May 9 (Bloomberg) -- Herbalife Ltd., the nutrition company at the center of a battle between hedge-fund managers Bill Ackman and Carl Icahn, was prompted by federal regulators in March to disclose payments to two directors who are also distributors.
Herbalife added the disclosure before filing its April 2 proxy statement, saying Director John Tartol was paid about $3 million in 2012 for mostly royalties and bonuses related to his work as an distributor, according to correspondence with the U.S. Securities & Exchange Commission made public today. Director Pedro Cardoso earned $1.59 million, according to the Cayman Islands-based company.
Tartol and Cardosa are part of Herbalife’s Chairman’s Club of distributors, whose members Ackman, founder of New York hedge fund Pershing Square Capital Management LP, has said are at the top of an illegal pyramid scheme. The men earned the royalties and bonuses from their work selling Herbalife products and coaching other distributors.
Herbalife has repeatedly denied Ackman’s assertions, saying it derives its profits from the sale of unique products.
The U.S. Securities and Exchange Commission said in an April 2 letter that it had completed its review of Herbalife’s preliminary proxy. The preliminary filing had showed only the men’s director compensation.
The SEC also asked Herbalife in a March 21 letter to include more details in its proxy statement of an arrangement with Icahn that led to shareholders adding two directors associated with the investor, who has come to Herbalife’s defense. Herbalife previously disclosed that it had agreed to increase its board to 11 directors and nominate two Icahn designees.
Herbalife shares rose 1.8 percent to $44.44 at 12:28 a.m. in New York. They’ve advanced 33 percent this year before today, compared with a 14 percent gain for the Standard & Poor’s 500 Index.
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