By Svea Herbst-Bayliss and Ryan Vlastelica
NEW YORK (Reuters) - Billionaire investor William Ackman's latest volley of accusations against Herbalife fell flat on Wall Street on Tuesday, with shares in the nutrition company soaring more than 17 percent.
Ackman, whose hedge fund Pershing Square Capital Management placed a $1 billion bet that Herbalife will go bust under regulatory scrutiny, told a conference of investors in New York that the firm's recruiting methods violate U.S. labor laws by employing drinks makers and babysitters without pay.
He has previously said Herbalife is running a pyramid scheme in the United States and China in which distributors are paid more for finding new recruits than for selling products to end-users - a charge the company has vehemently denied.
An Herbalife spokesman on Tuesday rejected Ackerman's claims, saying they were fabricated.
Herbalife shares rose more than 17 percent to $63.29 in heavy volumes, more than recovering the losses made Monday after Ackman told CNBC he would expose Herbalife as an "incredible fraud" and deal the company a "death blow."
OVER-PROMISED, UNDER-DELIVERED
"Unfortunately, Bill over-promised and under-delivered on this presentation," said Vijay Marolia, a fund manager at Regal Point Capital Management.
Ackman announced his $1 billion short bet against Herbalife in 2012, and his accusations have led to multiple ongoing investigations into Herbalife?s business practices, including by the Securities and Exchange Commission, the FBI, the Federal Trade Commission and attorneys general of several states.
But his bet has not gone well. Since the end of 2012, Herbalife shares have roughly doubled and Ackman's billionaire rivals, including Carl Icahn and George Soros, have purchased Herbalife shares.
"FREE LABOR"
Ackman said on Tuesday that Herbalife uses its "nutrition clubs" - places that serve Herbalife's nutrition drinks - as recruiting centers, and employs babysitters and drinks makers there without payment.
"They are not selling weight loss in these clubs, they are selling business opportunities," Ackman said. "This is all free labor, totally illegal," he said.
He said Herbalife targeted minorities, particularly Hispanics.
He also said the company was running a "money transfer scheme" through its operations in Venezuela. He did not elaborate.
"I think there is an armory of weaponry in the smoking gun department," Ackman said. "The government is moving too slowly," he said, adding he hoped laying out his case would lead investors to sell their shares in the company.
An Herbalife spokesman responded to the accusations saying: ?Bill Ackman?s claim about the earnings of Herbalife nutrition clubs is completely false and fabricated."
Last week, Herbalife issued a press release saying Pershing Square's thesis "is simply false" and that its "information, presentations and representations cannot be trusted."
Hundreds of people attended Ackman's presentation on Tuesday. About five of them stood up and left after about an hour. One of them told Reuters he had a lunch meeting to get to.
"The people who are leaving may be Herbalife distributors," Ackman said jokingly.
(Writing by Richard Valdmanis; Editing by Nick Zieminski and Phil Berlowitz)
