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One day in the summer of 2011, Christine Richard arrived at the forty-second floor of a high-rise on Fifty-seventh Street in Manhattan to visit a hedge fund called Pershing Square Capital Management. Richard worked for a boutique research firm that identified “short” opportunities—companies that investors could profitably bet against—and she was there to present an idea to Pershing Square’s founder, William Ackman. On the way over, though, she was caught in a rainstorm, and by the time a receptionist directed her to a conference room she realized that she was dripping wet.

A few minutes past the appointed time, Ackman rushed into the conference room, trailed by an assistant who was listing a series of meetings for that day. Ackman couldn’t stay, so he summoned one of his most trusted analysts, a twenty-eight-year-old red-headed Texan named Shane Dinneen, to sit down with Richard. She placed the rain-spattered report she had prepared on the conference-room table. On the cover was a three-leaf corporate logo. Underneath it was the word “Herbalife.”

Pershing Square is what’s called an “activist” hedge fund. Ackman uses its considerable resources—around eleven billion dollars, raised from wealthy investors, institutions, and employees—to amass major stakes in publicly traded companies. The intention is then to push the companies to improve their businesses, or at least their stock price, which is how an activist investor generally makes money. There are debates over whether activist funds strengthen the companies they invest in or simply force them into taking short-term measures—laying off employees, selling off divisions—to drive up profits and the share price. Ackman, who is sensitive to stereotypes about profiteering, says that Pershing Square has fewer than a dozen investments in its portfolio at a time, and sees them as long-term commitments. He maintains that his firm puts tremendous resources into each one, gives strategic advice over a period of years, and often recruits C.E.O.s and board members.

“This is going to sound goofy,” Ackman told me recently, when we met at his midtown offices, “but we try to do things that we think are good for America.” Ackman, a youthful-looking fifty, is tall, with steel-white hair and intense blue eyes. A devotee of tennis, he’s muscular and trim; he can give the appearance, when you stand next to him, of leaning over you in a slightly possessive manner. He seems accustomed to employing his physical charisma in the service of his business interests.

“There’s a good-for-America reason to do that, and there’s also an economic reason to do that,” he went on. “It’s much easier, if you’re an activist, if you’re on the right side of things.” He was gazing out over Central Park, through panoramic windows that cast the grand public space as his own back yard. To the far right of the vista was One57, a ninety-story skyscraper that looms over the city like a blade. He recently bought a duplex apartment there for $91.5 million.

To make his case, Ackman cited the example of Canadian Pacific Railway, a company that was established in 1881. Pershing Square bought fourteen per cent of its stock six years ago, and recruited a new C.E.O., who took it from the “worst-run railroad in North America” to the best, in Ackman’s appraisal—while reaping a $2.6-billion return on the fund’s investment. A less flattering example of Ackman’s judgment is the fund’s $3.3-billion investment in Valeant, the pharmaceutical company. Valeant was known for borrowing money to buy competitors and then raising the prices of their drugs—sometimes by a thousand per cent or more—while closing their R. & D. divisions. Valeant’s profits soared, for a time, and other drug companies followed its example. Then Valeant came under federal investigation; its share price is now a fraction of what it was when Pershing Square bought it.

Valeant was the sort of company that Pershing Square should have bet against rather than bought into, but shorting stocks wasn’t a big part of what the fund did. Short selling—betting that a company’s stock price will go down—requires a special level of fortitude. It involves borrowing a stock from a brokerage or a bank (and paying a small fee to do so), selling the stock in the open market, and then returning the borrowed shares at some point in the future, having bought back the stock for much less than you sold it for. That’s if things go well; the losses are potentially limitless if the stock keeps rising.

Short sellers are generally reviled by corporations as malevolent opportunists. But, unlike most investors, they’re motivated to expose problems in public companies. “I think short selling, and in fact public short selling, where you share your concerns in a public way, is an incredibly healthy thing, not just for the capital markets but because the regulators do not have the resources to find these things,” Ackman said. “What short sellers do is identify the problem, because they’re economically incentivized to do so. But if you don’t tell anyone about it, you know, nothing necessarily is going to happen.” By shorting, he maintained, an investor can find that rare opportunity to profit handsomely while also providing a public service. “If you can find a really crooked company that’s causing harm to poor people? The government’s going to be a lot more interested in that company than some other kind of fraud that’s ripping off rich people.” He added, “It’s more interesting to fight evil than just to play with stock certificates.”

Ackman grew up in the affluent New York City suburb of Chappaqua, where his father ran a brokerage firm. He graduated from Harvard College and then Harvard Business School, where he was on the rowing team, and had a reputation as someone who couldn’t keep his opinions to himself. He and the rest of the team had rowed with oars adorned with dollar signs. “Let’s face up to what HBS represents,” he wrote in the student newspaper. “We spend 90% of our studies at HBS pursuing the maximization of the dollar.”


He started his first hedge fund, Gotham Partners, in 1993, at the age of twenty-six. Ten years later, after a series of misjudged investments and unfavorable court rulings, he was forced to close it. He was left with only one investment, a large short position in M.B.I.A., Inc., originally named the Municipal Bond Insurance Association. M.B.I.A. insured bonds issued by cities, states, corporations, and mortgage lenders; its backing gave bonds a high credit rating, assuring buyers that they were protected in case a borrower defaulted. At the time, M.B.I.A. was one of the most profitable companies in America. Ackman, though, had determined that it was concealing billions of dollars in potential losses on high-risk debt, including vast amounts of subprime-mortgage debt. He made a bet against the company, and then set about publicizing his opinion that it was in danger of going bankrupt. With the support of much of the financial industry, the company fought back, accusing Ackman of spreading false information to benefit his investment, and New York’s attorney general, Eliot Spitzer, started investigating him. (Charges were never filed.)

Christine Richard, who is fifty-two, joined the financial-news service Bloomberg News in 2006 as a wire reporter covering the bond market. She has an earnest air, speaks with a soft voice, and has sympathetic blue eyes. She grew up in Union County, New Jersey, and earned a degree in psychology at Boston University while waitressing part time. As she pursued an M.B.A. at Georgetown University, she started reading the Wall Street Journal, which had distinguished itself as a source of consequential business journalism, and decided that she would rather write about the business world than work in it. Wire-service reporting was by nature a mechanical exercise, however, and Richard yearned to write longer, more narrative pieces.

It was just the sort of ambition that Ackman knew how to tap into. Part of his strategy for publicizing his investments was to favor certain journalists and shower them with attention. For a time, a reporter might find herself given scoops, granted interviews, invited to join a Wall Street luminary in his town car, while the rest of the media scrum were stuck outside. Ackman chose Richard to help bring scrutiny to M.B.I.A. The investment was Ackman’s first short position that involved a concerted effort to convince regulators, auditors, Wall Street analysts, and Washington lawmakers that the target was hiding something. But M.B.I.A.’s credibility exceeded Ackman’s, and for years Ackman got nowhere.

Then, in 2008, the financial crisis arrived, and, in just over a year, M.B.I.A.’s stock price plummeted from seventy-two dollars a share to three dollars. Ackman’s position yielded a profit of a billion dollars. It also made him one of the few investors who foresaw—and made money from—the disintegration of the subprime-mortgage market. In 2010, Richard published a book about Ackman and M.B.I.A., titled “Confidence Game: How Hedge Fund Manager Bill Ackman Called Wall Street’s Bluff.”

After the book came out, to modest sales, Richard left journalism and joined Indago Group, a small research firm that catered to hedge-fund investors. It had been successful developing short-selling ideas in the for-profit education sector, where low-income students took out government-backed loans to earn largely worthless degrees—leading to a high default rate. Now Richard was charged with finding another industry that had been allowed to inflate into a fraudulent, and presumably fragile, bubble. She started researching Herbalife. “Just looking at it, I vaguely felt that it was a fraud,” she said. “I remember thinking, If someone smart were to just call it out, someone who had the ear of the market, it would collapse.”

She called Ackman. “Bill,” she told him, “I think I found your next M.B.I.A.” It looked to her like a billion-dollar idea.

Multilevel-marketing companies such as Herbalife—and Amway, Mary Kay, and Nu Skin—peddle their products to the public through networks of salespeople rather than through retail venders. The salespeople both sell products and recruit more salespeople, and how much they do of each helps determine whether the company will run into regulatory trouble. Herbalife, which is based in Los Angeles, sells weight-loss-shake powder, vitamins, supplements, protein bars, and skin-care products, and when Richard started investigating the company it reported more than four billion dollars in sales.

Herbalife cultivates an image of wellness and athleticism; it sponsors more than sixty sports teams and a hundred and fifty professional athletes, including Cristiano Ronaldo, the Real Madrid soccer star. But most people who were getting involved in Herbalife, Richard believed, were responding to the company’s aggressive promises, advertised in both English and Spanish, of a business opportunity that might lead to wealth and financial independence. Testimonials spoke of how much money they could make. (“Now, while earning $25,000 a month with Herbalife, I get to do all the things I love: play music and ride my motorcycle!”)

Herbalife’s recruiting technique involved revival-style “seminars” where distributors in company T-shirts stood up and shared stories about the weight that they had lost and the money that they had gained. On a Saturday this fall, one such seminar took place at a hotel near Newark Airport. About a hundred people, mostly black and Latino, were crowded into a small ballroom, many wearing buttons pinned to their shirts: “I ♥ Herbalife” or “lose weight nowask me how!” The fee to attend the meeting, which was ostensibly for sales training, was thirty dollars, and the aesthetic in the room tended toward high heels and gold jewelry.

At the front of the room, a man named Reggie walked back and forth on a riser before a table of Herbalife products, pumping up the crowd. He had a bushy beard and wore a tight purple sweater that accentuated his upper-body musculature and slender waist. (The company encourages its distributors to use themselves as walking billboards.) Reggie was discussing a key skill for Herbalife entrepreneurs: how to deal with friends who were skeptical of the bold health claims made about the company’s offerings. “This is why we don’t have to know what’s in the products,” Reggie said. He gestured toward a slide on a screen, showing head shots of a group of medical experts affiliated with Herbalife. “We have awesome doctors, awesome scientists that make the product!”

The crowd roared (“Yeah! ”), music blasted, and rocket sounds blared.

“If somebody asks you, ‘What’s in the products?,’ they know!” Reggie went on. “Iknow it works!”

At the core of Herbalife’s appeal is the individual testimonial—here’s how I did it, and here’s how you can, too—and Reggie began inviting people from the audience to come up and share their “product stories.” He called out, “Who here has lost a pound?” There were cheers. “Five pounds? Who here has gained some muscle? Who here’s got softer skin?” More enthusiastic applause. Many of those who spoke expressed gratitude for being able to spend more time with their kids.

Between the testimonials, a man named Juan—a member of Herbalife’s Active World Team, one of the upper echelons of the sales hierarchy—spoke to the crowd. He said that he didn’t want to “do” Herbalife at first, but he was unhealthy and overweight, and “my wife told me that there were going to be some services that were going to be cut off at home if I didn’t start trying their products—if you know what I mean.” Because of Herbalife, he said, he had lost thirty pounds and looked amazing.

“You’re obviously under consideration for something.”

Juan was there to explain how the business of Herbalife worked. It was based on a system of product discounts. Once people used the products and liked them, they could sign up and get them at a twenty-five-per-cent discount. They could use the products themselves, or become distributors and sell to friends and acquaintances at full price, keeping the difference. Distributors were required to purchase a “business pack,” priced at ninety-four dollars. The pack included copies of a sales video, buttons, and product samples. As their purchase volume increased, they qualified for deeper discounts. “That is based on how many people you’re sharing your story with,” Juan said. “It doesn’t happen overnight.”

Distributors could bring in new salespeople and earn commissions from their “downline,” the recruiting activities and purchases of everyone on the chain below them. The company also encouraged distributors to open “nutrition clubs,” where they could invite prospects to come in and try Herbalife protein shakes, work out, talk about weight loss and fitness, and sign up to become distributors themselves. Juan explained that, if you bought enough Herbalife products each month, you would eventually qualify for a fifty-per-cent discount. If, over time, the friends in your downline started buying enough to qualify for the fifty-per-cent discount, “the business gets really, really, really exciting, because we start talking about something that is called ‘royalties,’ O.K.?” In addition to the commissions on your recruits’ purchases, and on their recruits’ purchases, and on their recruits’ purchases, the company would start paying you a production bonus.

“I’ve managed a company with over six hundred people, and I only get paid on what I do, O.K.?” Juan said, referring to his previous career. “When they told me in Herbalife I can get paid on teaching some other people how to do a good job, and when they do it I get paid as well, I was, like, yes, this is the kind of business that I want to be in!”

In a pyramid scheme, according to the definition most commonly used by courts and by the Federal Trade Commission, participants derive most of their compensation from recruiting other people into the network as salespeople, rather than from selling products to actual consumers. If recruiting is a company’s main purpose, its survival depends on constantly bringing new people in, and those at the top of the pyramid make money largely from those coming in at the bottom. Still, it can be hard to distinguish between enterprises that are legally considered fraudulent and those which aren’t, and no specific statute outlaws pyramid schemes. A series of settlements with the F.T.C. dating back to the nineteen-seventies have shown companies how to adjust their business models in order to remain in the zone of legality.

Christine Richard was doubtful that Herbalife had done so. From her research, she had concluded that the company’s real business was recruiting people to recruit more people to recruit more people to sell its products. “Distributors were put on this treadmill of purchases in order to advance,” she told me. “It was so manipulative.” Most of the recruits appeared to be low-income people, particularly native Spanish speakers; many were spending thousands of dollars to open nutrition clubs that would never turn a profit. Herbalife was using the dearth of economic opportunity for people who lacked college degrees and other advantages in order to recruit more distributors. “People are losing their homes, their jobs . . . markets are crashing,” one company recruiting video from 2008 says. “Let’s face it, it’s a scary time, the economy’s in trouble.” But Herbalife, viewers were assured, was “recession-proof.” An Indago Group report was blunt: Herbalife was “a pyramid scheme whose revenue comes not from retail sales of its products, as it contends, but from capital lost by failed investors in its business opportunity.”

After her initial meeting with Shane Dinneen, Richard gathered documents from the many lawsuits that had been brought against Herbalife over the years. If the company was a tempting target for a short seller, it was also an elusive one. Its structure, like that of many multilevel-marketing firms, was complex to the point of opacity. It had powerful lawyers and advisers on its payroll, including former Secretary of State Madeleine Albright, who appeared at several of the company’s extravaganzas.

Meanwhile, Dinneen—described by a colleague as “Ackman’s right hand”—began applying his own methods to studying the weight-loss-nutrition industry. “I think that looking at companies is like solving a puzzle,” he says. “I like to understand the narrative behind a company.” He and a colleague, Mariusz Adamski, started researching Herbalife intensively. Adamski told me, “We read some presentations, did some legal work, spoke to a bunch of consultants, and thought, This company looks like actual garbage.”

Herbalife said that its flagship product, the Formula 1 nutrition-shake powder, had sales of $1.2 billion every year, about as much as Palmolive dish soap or Gerber baby food. Compared with SlimFast or other nutrition shakes you could buy at Whole Foods or G.N.C., Formula 1 was, Dinneen and Adamski believed, sold at an inflated price, and the claims that had been made for it—that it could swiftly produce enormous weight loss, even help curb diabetes and heart disease—seemed implausible. The more they looked into it, the more dubious it appeared to be.

None of this meant that the company would collapse, though, and certainly not on Pershing Square’s schedule. Short sellers look for a catalyst—a precipitating event that will trigger the decline. This event could be a government action: an S.E.C. investigation or a charge from the Justice Department. Sometimes a presentation by a well-respected short seller will suffice.

Yet Indago’s hedge-fund clients had been largely unresponsive to the Herbalife proposal. They warned Richard that most multilevel-marketing outfits were nearly indestructible, like cockroaches. Although a few had been shut down or sanctioned in recent decades, many prospered, contorting themselves to comply with the law. Investors had tried shorting some of them—notably Usana, another nutrition company, and Nu Skin, which settled deceptive-marketing charges with the F.T.C. in 1997, for $1.5 million—but the companies endured, and their share prices held. What Indago heard from its hedge-fund clients was some version of: “We’ve all looked at the companies, we all know they’re frauds, but if you short them you get burned, guaranteed. What is the catalyst to put an end to them? If you can’t tell me that—next!”

What’s more, most hedge-fund investors were averse to publicity, which a campaign against Herbalife would surely entail; they saw little benefit in bringing attention to how much money they were making, and how they were making it. The prospect required a certain kind of self-assurance, possibly even narcissism—it called for someone who thrived in the center of controversy. In other words, someone like Bill Ackman.

Even Ackman had misgivings, though. “Collectively, we decided that we did not want to be the tip of the spear here,” he recalled. “We just didn’t think it was worth the brain damage. Getting attacked, and possibly sued. . . . There’s just not enough in it.” Pershing Square would probably have to spend millions of dollars just on legal advice. Given the effort and the expense, was Herbalife big enough, with enough shares trading each day, for an adversary to craft a truly lucrative short?

He went on, “It’s going to take a lot of time and distraction, and they’re going to go after us in the press. And, unfortunately, the media generally hate short sellers.” The research piled up, but Ackman held back. Then, on May 1, 2012, Herbalife’s executives hosted a conference call for analysts and investors, and the calculus abruptly changed.

“Ninety-six kids? Well, you look amazing.”

“Good morning, everyone, and welcome to our first-quarter 2012 earnings conference call,” Michael Johnson, Herbalife’s C.E.O., said. “Our financial and business trends continue to be strong.”

Johnson, a former Disney president, had been recruited to be C.E.O. of Herbalife in 2003, and he had worked since then to establish an air of legitimacy. “As I approach my first decade at Herbalife, I’ve been reflecting on how much our company and business have changed over the past decade,” he said. “We are consistent in teaching the importance of integrity and ethics in everything we say and do.”

After the call was opened up for questions, David Einhorn, the founder and president of the hedge fund Greenlight Capital, came on the line. Einhorn was a highly respected investor, known for his instincts as a short seller. At an investor conference in 2008, he had stood up and correctly predicted that Lehman Brothers was going to go bankrupt under the weight of its subprime-mortgage debt.

“I got a couple of questions for you,” Einhorn said to Des Walsh, Herbalife’s president. “First is, how much of the sales that you make in terms of final sales are sold outside the network and how much are consumed within the distributor base?”

It was the key question to be asked of a suspected pyramid scheme, and Herbalife’s executives seemed alarmed. Einhorn was, as Vanity Fair and Fortune reported, a client of the Indago Group, and had received Christine Richard’s Herbalife pitch.

Walsh didn’t really answer the question. “David, we have a seventy-per-cent customer rule, which effectively says that seventy per cent of all products are sold to consumers or actually consumed by distributors for their own personal use,” he said. He spoke of the growth of Herbalife nutrition clubs: “That has given us visibility to the tremendous amount of products that are being sold directly through to consumers, and we see that as a growing trend in our business.”

Einhorn returned to his question: “What is the percentage that is actually sold to consumers that are not distributors?”

“We don’t have exact percentages, David,” Walsh said, “because we don’t have visibility to that level of detail.”

Seconds after Einhorn’s questions, Herbalife’s stock price started dropping, from around sixty-nine dollars to the mid-fifties. Dinneen was listening to the call, and ran into Ackman’s office. “We missed it!” Ackman recalls Dinneen telling him. “We should have been short already.”

Ackman saw things differently. “I’m, like, ‘No no no no no!’ ” Ackman told Dinneen. “ ‘This is really good!’ ” Einhorn, he figured, must have had a short in place already, and was profiting from the decline. If Greenlight Capital was going to lead the campaign, though, Pershing Square could draft behind it.

Within the hour, Ackman started shorting Herbalife stock. He decided to commit ten per cent of Pershing Square’s capital to the short—around a billion dollars. He estimated that the most the stock could possibly go up, which would represent the fund’s potential losses, was fifty per cent. On the other hand, once regulators and the public learned what was really going on at the company, he expected Herbalife stock to go to zero—whereupon his fund would net a billion dollars in profit.

“You take a lot of opprobrium for going after a public company, particularly a company like this one,” Ackman said. “They’ve been prepared for battle. We assumed that Einhorn would be carrying the flag, and we could just ride his coattails.”

But Ackman had misread the situation. He soon came to believe that Einhorn, after taking advantage of the sell-off he had prompted, then bought back his stock and completed the short, figuring that it would rise again. It looked as if Einhorn was playing a short-term game, and had no interest in convincing the world that Herbalife was going to collapse.

“We usually do all the work,” Ackman went on, “so I’m, like, finally, we can let David do all the work, and we’ll make a bunch of money, and everyone wins.” He sighed. “Well, it didn’t work out that way.”

Driving through some of the towns and neighborhoods where Herbalife has flourished is like taking a tour of vanished economic opportunity. You might find a high concentration of Dollar General outlets, interspersed with boarded-up Main Street businesses that went under after Walmart came to town, and then the Walmart itself, at the edge of the city, might have shut after incursions from Amazon. People are desperate for anything that seems like an escape from a life of working behind a cash register.

In the eyes of skeptics, the Herbalife “business opportunity” bore some resemblance to the American economy as a whole: a triangle in which the top one per cent of distributors received almost ninety per cent of the financial rewards, while those below tried to claw their way up the chain, often to little avail. Government investigators have found that it was almost impossible to make money selling Herbalife products, and that more than half the company’s sales came from purchases of products by its own distributors. Hundreds of thousands of new distributors joined the network each year; after losing money, or at least not making any, eighty-nine per cent of them ended up dropping out within the same year. (The company disputes these conclusions, and says that most of its sales go to actual customers using its products, although it also says that it doesn’t know the precise breakdown.)

Strikingly, many of the themes and slogans that multilevel-marketing companies favor—lots of gilt, and promises that “we are going to make you rich”—are the same ones employed by Donald Trump, whose pledge to solve Middle America’s economic woes helped propel him to the Presidency. Trump honed his pitch during his own career in multilevel marketing, as a promoter of the short-lived Trump Network, which peddled “cutting-edge health and wellness formulas,” in Trump’s words, and as a spokesman for the telecom outfit ACN, which has settled state fraud charges. “The economic meltdown, greed, and ineptitude in the financial industry have sabotaged the dreams of millions of people,” Trump said in a 2009 video for the Trump Network. “Americans need a new plan. They need a new dream. The Trump Network wants to give millions of people renewed hope, and with an exciting plan to opt out of the recession.”

Herbalife has been singularly effective at selling the dream. The company was founded, in 1980, by Mark Hughes, a high-school dropout with a talent for storytelling and salesmanship. Within Herbalife culture, Hughes is a figure of worship. He was twenty-four years old when he started selling weight-loss products out of his car. (According to the Los Angeles Times Magazine, he used as part of his pitch a fake story about his mother having died of obesity.) By the mid-nineteen-eighties, the company had annual sales of more than three hundred million dollars, and Hughes was living in a mansion in Beverly Hills.

“Maybe my argument will make more sense if I run it through some of these sick effects pedals.”

That was when CNN broadcast a devastating series about the company, in which scientists and physicians debunked Herbalife’s claims for its products and challenged the company’s assertion that it employed medical experts and ran a research lab. California’s attorney general launched an investigation, and Hughes was called to testify before the Senate. Herbalife settled with the government, agreeing to adjust its business practices. Hughes died in 2000, reportedly of an overdose of alcohol and antidepressants. In the company’s thirty-seven years, it has gone through several transformations. But at its core is a sort of prosperity gospel with deep American roots.

Ackman’s bet was that rational scrutiny would prevail over extravagant hope. He was now fully committed to the campaign, and, after shorting twenty million shares in several months—borrowing them and selling them at the market price—he was eager to go public with the case against Herbalife. The company, he would argue, was a pyramid scheme. It was ripping off vulnerable members of the Latino community. The government was duty-bound to sanction it. The stock was going to zero.

Shane Dinneen, Christine Richard, and a handful of others—including David Klafter, Pershing Square’s in-house counsel—hunkered down. Richard had left Indago to work full time for Ackman, under contract as a dedicated Herbalife researcher. She had been travelling around the country, documenting Herbalife nutrition clubs that were sprouting up in communities dense with Spanish-speaking immigrants. Dinneen had helped to compile a dossier of court filings, and had been tracking some of Herbalife’s top distributors. The Pershing Square team talked about how quickly they could get regulators and state attorneys general interested in investigating Herbalife. Dinneen put in long hours and sometimes slept under his desk as he and his colleagues worked furiously to condense everything they had learned into some three hundred PowerPoint slides.

“We went to war,” Klafter said. “And war is chaotic. You never quite know what’s going to happen.”

Pershing Square’s first assault was launched on December 20, 2012, at the AXA Equitable Center, in midtown Manhattan, before a packed house. The presentation, called “Who wants to be a Millionaire?,” was meant to capture the attention of government regulators, the mainstream media, and Spanish-language news outlets that could help spread the word to the Latino community.

Ackman strode onstage in a stylish black suit, one hand in his pocket and the other holding a slide-clicker remote. He began by announcing that Pershing Square was shorting Herbalife stock: “Herbalife stock goes down, we make money; Herbalife stock goes up, we lose money.” He then argued that most of the company’s sales came from distributors who bought products and then failed to make a successful business out of their investment, while those at the top raked in millions—a classic pyramid scheme. He showed a clip of a testimonial from an Herbalife Chairman’s Club member, one of the company’s top earners. “This is a product that changes people’s lives,” the man onscreen said, as images of sports cars flashed by. “In ninety days, our income hit ten thousand dollars a month.” The presentation contained dozens of pie charts and bar graphs, and went on for three and a half hours. Ackman pledged to donate his personal profits from the short to charity.

Given the depth of the research—and the fact that he’d been right about M.B.I.A.—Ackman says he figured “that we’d have a lot of credibility, and that it would cause the government to investigate.” He added, “And the facts were so damning—I thought it could be a year?” At first, the bombardment had its desired effect: Herbalife’s stock price dropped from more than forty dollars, around where Pershing Square had shorted it, to twenty-six dollars right before Christmas.

But a week after the presentation, to Ackman’s dismay, Herbalife’s stock price started to creep up. He found out why in early January, in his Gulfstream G550 on the way to Myanmar for a scuba-diving trip. A prominent hedge-fund manager, Dan Loeb, of Third Point L.L.C., had bought a significant chunk of Herbalife stock. Apparently, at the newly depressed price of twenty-six dollars, it looked like a good short-term value.

Maybe the company wasn’t especially virtuous, Herbalife’s defenders reasoned, but this didn’t mean that it was provably a pyramid scheme, or couldn’t survive by adjusting its business practices. Even if Ackman’s charges were vindicated, would the government really shut it down, all to the benefit of a hedge fund? The company seemed to be expanding successfully into other countries, with millions of new distributors flowing into the network in China, Mexico, and Venezuela. Other investors reached similar conclusions and started to buy shares as well. The stock price moved further upward.

On January 10, 2013, Herbalife Webcast a hundred-and-five-slide rebuttal, denying Ackman’s allegations, and insisting that most people bought its products because they loved them, not because they wanted to recruit other salespeople. Ackman listened to the presentation on the deck of “some dive boat in Myanmar,” rocking back and forth while clutching the satellite equipment he had brought along. He was neither surprised nor impressed. “A completely fraudulent response,” he told me. “They were totally mischaracterizing our presentation. I thought it was a joke.”

Ackman wasn’t prepared for what came next, however. Two weeks later, the legendary investor Carl Icahn lashed out at Ackman and his Herbalife play on Bloomberg Television. “It’s no secret I don’t like Ackman,” Icahn said. “I think if you’re short you go short, and, hey, if it goes down, you make money. You don’t go out and get a roomful of people to bad-mouth the company. If you want to be in that business, why don’t you go and join the S.E.C.?” He went on, “I don’t respect him. . . . Don’t be holier than thou and say, ‘Look, I’m doing this for the good of the world, and I want to see sunshine on Herbalife.’ I mean, that’s bullshit.”

Icahn, who is eighty-one, made his career as a corporate raider—he launched hostile takeovers of companies such as T.W.A., Texaco, and R.J.R. Nabisco—and is estimated to have amassed a sixteen-billion-dollar fortune. (He is an economic adviser to the Trump Administration). Prickly and ready for a fight, he had a turbulent history with Ackman dating back a decade, when a joint investment led to a lawsuit that was resolved in Ackman’s favor. A day after Icahn’s attack, a CNBC anchor urged Ackman to respond. “I’m a little sensitive to the whole reputation thing,” Ackman said, and so he agreed.

The interview was conducted over the phone. Ackman, inside his glass-walled office at Pershing Square, explained his history with Icahn, and then accused Icahn of being a hypocrite: Icahn himself had held very public short positions in the past. After a few minutes, the Pershing Square staff was stunned to see that Icahn had been patched in to the interview. The two men were now arguing on live television.

“I’ve really sort of had it with this guy Ackman,” Icahn said. “He’s like the crybaby in the schoolyard. I went to a tough school in Queens, and they used to beat up the little Jewish boys. He was like one of these little Jewish boys, crying that the world was taking advantage of him.”

“I vary her diet with a wide variety of pasta shapes.”JUNE 3, 2013

For most of the twenty-seven-minute exchange, Icahn hurled insults at Ackman. (CNBC had to bleep Icahn and remind him that he was on the air.) Ackman mostly maintained his composure as he attempted to counter Icahn’s charges. Occasionally, hoots and howls could be heard coming from the floor of the New York Stock Exchange, where the CNBC interviewer was situated. “I had dinner with him, and I gotta tell ya,” Icahn said, “I couldn’t figure out if he was the most sanctimonious guy I ever met in my life, or the most arrogant.”

Icahn revealed not long afterward that he had bought fourteen million shares of Herbalife stock—thirteen per cent of the company. It wasn’t clear whether Icahn simply saw a good profit opportunity or whether it was personal; there was no evidence that he had conducted the kind of in-depth research that Pershing Square had. Yet it was a public invitation for others to join him—especially investors who recoiled at Ackman’s slick self-presentation as a champion of oppressed immigrants. The spectacle further buoyed Herbalife’s stock price.

“It was not a helpful thing,” one Pershing Square investor told me. “To engage a tyrannical eighty-year-old with a twenty-billion-dollar net worth who wants to fight you? That was not a helpful thing.” Now the focus of attention had shifted from the case against Herbalife. All anyone wanted to talk about was the feud between the two men.

“Unfortunately, Wall Street for the most part is amoral,” Ackman said when I asked him about it. “So, with Herbalife, people saw an opportunity for profit—my friend Carl was going on TV once a week saying, ‘This could be the mother of all short squeezes!’ Which was kind of a call to arms for people to buy the stock and restrict the supply of the stock, to cause the stock price to go up—figuring I would have to cover—and laugh all the way to the bank.”

The more vocal Ackman became about Herbalife, the more the stock price rose. The company hired more lobbyists and advisers, including Antonio Villaraigosa, the former mayor of Los Angeles, and the law firm of David Boies. Ackman had set up a Web site called Facts About Herbalife (“Herbalife is a pyramid scheme that harms millions of people around the world”); the company countered with a Web site called The Real Bill Ackman (“Bill Ackman’s self-serving activism has cost investors millions of dollars”). Herbalife benefitted from a widespread sense that Ackman was smug and patronizing. It wasn’t that he was wrong, necessarily; it was that he took too much pleasure in believing he was right.

Shane Dinneen and Christine Richard found themselves reviled by association. As the stock price rose toward eighty, financial bloggers predicted that Dinneen would be fired. Richard received taunting messages. “You are a racist—and it will wind up costing you your reputation and your client billions of dollars,” a rival hedge-fund manager wrote to her in an e-mail. “When this is over I will say that publicly. . . . You are a deeply offensive and morally reprehensible person.” Dinneen decided to quit his job, telling his colleagues that he was burned out.

Ackman, meanwhile, redoubled his efforts to trigger an official investigation into his allegations. Pershing Square spent hundreds of thousands of dollars lobbying state senators; it also met with the S.E.C., and with activists in the Latino community. The Times reported that Pershing Square even bankrolled civil-rights groups to help find victims of Herbalife whom they could present to regulatory agencies, making videos of their stories and posting them online. The hedge fund’s consultants met more than a dozen members of Congress or their staff, as well as representatives of New York’s and California’s attorneys general. Ackman also began coöperating with a filmmaker on a documentary about the battle, called “Betting on Zero.”

“The company kept saying we’re manipulating the stock price,” David Klafter told me. “The joke around here was: We manipulated it up! We promised the deathblow, and it goes up. The irony is, only we could afford to do the kind of campaign we did. And the only reason we could do it is that we’re not just trying to do the right thing, we’re also managers of capital. But, because we’re managers of capital, everything we do is suspect. We were told that by regulators, too, by the way—boosting is American, shorting is not.”

On March 12, 2014, Pershing Square’s advisory board, which meets once a quarter, gathered in the company’s largest conference room. The board members include corporate executives and old friends of Ackman’s, such as Marty Peretz, who had been his undergraduate adviser at Harvard. Herbalife stock had reached sixty-one dollars, representing a loss for Pershing Square, on paper, of about seven hundred million dollars. The board meeting was a soul-searing discussion about how much the Herbalife crusade had cost the fund and whether it was wise to continue.

“Is the reason the government is doing nothing that we are short the stock and we stand to make a profit,” Ackman recalled one of the board members asking, “and they just don’t want to get in the middle of something and, in effect, pick sides between two rich people?”

Ackman was sitting at his usual spot at the head of the table eating cashews, which were his preferred healthy snack until recently, when he became concerned that they might contain toxic amounts of mercury. He knew that the board member had a point. But he was convinced of his case, and the idea of backing down was painful.

“If he gets obsessed with something, he is really obsessed,” Peretz recalled. Peretz had helped Ackman with his senior thesis, which concerned racial inequities in Ivy League admissions. “I think other money managers would have long ago dropped Herbalife,” Peretz went on. “He has a great sense of fairness, and that operated in his thesis, and it operates in his investing.”

Still, Ackman says he was half-seriously considering surrender when the conference-room phone rang. It was Pershing Square’s head trader, calling from his desk. “Herbalife stock is halted,” he told Ackman. “News pending.” The Stock Exchange was not allowing the stock to trade, because information was about to come out that could affect the price.

Speculation ensued. Was Icahn going to make a takeover offer? “Carl’s never going to buy this company,” Ackman said. It was something else. “If the F.T.C. launches an investigation of this company, there is a God!” he said.

Fifteen minutes later, the news arrived: Ackman was right, and God was in his Heaven. The F.T.C. was investigating Herbalife.

Herbalife’s stock went down. Then it went back up again. During the next two years, Pershing Square continued lobbying and putting out reports and videos as it waited for the F.T.C. to complete its investigation. Herbalife’s stock price remained in the sixty-dollar range, well above the forties, where the fund had sold it.

On July 15, 2016, Ackman was at home, getting ready for work, when, he says, he got a call from a Wall Street Journal reporter. “We’re hearing a two-hundred-million-dollar settlement with the F.T.C.,” the reporter said. “Herbalife has been determined not to be a pyramid scheme.” Ackman was startled. “Two-hundred-million-dollar settlement—yeah, sounds about right,” he recalled. “But ‘determined it’s not a pyramid scheme’? There’s no way that’s right.” He told the reporter not to run with that story; it was wrong. “And don’t rely on Herbalife’s characterization of this,” he added.

“I don’t know art but I know what I like.”MARCH 9, 2015

Later that morning, after the F.T.C. released its report, Ackman learned that the agency had confirmed many of his allegations. The commission did not use the phrase “pyramid scheme” in the document, but it did accuse the company of engaging in “deceptive and unlawful acts,” by luring people with misleading promises of how much money they could make. Herbalife, according to the F.T.C., was not offering its distributors a viable opportunity to sell products to actual retail customers, and the company was structured mainly to reward people for recruiting new distributors. Most people who started nutrition clubs lost money. A federal court ordered Herbalife to restructure its business so that people were paid based on their retail sales, not on recruiting new people—a measure that, Ackman believed, could lead to its downfall. (The company says that the F.T.C. misunderstood the nature of its sales.) The two-hundred-million-dollar fine was meant to compensate members who had lost money. Many of the strictures will not go into effect until May of this year.

“It was amazing,” Ackman said. “Confirmed every one of our allegations.” He went on, “Look, when this whole thing is over? I’m going to hold everyone accountable. Madeleine Albright, the Gibson Dunn firm”—one of several law firms working with Herbalife. “All the enablers. They are facilitating fraud, and they’re collecting a huge amount of money doing it. I think they are culpable.”

Once again, however, Ackman’s expectations were confounded. Despite his urgings, the Wall Street Journal ran the story with the headline “ackman dealt blow as herbalife settles with ftc.” The New York Post went with “herbalife no pyramid scheme: ftc.” Other news outlets followed suit. The commission’s findings could have been interpreted as a major setback for Herbalife; instead, they were cast as a victory—a validation of its business model. Icahn issued a statement saying that Herbalife offered many people the chance to “start their own business,” and that Ackman had been proved wrong. Icahn increased his ownership stake to thirty-five per cent. Herbalife continued to insist that its business was healthy, and that its future would be unaffected. Its stock price, in turn, continued to reflect a reality vastly different from the one the F.T.C. had described.

Herbalife’s corporate headquarters occupy two stories of a building in downtown Los Angeles. The lobby is bright and airy, with expansive terrazzo floors that bring to mind a European airport. Glass cases display pills and powders; one wall is covered with framed portraits of Herbalife’s Founder’s Circle and Chairman’s Club members, the highest-earning distributors. In these precincts, the official message is that everything is fine and the settlement with the F.T.C. was the best thing that could have happened to the company.

“I’m an operating person,” Michael Johnson, Herbalife’s C.E.O., told me, sipping from a purple protein shake and surrounded by sports equipment and trophies. “I have pretty good financial chops. But I did not know about activist investors.” Johnson is tan, square-jawed, and broad-shouldered. Like Ackman, he’s a competitive athlete; he’ll put in hours traversing a mountain range by road bike before showering and taking his place behind his desk in the morning. He recounted the battle with Ackman with a slight air of P.T.S.D.

After Ackman made his presentation at the AXA Equitable Center, Johnson said, Herbalife’s top executives went into crisis mode. They divided into teams; one would continue running the business, while the other—including the chief financial officer, the legal and communications departments, and Johnson himself—formed a reaction unit. “That became, I don’t want to say a holy war, but it became a process that engulfed some of us for a while,” Johnson said. “We hired a ton of consultants. We were a full-employment act for every P.R. firm, law firm. We were spending a lot of money”—around eighty-five million dollars, Herbalife says. In 2014, the company brought in Alan Hoffman, Joe Biden’s former deputy chief of staff, to help fight off Ackman. “It’s horrible playing defense all the time, but with him we had to,” Johnson went on. “Then we went on the offense a bit. We said, ‘We need the world to see what Bill Ackman is all about.’ We’ll see if his act is as wonderful as he thinks he is.” A thousand-page dossier on Ackman was prepared, containing allegations of market manipulation, and Herbalife sought to generate news stories that reflected its point of view.

The F.T.C. settlement places some onerous conditions on the company: in order to continue giving full commissions to its salespeople, it must prove, through documented receipts, that eighty per cent of its revenue comes from actual retail demand for its products. To qualify for commissions, individual distributors must show that sixty-six per cent of their sales comes from retail customers. Johnson says that the F.T.C. didn’t understand how many consumers Herbalife had. At the same time, however, Herbalife executives maintain that they really didn’t know who was buying the company’s products before, and what their intentions were. Now, with the May deadline approaching, the company is rushing to implement technology that can track every sale, and is teaching its hundreds of thousands of distributors to use it, all in the hope of showing that people are buying Herbalife products for the right reasons.

Because the chair of the F.T.C. had stated that Herbalife needed to “start operating legitimately, making only truthful claims,” the company hired a hundred and thirty people to comb through its distributors’ social-media profiles, in order to remove pictures of their exotic cars and to curb exaggerated boasts about the money they were making. In January, Herbalife announced that two hundred thousand of its five hundred thousand U.S.-based distributors had agreed, in exchange for a twenty-five-dollar product coupon, to declare themselves to be Herbalife retail customers rather than distributors. (Previously, everyone in the network was known as a “distributor”; the company is now trying to distinguish between distributors and “members.”) This, according to the company, is an indicator that its business is sound.

“We’ve had lies thrown at us, we’ve seen manipulations of the press, of media, at local, state, and federal levels,” Johnson said. “It’s been, frankly, a multifaceted, multi-front attack on us.” After the F.T.C. settlement, he agreed to step down as the company’s C.E.O. in May, as the new rules go into effect, though he will stay on as executive chairman.

When I asked Johnson how he felt about all the people who had lost money trying to get rich through Herbalife, he hesitated. “I’m sorry that it happened,” he said. “I’m sorry people lost money at a racetrack and at the lottery. Today’s Herbalife is about hard work and energy. I can’t go and fix anything in the past.”

A central question for Ackman is whether the company could simply become smaller in the United States and make up its business in China and other countries where the F.T.C. order doesn’t apply. “Herbalife is going to have to go from a D to a B-plus,” Kevin Thompson, an attorney who works with multilevel-marketing companies, said. “Herbalife will have to change its culture. But I don’t think it’ll have to change its culture so much that it’ll go out of business.” There is always the possibility that the F.T.C.’s findings could translate internationally, though, which would be a blow to the company’s prospects. Thompson added, “It boils down to: can Bill Ackman learn Chinese fast enough?”

“I love our little chats, Jack, but you’ve got to start drinking again.”OCTOBER 11, 2007

A few months after the F.T.C. settlement, Christine Richard travelled to Las Cruces, New Mexico, a flat, dusty city of about a hundred thousand people, an hour’s drive from El Paso. In 2012, she had compiled a report on the town, because it seemed to have a particularly dense concentration of Herbalife nutrition clubs relative to its population. Now she wanted to see if anything had changed. I accompanied her as she drove past block after block of pawnshops, bail bondsmen, used-car dealerships, and Mexican restaurants. I learned to recognize Herbalife clubs in the little strip malls. They typically had green curtains covering the windows, in keeping with company policy, because they were meant to be invitation-only; attracting foot traffic would make them retail stores. They had names like The Good Life Nutrition, Living Healthy Nutrition, and Triple Threat Nutrition. Richard was trying to track down the club owners whom she had met on her last visit, but they were hard to find. There were dozens of the clubs. A few were open and busy; many others appeared to be abandoned.

We wandered into one called The Nutrition HeadQuarters, next to a hair salon on a stretch of highway. A fit young man in jeans and a red T-shirt was there by himself; his club consisted of a tiled floor and, in a corner, a bar with a blender and a sink. Herbalife posters hung on the wall, and country music was playing. In order to pursue his new business, he said, he had dropped out of New Mexico State University and quit his job at Sam’s Club.

“I just fell in love with the Herbalife business opportunity,” he told us.

In exchange for five dollars, he poured Richard some Herbalife aloe water, which was supposed to relieve indigestion. He said that he had taken over the club from someone who had left the business, and that he was there six days a week, trying to sell shakes and to recruit members.

When we asked him about the F.T.C. settlement, he said, “In my opinion, it’s absolutely the best thing that could have happened to the company. To show the world that we are not a scam.” He assured us that in five years he would have reached the company’s President’s Team level, where the average earnings are more than a hundred thousand dollars a year. In Michael Johnson’s terms, these are the lottery winners. (According to Herbalife’s own disclosures, the chance of a new recruit reaching this level is vanishingly small.) It was hard not to recall how Trump had pitched his version of Herbalife: “The Trump Network offers people the opportunity to achieve their American Dream.”

Richard shook her head as we walked back to the car. “I wonder if he’s living with his parents,” she said.

She seemed to be wearying of the bleak task of exposing Herbalife’s lures; occasionally, she worried about what she would be qualified to do after researching one company for one hedge fund for so many years. “Being a hedge-fund researcher is sort of like being a journalist, without all the camaraderie,” she said.

Over enchiladas that evening, Richard told me about an experience she had had when she was a college student home for Christmas break. Her parents were then living in Allentown, Pennsylvania, around the time that Bethlehem Steel, the major employer in the area—and once the second-largest producer of steel in the United States—was spiralling into bankruptcy. Looking to earn some extra money, she responded to a newspaper ad for a part-time job well suited to students and stay-at-home moms. The interview was to be held at a community college, and when she arrived there was already a small crowd of people.

As she and the others were led into a classroom, Richard realized that it wasn’t a job interview but some sort of sales seminar. A man came out and started spouting clichés about closing the deal, about having what it takes. He was there to introduce them to a multilevel-marketing outfit that sold Cutco knives. The man walked around the room, asking the attendees one-on-one questions: “Are these knives going to sell themselves? Is the answer ‘Yes,’ because they’re so good, or ‘No,’ because they need a good salesman?” People started to become agitated. They had responded to the promise of a well-paying job, and here they were being pitched on a door-to-door sales gig. It became clear that they’d all have to buy at least one set of knives in order to start selling them. As the sense of unrest grew, Richard recalled, the man suddenly paused.

“Someone here has a negative attitude and doesn’t belong here,” he told the group darkly. He turned to Richard. “Christine, you need to leave.”

She sensed her cheeks burning and her eyes welling up. Almost involuntarily, she found herself apologizing and begging to stay, to no avail. It was a clever tactic, she later reflected; everyone she left behind must have felt thankful that they got to stay.

This evening in Las Cruces, she saw a connection between that moment, when someone had tried to manipulate her desire to earn some money, and what she was doing now, trying to expose Herbalife, and disabuse all those recruits who believed that the company would grant them lives of financial security.

“You get so tired of stomping on people’s dreams,” Richard said. “I don’t want to be the one stomping on people’s dreams anymore.”