Bill Ackman’s Secret $$ Deal for Herbalife Whistleblower

April 22, 2014 — -- In his year-long campaign against the embattled Herbalife company, Wall Street hedge fund manager Bill Ackman secretly promised a disgruntled former company executive as much as $3.6 million over 10 years if he lost his job after providing information to government investigators and the media.

Ackman’s firm so far has paid the whistleblower $80,000 under the arrangement, according to the former Herbalife executive’s lawyer.

“It was the right thing to do,” Ackman told ABC News.

The hedge fund run by the prominent Wall Street investor, known for his “short” positions, stands to make $1 billion if the price of Herbalife’s stock collapses as a result of his allegations the company is a fraud, a charge the company strongly denies.

The agreement between Ackman and the former executive, Giovanni Bohorquez, was signed in June 2013 but required both sides to keep it confidential.

Two months later, the New York Times published a critical article about an alleged problem in 2011 at an Herbalife manufacturing plant based on internal documents provided by a person described only as a “former employee, who was granted anonymity out of fear of retribution from the company.”

Herbalife says the former employee is Bohorquez and that any alleged manufacturing problems were quickly and safely resolved.

The article said the former employee’s legal bills were being paid by Ackman.

In December, after extensive discussions with his attorney, Bohorquez agreed to be interviewed on camera by ABC News for a report about his experience inside the Herbalife executive offices.

During the on-camera interview, which Ackman’s public relations team helped to arrange and which Bohorquez’s attorney attended, Bohorquez flatly denied he was being paid anything by Ackman or receiving any benefit other than his travel expenses and lawyers’ fees and legal costs.

“I’m not getting a benefit,” he said.

Asked last week why he did not disclose the additional arrangement with Ackman during the interview, Bohorquez said his answers were truthful because he had not invoked the provisions at the time and so had not yet collected any money.

“I didn’t tell you because I was not looking at using it,” he said.

His lawyer, Stephen D. Alexander, said ABC News did not ask “the right questions” and should have assumed there was more to the indemnification arrangement for Ackman to cover legal costs than Bohorquez said.

“We described the fact that he was indemnified for litigation,” Alexander said, but added, “We never told you, I admit, about the terms of the indemnification agreement.”

Bohorquez, who left Herbalife in 2011, said he lost his new job at a chain of laundromats before the ABC News interview due to the stress of being whistleblower. He said he began collecting the $20,000 monthly payments under his arrangement with Ackman a few weeks after the ABC News interview because his wife had also lost her job.

“This opportunity to do justice to the things that I saw came up, and Pershing Square [Ackman's hedge fund] indemnified me from what would happen if I were to lose my job,” Bohorquez said.

Ackman said he thought Bohorquez and his lawyer had disclosed the deal.

“He should disclose it, absolutely. Absolutely,” said Ackman.

But Ackman’s own public relations team also failed to reveal the secret arrangement prior to the interview.