Herbalife is one of those multilevel marketing companies, often sketchy, that usually operate below the view of the national press. Bill Ackman is a hedge-fund billionaire who has placed a billion-dollar bet against its stock, arguing loudly that the company is a fraud, a pyramid scheme.

A New York Times investigation shows how Ackman has spread cash around to astroturf the issue. It’s a case study in how vested interests pollute the news stream.

To pressure state and federal regulators to investigate Herbalife, an act that alone could cause its stock to dive, his team has helped organize 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, an investigation by The New York Times has found.

His team has also paid civil rights organizations at least $130,000 to join his effort by helping him collect the names of people who claimed they were victimized by Herbalife in order to send the leads to regulators, the investigation found. Mr. Ackman’s team also provided the money used by some of these individuals to travel to Washington to participate in a rally against Herbalife last month.

These are the larger forces playing out behind the scenes, dear readers, when you see stories like “Latino Group Demands Herbalife Probe” from ABC News, as we did a month ago. Nowhere in that story did ABC report that the Latino group, the League of United Latin American Citizens had received $10,000 from Ackman early last year before it went on its crusade. The Times:

“It’s not the Latino groups that are helping Bill Ackman,” (Brent A.) Wilkes said. “Bill Ackman is helping the Latino groups. He has elevated this battle.” On Sunday evening, after questions from The Times, Mr. Wilkes said he had decided to return the donation, so there was no chance anyone could suspect he had undertaken the effort “for a mere $10,000 table purchase” at one of his fund-raising events.

That’s very interesting, because the Washington Post reported in November that LULAC hadn’t taken money from Ackman. Or as the paper put it:

Wilkes has spoken with people from Ackman’s investment fund, Pershing Square, but both of them opted against financial support for LULAC’s awareness-raising about Herbalife’s perils, to avoid the perception of a conflict.

That’s so narrowly worded that it’s potentially accurate. But it’s definitely misleading. A reader would think Ackman hadn’t given LULAC money, when that was not the case at all. That’s a miss by the Post.

Indeed, the Latino nonprofits involved in this mess come out looking pretty bad all around. Herbalife, for its part, has funneled cash to its own set of nonprofits, as the New York Post reported two weeks ago:

Herbalife recently donated money to five of the seven Hispanic groups that signed a letter last week supporting the company, The Post has learned. The donations were not disclosed and were only admitted by Herbalife after a reporter contacted three of the groups on Wednesday.

The NYT has a smoking gun on at least one nonprofit, the United States Hispanic Leadership Institute, which tried to get Ackman’s people into a “bidding war,” as the paper puts it, euphemistically, in my book:

“Are you able to match the $30K we have received from Herbalife?” Juan Andrade Jr., the president of the Institute, wrote to the consultant. “If Herbalife says neutrality is unacceptable and wants their money back, are you able to replace it?”

Ackman and Herbalife have so poisoned the well by paying nonprofits and hiring key congressional staffers that it’s hard to tell if anyone in this fight is untainted.

This is not to say that Ackman and/or the Latino advocacy groups don’t have a legitimate case against Herbalife—one that they truly believe in. The propriety of the multilevel marketing industry and of Herbalife in particular are serious issues.

But Ackman’s machinations are so cynical and ham-handed that they’ve backfired. As Bloomberg View’s Jonathan Weil writes:

Still, the regulators have done nothing. And who can blame them? If they did something now, they would look like Ackman’s tools.

See, for example, the Federal Trade Commission, which, either despite or because of Ackman’s lobbying, is probing Herbalife, the company announced today after the Financial Times contacted it about the investigation. Its stock plunged.

Having said all that, the Times’s piece could have been better balanced. Surprisingly, it doesn’t report that most of the “Friends of Herbalife” letter’s signers had taken Herbalife cash, as earlier reported by the Post. It notes only one, the National Puerto Rican Coalition. And it doesn’t mention anything about the millions it has poured into UCLA, whose scientists have given it their imprimaturs, as the Los Angeles Times’s Michael Hiltzik found last year.

More problematic, the Times doesn’t mention that Herbalife spent seven times more money lobbying last year than Ackman did. Herbalife isn’t even in the Fortune 500, but it ranked 290th in the country in lobbying last year after ramping up to fight Ackman.

To a certain extent, then, it looks like Ackman’s trying to fight fire with fire. That doesn’t excuse the astroturfing, of course, but it raises questions about why the Times, in a generally fine piece, didn’t focus at least a little more on Herbalife’s activities.


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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.