Helping a Billionaire Get Richer: Nonprofit Complicity and a Lack of Disclosure

I recently read a fascinating story in the New York Times about a hedge fund billionaire, William A. Ackman, who is attempting to destroy the company Herbalife after making a billion dollar short bet on the company.  He claims he is doing it for altruistic reasons, saying that it is a pyramid scheme that victimizes low income people of color, but the bottom line is, he and his business, Pershing Square Capital, stand to profit greatly if he can successfully drive the price of the company’s stock down below a certain level.

In his effort to win this billion dollar bet, Mr. Ackman has enlisted local, state, and Federal political figures to write letters and file complaints to Federal Trade Commission and Securities and Exchange Commission, including Congresswomen Linda Sanchez of California and Loretta Sanchez of New Mexico, as well as Senator Edward Markey of Massachusetts, whose letter containing inflated and incorrect information has initiated an FTC investigation.  (Senator Markey has recently had an ethics complaint filed against him because of his activities on behalf of the Ackman campaign)  To be honest, I have a cynical attitude when it comes to ethics and politics, so I am not surprised by this questionable behavior by politicians.

However, Mr. Ackman has also enlisted the help of several nonprofit groups that have taken a vocal stance only after receiving substantial donations from his company and its representatives.  Numerous organizations in several states participated in letter writing campaigns, using letters that were provided by Ackman and his paid consultants with “nearly identical wording” and signed by leaders of those organizations .  According to the Times, individuals associated with these nonprofits traveled to Washington D.C. to rally against Herbalife on Ackman’s dime.  Ackman has paid groups to set up toll free hotlines and videos on websites to locate possible “victims” of Herbalife.  Yet none of these groups had ever considered a campaign against the company before being lobbied by Ackman or receiving “donations”from his representatives, nor do they acknowledge his support in their efforts.

To be fair, Herbalife has made more contributions to similar nonprofits to gain their support in protecting its business.  It has paid a great deal of money to organizations to support them or at least stay neutral on the matter.

The ethical issue in this is the failure to disclose that the organizations are being paid by Pershing Square Capital or Herbalife.  According to the AFP Code of Ethical Principles and Standards, “Members shall effectively disclose all potential and actual conflicts of interest; such disclosure does not preclude or imply ethical impropriety.” By not acknowledging that they have received “gifts” from businesses that stand to gain financially from their support, these nonprofits are misleading the public and their supporters.  I personally and professionally find that disappointing.

Recently, Mr. Ackman said that,should his effort to destroy Herbalife succeed, he will donate his personal profits (not his clients’) to charity.  I wonder which charities will get that money?



About greatergoodfundraising

Richard Freedlund has been active in the nonprofit sector in a number of ways, both professionally and as a volunteer. He is the founder of Greater Good Fundraising, a business that helps schools and organizations raise money for their programs while accomplishing something positive for the community. After living in Oregon for 27 years, he has returned to his hometown of Rockford, Illinois and hopes to make his mark on the nonprofit sector there. He is the father of a talented jazz musician and the son of philanthropic parents that continue to support multiple causes. To contact Richard for consulting, fundraising, or speaking opportunities, email or reach him on @ggfundraise
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5 Responses to Helping a Billionaire Get Richer: Nonprofit Complicity and a Lack of Disclosure

  1. I voted no under the assumption that the question implies that it is not within the organization’s mission to do so.

  2. Marcy S says:

    This is definitely a special case, though probably more common than we think. But where do we draw the line? If I own a solar panel installation business, should I not be allowed to support non-profits that advocate for renewable energy subsidies that would benefit my bottom line?

  3. lnspencer says:

    Another sticky wicket you write about. Great article.

    • Thanks, Linda.

      I found the article and others associated with it intriguing. What bothered me the most was that the issue with Herbalife was never an issue with the groups until they took the money from the billionaire, and then they squawked louder than a murder of crows.

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