An Herbalife Ltd. independent distributor packs individual bags of products for his customers at the Los Angeles Distribution Center in Carson, California, U.S., on Tuesday, March 4, 2014. Photographer: Patrick T. Fallon/Bloomberg

New York - Herbalife, the company that hedge fund manager Bill Ackman has accused of being a pyramid scheme, is being probed by the FBI, according to a person familiar with the matter.

Federal authorities were looking into the company’s marketing practices, said the person, who asked not to be identified as the investigation was private. The Financial Times reported the investigation on Friday, saying the FBI and the US Attorney’s Office in Manhattan were involved.

Herbalife, which said on Friday it had no knowledge of an FBI or Justice Department enquiry, has spent more than a year denying Ackman’s accusations that it misleads distributors, misrepresents sales and sells a commodity product at inflated prices. In that time, the company has won allies such as billionaire Carl Icahn, who has become its largest shareholder.

“Not every probe leads to an indictment,” said Meredith Adler, an analyst at Barclays in New York. Adler, who recommends buying the shares, said she would wait for more details and developments before forming an opinion.

Shares of Cayman Islands-based Herbalife dropped 14 percent to $51.48 (R538) in New York on Friday, the biggest one-day decline since December 21, 2012, the day after Ackman laid out his arguments.

Representatives of Icahn and Ackman did not respond to requests for comment. Jim Margolin, a spokesman for Manhattan US Attorney Preet Bharara, declined to comment.

Herbalife, which sells vitamins and meal-replacement shakes through a network of independent distributors, said on Friday that it had not received requests for information from the FBI or Justice Department.

The group said last month that the Federal Trade Commission had started a civil probe into its practices, which Ackman had sought since his firm, Pershing Square Capital Management, bet $1 billion against Herbalife’s shares.

The commission had been asked by Senator Edward Markey to look into Herbalife’s business practices, and an advocacy group called the League of United Latin American Citizens had met agency chair Edith Ramirez to describe alleged abuses by the company.

Defending Herbalife has been Icahn, who early last year disclosed he had taken a stake in the nutrition company and said he would discuss strategic alternatives with its management, which works from Los Angeles. – Bloomberg