Not too many movies start with the hero directing a makeup artist to make him look "authentic."
The audience in my theater laughed at the irony of the remark because the fellow is not an actor, but hedge fund manager William Ackman, the chief executive officer and portfolio manager of Pershing Square Capital Management. And the cosmetics being applied to his face might as well be war paint.
In the new documentary Betting on Zero, which debuts on video on demand today, Ackman goes on a nearly five-year quest to publicly sell short the nutrition supplement multilevel marketing (MLM) firm Herbalife. Anyone who has seen The Big Short knows that it's possible to get wealthy off of a company or even an industry's collapse, but as director Ted Braun (2007's Darfur Now) explains, Ackman's wager is far from safe or easy.
"[Ackman] had put a billion dollars of his investors' money on the line in a short position, in which the risk is theoretically infinite, " Braun says, adding that because Ackman had been so public about his beliefs, he also risked massive damage to his personal reputation.
"On Herbalife's side, the future of the company, that's a lot on the line. Regardless of who's right or who's wrong, I think a filmgoing audience would be caught up in a story where there was so much at stake and where the combatants were morally complex, where it was hard to determine by conventional standards what was motivating people and why they were doing what they were doing."
Like his rival activist investor Carl Icahn, Ackman can publicly make or break a company. Throughout the film, Ackman says he'll donate his own share of the bet to charities that benefit people he claims Herbalife has defrauded. He and Icahn, who owns a quarter of Herbalife and fights just as fiercely as Ackman, seem more intent on humiliating each other than debating whether Herbalife is a legitimate concern.
This is the sort of yelling match one might encounter at any time on CNBC or Bloomberg, but Ackman has hardly taken his fight with Herbalife lightly.
An Odd Road to Wellville
Since its founding in 1980, Herbalife has been controversial. Founder Mark Hughes started the firm from the back of his truck and could give stirring speeches (which are excerpted in Betting on Zero) that have attracted millions to the company. In 1985, however, the company settled with the California attorney general for $850,000 for exaggerating the benefits of its products.
More recently, in July, the company paid $200 million to settle with the Federal Trade Commission and the state of Illinois. The FTC suit claimed that most Herbalife distributors make little or no money, and that there's more cash to be made from selling memberships than shakes.
"The film doesn't take up in any significant way the merits or the lack thereof of the products Herbalife sells. The nutritional products space is not one that is closely regulated. It's an area where inflated claims of efficacy are commonplace," Braun says. "Though there's little that substantively distinguishes Herbalife from competitors' products on the shelves, the price that their distributors are selling it for is rather astonishingly three to four times what you could get on a grocery shelf. That price difference is a head scratcher because their president in our film is saying that joining Herbalife is just like joining Costco, but if you join Costco, you will pay considerably less than retail for the products you get."
The company has also come under criticism for targeting people who can ill-afford to lose money starting a career selling or distributing their merchandise. In Betting on Zero, activist Julie Contreras, with the Commission for the League of United Latin American Citizens in Chicago, and former distributor Zak Kirby both say Herbalife targeted their communities and hurt the people there. Kirby ran his stores from the struggling Oklahoma town of Ponca City.
"One of the points (Kirby) makes and some of the points the Latinos in the film make is that they were approached at moments when they were economically vulnerable and to some extent emotionally vulnerable as well," Braun says. "They felt that they had very few options and they were closed out from dreams that they previously thought they could realize. It was at this moment that someone from Herbalife approached them. From what they've said and what I've gleaned during the research during the film is that this is very much a strategy that experienced recruiters often turn to people at vulnerable moments because they realize that they're likely to take a chance and sign up. More often than not, that proves to be disastrous decision."
"The economic loss is only part of the loss that the folks who get drawn into this suffer. As you can see from the film, families are torn apart. Marriages often suffer a horrendous strain. In addition to losing money, people lose a great sense of themselves, their identity and their sense of self-worth."
A Durable Foe
Herbalife may have agreed to change its business practices and pay off the latest settlements, but the company has proved remarkably adept at surviving scandals. For example, it's hard to imagine anyone buying health products from the firm after Hughes himself died in 2000 of an overdose of alcohol and the antidepressant doxepin. He was only 44.
So how has the firm managed to survive for so long?
"That's an excellent question that the film, Mr. Ackman and Herbalife's critics have never been quite able to answer," Braun says. "Despite a damning regulatory filed by the Federal Trade Commission last summer and settled, the stock price of Herbalife remains resilient. Whether it remains resilient in May will be determined when the auditor decides if Herbalife is in compliance with the settlement. It remains to be seen."
Icahn is now the head of President Donald Trump's group examining regulatory reform, so the company may continue for the foreseeable future. Before you change your party registration or write a thank-you note to the White House for ensuring Herbalife survives, Braun says there are several factors that have kept Herbalife afloat.
"Former Secretary of State Madeleine Albright is a paid consultant, and the former mayor of Los Angeles, Antonio Villaraigosa (both Democrats) is a consultant," Braun says. "With the resources that they have, they've been able to attract very powerful people who seem content to go to Herbalife and help maintain them as a profitable company."
The company has accused Braun of being shill for Ackman and has even put up a site (bettingonzero.com) that might distract viewers from finding the official one (bettingonzeromovie.com).
"Bill Ackman's not paying for this film," Braun says. "It was financed and paid for by Biltmore Films, which has no relationship or connection with Bill Ackman. That move was made without ever having seen the film and without participating in the film. [Herbalife was] offered ... a chance to be in the film, the executives and the distributors, but they declined."
One factor that supports Braun's assertion is that Betting on Zero is loaded with irony. When Kirby says he feels he's on better moral ground switching from Herbalife to vaping, my audience had a good chuckle even though they probably agreed with him.
"A huge part of what drew me to this story was the moral complexity of the situation in the fact that with Mr. Ackman we had a seemingly unlikely person to go on a moral crusade," Braun says. "In Herbalife, we had something that seemed to be a perfectly fine presentation of things that Americans value: health, nutrition and a shot at realizing your economic dreams."
A Welcome Similarity
If following actor Don Cheadle around as he lobbied a variety of organizations in his earlier documentary Darfur Now seems distinct from examining corporate feuds and potential pyramid schemes, Braun says both films are remarkably similar.
"Comparing Darfur Now and Betting on Zero, thematically the films didn't seem to have a lot to do with each other," Braun says. "When I started Betting on Zero, I wasn't thinking in an explicit way about its similarities to Darfur Now, but as the story unfolded and certainly by the time we got deep into the editing of it, I began to recognize that the film Betting on Zero that started off as an exploration of the role of money in American life had really turned around to look at the place of justice and fact in American life. And what brought these two rather strange bedfellows together, Julie Contreras and Bill Ackman -- unlikely allies -- was the shared belief in that the American dream was more than just money. It was about a sense that, regardless of your economic station in life, the government would protect you. You could bring your case before the courts or the regulatory agencies of this country and get a fair shake, that the truth and the facts would come to light and be weighed fairly.
"The important place that justice plays in people's lives and the importance of a functioning judiciary was certainly something that was central to Darfur Now."
MovieStyle on 04/07/2017
Print Headline: Stakes high as film targets Herbalife