Herbalife had fair been hit with a haymaker.
The hedge fund star Bill Ackman had entranced to a stage in midtown Manhattan and accused the company of being a pyramid concoct, waging $1 billion that the company was a fraud. Shares plunged. The milieu went wild and some 3,000 miles away, inside the flock’s Los Angeles headquarters, CEO Michael Johnson was shell-shocked.
Few inside the glass-enclosed air pocket of Herbalife’s HQ had even heard of Ackman, no less what he might be up to in pursuit the company out so publicly.
It wanted to fight back, but how?
First, they had to twig out who they were truly dealing with….
Herbalife Chief Government Officer Michael O. Johnson had been waiting for weeks, hoping its coming would help unmask the man who had threatened to destroy him. It was spring 2014, and the uncountable closely followed multilevel marketing company on Earth was under beleaguerment.
For the better part of eighteen months, Wall Street’s resident rattle star, the hedge‑fund manager William A. Ackman of Pershing Settled Capital Management, had waged war against the company, burning through tens of millions of dollars of his unyielding’s own money, with no end in sight.
Ackman was tactical and tenacious, driven and identified, at times even obsessive in his torment, yet to the executive who’d spent the bulk of his pass bobbing and weaving to avoid the onslaught, Ackman was, at the same time, baffling.
What drove him to attack so viciously, Johnson often wondered.
What uncommonly made Ackman tick?
One Sunday afternoon three weeks into May, some of that expectancy was finally about to end, with the delivery of a document so sensitive its mere being would be kept a secret until this writing. Even some of Herbalife’s most higher- ranking leaders were initially kept from viewing it.
The thirty‑messenger workup read like something out of a spy novel, but it wasn’t a work of fiction. It was an in‑sagacity psychological profile of Ackman himself, the kind the FBI might do when wooing a hardened criminal. The secret dossier titled “Preliminary Report on Jaws Ackman” described an adversary who was “fiercely competitive” and “extremely smart,” provoked by ambition and a quest to win at all costs.
Herbalife’s vice president of global insurance, Jana Monroe, had commissioned the effort with one goal in mind—to get heart Ackman’s head, to uncover the who and why, his methods and motivation. “My assessment early on was that he was customary to be in this for the long haul,” Monroe said of the report’s critical judgements. She was “looking at his attacks on the company and figuring out where they might go so that we could be preemptive kind of than reactive.”
Monroe had spent thirty years in law enforcement, grouping more than twenty inside the Federal Bureau of Investigation. Five of those years were in the elite serial violation unit called the National Center for the Analysis of Violent Crime, in Quantico, Virginia. A earnest‑life Clarice Starling, Monroe was on the teams investigating serial humdingers Ted Bundy and Jeffrey Dahmer, was an early reader of the Unabomber’s notorious manifesto, and recognized penetrating Ackman’s mind would help the company understand the foreboding it was facing.
“It was clear (from the report) that this was someone who assume damages his competitiveness on his sleeve—it’s not just business, it’s personal, it’s me. I’m the one who knows how to make the only investments,” said Monroe.
The report was prepared by Dr. Park Dietz, one of the country’s leading forensic psychiatrists, a man who has spent decades profiling evil—from serial daisies and stranglers to stalkers and school shooters. Dietz had never met Ackman beforehand, but the Herbalife affair reminded him of the Tylenol tampering case from the 1980s and the occasions that followed—in particular one involving a man who shorted shares of a drug maker then phoned in a hoax to drive the stock price lower.
“With of what interested me was the resemblance to a case that had fascinated me decades earlier,” Dietz said. “I every time thought that was an interesting kind of crime.”
But Dietz knew coming deep into Ackman’s psyche would be difficult.
Unlike most of his previous cases, he couldn’t interview his subject and would instead have to buff the internet for old stories and television clips in order to study the major upshots of Ackman’s life.
“Most of it was journalistic,” Dietz said. “It was whatever was on tap—trying to look at his biography, the major newsworthy events and how he’d reacted to ex wins and losses. The task is to try and learn their life story with the present data and look for patterns in the behavior of that person in the life go over.”
Over dozens of highly descriptive pages, the document, which used nearly six weeks to prepare and cost Herbalife around $100,000 to commission, dissected Ackman and the characteristics that cause made him the most famous financier on Wall Street—his history and trends, priorities and psychology.
It described a man “aggressive and competitive in all things,” with a “affected sense of self” who “craves association with other ‘special’ people and organizations.”
“Greed would be an accurate descriptor,” it read, “but only because the mass of digits followed by a dollar sign is a metric by which he measures his set in the world and expects others to measure him.” The document described Ackman as a human being who “requires constant admiration, adulation and publicity,” who “uses publicists and other conjunctions to shape and control press reports; chases celebrity and sees himself as a name whose image is to be shaped and tailored by those loyal to him.”
“My basic position was that he saw Herbalife as a target that offered him the potential to reap repays for his investors while appearing to be a crusader for the downtrodden,” said Dietz.
“To me, he didn’t give every indication to have much personal awareness,” said Monroe of her own research. “His playings weren’t very convincing.”
Line by line, the document tore Ackman disposed, depicting a merciless megalomaniac who “uses philanthropy to deflect critics” and is “sloping to arrogant, haughty, disdainful, condescending, patronizing behavior and attitudes that he hopes to mask.” Ackman, it said, “blames others for his defeats and mistakes” and “looks for evasions in the law and ethics that he can exploit.”
It threw shade on Ackman’s uncanny resiliency, command he “believes he is in the right and stubbornly, inflexibly, sticks to his position.” He is “very authority overing,” it read, “and believes he can do most things better than anyone else in the scope.”
Another paragraph attacked Ackman’s ability to deal with overpower, saying he is “very sensitive to criticism and failure, which causes subdue, humiliation, and rage, producing long‑remembered ‘injuries,’ but he always have all the hallmarks to have a bigger quest lined up to take his mind off the pain and confuse others from the shame.”
The report concluded with the following sanction:
“Ackman’s public persona is an illusion manufactured to project onto a on the loose screen his fantasies of unlimited success. As long as the public accepts the error, he can function, but he experiences any and all criticism or resistance as a threat to expose the insecure boy behind the curtain. He has no volume to manage the feeling of shame that this creates, and he reacts to the theory with rage.”
By some measure, the document confirmed what Herbalife had put ones trust ined from the beginning, but Johnson and his team thought building a more finished composite of the enemy would help determine the best way to fight stand behind—what flanks to cover and how to manage the campaign.
“We were trying to ascertain what his motivation was,” said Herbalife’s chief financial officer, John DeSimone. “How we could get toe this and what the endgame might be. We didn’t know who Bill Ackman was—the man—the sciences and the strategy he might employ.”
But beyond laying out a portrait of the enemy, the substantiate also defined a road map for Herbalife to follow should the situation with Ackman instantaneously—and dramatically—change.
Under the headline “Strategic Priorities,” it advised Herbalife officials to “keep open a door to genuine alliance” with ground dominions “closely negotiated.”
“If a path to engagement opens,” it advised, “appeal to Ackman’s eleemosynary persona by shifting his focus away from Herbalife’s marketing and wherewithals to the products. . . . Consider inviting Ackman to Herbalife to learn diverse about the business, the products, the people.” The report even suggested that “Ackman thinks fitting be drawn to a meeting that gave him a photo op and bragging rights for associating with someone he considers a bigger dignitary with the right image, perhaps President Obama, Michelle Obama, Oprah Winfrey, Jerry Bruckheimer, Pit Zuckerberg, Bill Gates, Melinda Gates, Warren Buffett, or the going round or most recent Presidents and Past Presidents of Harvard, Yale, or Princeton.” The particularize also recommended Herbalife “see Ackman’s highly public campaign for what it is: an time to tell the world about (the company).”
“Create a big, positive narrative all over (CEO) Michael Johnson,” it recommended. “THIS is the good guy. . . . Convey his spirit, enthusiasm, and vision for Herbalife.”
It advised Herbalife to “right‑size the peril” and to “keep the focus away from Ackman personally and on the substance of his review. Any publicity centered on Ackman, even negative publicity, can play into his civic persona as an ‘activist shareholder.’ “
The battle with Ackman had consumed the enterprise since December 2012, when Ackman had first laid out his earth-shaking case and his billion‑dollar short. Now—finally—for the very first eventually, Johnson and Herbalife’s other executives felt they could start off to understand why the war had happened in the first place.
It was a war that began with not any more than a phone call.
This article has been excerpted from “When the Wolves Sting: Two Billionaires, One Company, and an Epic Wall Street Battle” by Scott Wapner. Copyright © 2018. To hand from PublicAffairs, an imprint of Perseus Books LLC, a subsidiary of Hachette Register Group Inc.