of publicly announcing his position, while declaring the company as the “best-managed pyramid scheme in the history of the world.” He even boasted that the stock would eventually fall to zero.

Risky moves can be very lucrative. They can also be costly. Three years later, it’s clear that other investors aren’t convinced. While Herbalife’s stock has been volatile, it’s nowhere close to worthless. Over the past few months it has even been valued higher than when Ackman made his risky play.

The crux of his argument is that Herbalife is a multilevel marketing firm, and therefore a pyramid scheme. MLMs use independent contractors to distribute their products and typically reward them both for selling product and recruiting other distributors. The main product of Herbalife is a meal-replacement shake powder. Prominent examples of MLMs include Avon and Tupperware.

Other investors didn’t bite. For one thing, courts and regulators rejected the idea that the MLM structure alone is sufficient to identify a pyramid scheme. In pyramid schemes, recruitment provides the bulk of income and products rarely end up in the hands of consumers that aren’t themselves distributors. This doesn’t seem to be the case here at all. Herbalife actually sells products – its shake powder sells more than the three leading competitors combined, including the popular SlimFast – which is likely why investors have stuck with the company, despite the onslaught.

Pyramid schemes tend to collapse before they are as old as Herbalife, which was founded 35 years ago and brings in $5 billion in revenue.

Ackman’s position is a tough sell, but that hasn’t stopped him from trying. In a very ugly move, the investor is now betting that the government will take down the company so he can finally cash in.

Using all the political influence his corporate money can buy, he has been putting pressure on state and federal regulators to investigate Herbalife in hope that the company’s stock would finally dive. To build his case, an investigation by The New York Times reports that he organized “protests, news conferences and letter-writing campaigns in California, Nevada, Connecticut, New York and Illinois, although several of the people who signed the letters to state and federal officials say they do not remember sending them.”

His lobbyists also scoured the country to find distributors who lost money and could be held up as victims, and convinced members of Congress to write to the Federal Trade Commission encouraging an investigation. Ackman also made presentations directly to the FTC, the Securities and Exchange Commission and federal prosecutors.

The costly efforts are beginning to pay off with the FTC and SEC initiating investigations, and now a New York state senator promising to introduce legislation.

What’s troubling is not that a company is being scrutinized; it’s how that scrutiny can be bought by another private entity with a vested interest in the outcome. Short selling is a valid investment strategy with numerous benefits, such as providing liquidity and checks against bubble-inducing hype and excessive optimism. It’s another matter entirely if officials step in when that strategy goes awry.

Regardless of one’s impression of Herbalife as a good or bad company, one place of common ground should be in the belief that the super rich should not get bailed out by the government. If Ackman’s lobbying pays off, however, we can expect many more to follow his example.


Who We Are

The Patriot Post is a highly acclaimed weekday digest of news analysis, policy and opinion written from the heartland — as opposed to the MSM’s ubiquitous Beltway echo chambers — for grassroots leaders nationwide. More

What We Offer

On the Web

We provide solid conservative perspective on the most important issues, including analysis, opinion columns, headline summaries, memes, cartoons and much more.

Via Email

Choose our full-length Digest or our quick-reading Snapshot for a summary of important news. We also offer Cartoons & Memes on Monday and Alexander’s column on Wednesday.

Our Mission

The Patriot Post is steadfast in our mission to extend the endowment of Liberty to the next generation by advocating for individual rights and responsibilities, supporting the restoration of constitutional limits on government and the judiciary, and promoting free enterprise, national defense and traditional American values. We are a rock-solid conservative touchstone for the expanding ranks of grassroots Americans Patriots from all walks of life. Our mission and operation budgets are not financed by any political or special interest groups, and to protect our editorial integrity, we accept no advertising. We are sustained solely by you. Please support The Patriot Fund today!

The Patriot Post and Patriot Foundation Trust, in keeping with our Military Mission of Service to our uniformed service members and veterans, are proud to support and promote the National Medal of Honor Heritage Center, the Congressional Medal of Honor Society, both the Honoring the Sacrifice and Warrior Freedom Service Dogs aiding wounded veterans, the National Veterans Entrepreneurship Program, the Folds of Honor outreach, and Officer Christian Fellowship, the Air University Foundation, and Naval War College Foundation, and the Naval Aviation Museum Foundation. "Greater love has no one than this, to lay down one's life for his friends." (John 15:13)


“Our cause is noble; it is the cause of mankind!” —George Washington

Please join us in prayer for our nation — that righteous leaders would rise and prevail and we would be united as Americans. Pray also for the protection of our Military Patriots, Veterans, First Responders, and their families. Please lift up your Patriot team and our mission to support and defend our Republic's Founding Principle of Liberty, that the fires of freedom would be ignited in the hearts and minds of our countrymen.

The Patriot Post is protected speech, as enumerated in the First Amendment and enforced by the Second Amendment of the Constitution of the United States of America, in accordance with the endowed and unalienable Rights of All Mankind.

Copyright © 2024 The Patriot Post. All Rights Reserved.

The Patriot Post does not support Internet Explorer. We recommend installing the latest version of Microsoft Edge, Mozilla Firefox, or Google Chrome.