Washington, D.C. — Today, Citizens for Responsibility and Ethics in Washington (CREW) asked the House and Senate Commerce Committees to investigate the increasing problem of short sellers attempting to manipulate the federal government for personal financial gain.
CREW Interim Executive Director Anne Weismann stated, “First it was Steve Eisman working over the Department of Education (Education) while he shorted the stocks of for-profit colleges and now it’s William Ackman ginning up a federal investigation into Herbalife to make good on a billion dollar bet against the company.”
As the New York Times documented last year, Mr. Ackman and his hedge fund, Pershing Square Capital Management, have gone to unprecedented lengths to urge federal regulatory action against Herbalife, a company in which Mr. Ackman and his fund have maintained a significant short position. Mr. Ackman has admitted he just needed to get any one of “the SEC, the FTC, the 50 attorney generals around the country, [or] the equivalent regulators in 87 countries,” interested in investigating to succeed in driving the price down. Last week, the Wall Street Journal reported the Department of Justice is investigating whether Mr. Ackman has engaged in market manipulation of Herbalife’s stock.
Documents CREW obtained through a Freedom of Information Act (FOIA) request reveal that Mr. Ackman’s lawyer regularly contacted Lois Greisman, the Associate Director of the Division of Marketing Practices at the FTC, with emails attaching articles and blog posts critical of Herbalife — many of which appear to have been ginned up by Mr. Ackman or his supporters.
Mr. Ackman is not the first Wall Street investor to try and game Washington. In 2011, CREW asked the Securities Exchange Commission (SEC) and Education to investigate short seller Steve Eisman’s efforts to persuade the department to adopt a so-called “gainful employment regulation,” which would have driven down the stock price of for-profit colleges. Several senators, including Sen. Charles Grassley (R-IA) called on Secretary of Education Arne Duncan to investigate the matter.
In 2012, CREW asked the SEC and U.S. Attorney’s Office for the Southern District of New York to investigate another short-seller, Martin Shkreli, for attempting to manipulate the market price of biotechnology and pharmaceutical company stocks by asking the FDA not to approve new drug applications. Mr. Shkreli, like Mr. Ackman, also posted and may have persuaded others to post negative information about the companies he was shorting on well-read financial blogs in an apparent attempt to manipulate the market.
Last week, CREW published a new website, CapitolGamed.org, highlighting efforts by some investors to abuse government processes for financial gain.
Ms. Weismann continued, “While it appears DOJ and the SEC may be investigating Mr. Ackman’s conduct, Congress needs to look at this issue. Many Americans already believe Wall Street is a rigged game. Watching billionaire hedge fund managers get richer by instigating government action can only lead to further decreased confidence in the country’s financial markets and government leaders.”
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