It is hard to say which is more surprising: A Wall Street baron hiring top-level Democratic operatives to use the federal government to try and force a $6.7 billion company out of business – and help him collect on a $1 billion bet that the company’s stock will go down. Or the New York Times actually publishing a great story about this toxic blend of liberal politics, government regulation and Wall Street. 

Either way, the story is rocking political and financial circles around the country.

It is no secret that William Ackman and his investment company, Pershing Square, were going after Herbalife. Fourteen months ago, he began his campaign with a $500 million purchase of shares that would go up if the value of the downtown L.A. company’s stock went down. Last year, he even doubled down on his wager. It’s called selling short, and that is not the controversial part. 

The Times pieced together how Ackman hired top-level former aides to Presidents Barack Obama and Bill Clinton as well as Democratic lawmakers who regulate the federal regulators, and how they spread out across the country to convince Democratic lawmakers and liberal interest groups – mostly black and Hispanic – to join in.

The Times began its story with a conventional dinner meeting of hedge fund managers in New York. Ackman had a dog-and-pony show about how the price of Herbalife stock was destined to go down. Fair enough, so far. Then the Times described how it got strange:

“Mr. Ackman told his dinner companions that Rep. Linda T. Sánchez, Democrat of California, had sent a letter to the Federal Trade Commission the previous day calling for an investigation of the company.

“The commission had not yet stamped the letter as received, nor had it been made public. But Mr. Ackman, who had personally lobbied Ms. Sánchez and stood to profit if the company’s stock dropped as a result of the call for an inquiry, already knew what it said, and read from a copy of it that he had on his cellphone.

“When Ms. Sánchez’s office ultimately issued a news release a month later, it was backdated as though it had been made public the day before Mr. Ackman’s dinner talk.”

That kind of thing – releasing inside info to an investor that could materially affect the price of a stock – could land a chief executive in a federal penitentiary. But to Sánchez, it was a constituent service.

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