(Corrects 10th paragraph to show company says it does not pay for recruitment)
* More information on earnings by distributors
* Company president concedes data may not placate critics
* Hedge fund manager Bill Ackman has big short position
By Martinne Geller
NEW YORK, Feb 6 (Reuters) - Herbalife Inc, the embattled nutritional supplements company, is disclosing more information about how much its U.S. distributors earned in 2012 than it did in 2011, though the details are unlikely to satisfy critics like billionaire hedge fund manager Bill Ackman.
Specifically, Herbalife laid out on Wednesday the ranges of gross compensation it pays to distributors at various levels, how many distributors it had last year at each level, and what their average gross payments were.
The shift toward greater disclosure comes in the face of an attack by Ackman, who has a $1 billion bet against the company and alleges that its direct-selling model is nothing more than a "well-managed pyramid scheme". He has said he believes the company's stock price will eventually go to zero.
The new disclosure, to be posted on Herbalife's website on Wednesday, is more open about how much money Herbalife pays its independent sales people, a central theme in the high-stakes debate over the legitimacy of its business.
Herbalife President Des Walsh told Reuters that Herbalife is not a pyramid scheme because its distributors do not get paid anything for recruitment in and of itself. He does agree that recruitment is a path to greater income, since distributors can get payments related to the sales performance of distributors they recruit.
In Herbalife's 2011 disclosure about distributor compensation, it only mentioned payments for those distributors that made it to supervisor level or higher, a group that in 2012 only accounted for 17 percent of all U.S. distributors. It also did not say in 2011 how many people were at each level, describing the level's size only as a percentage of an undisclosed total.
Still, the increased disclosure is unlikely to silence critics like Ackman, who asserts that Herbalife distributors make 10 times as much from recruitment as they do from selling product.
"We believe many of those critics are guided by a profit motive and to that extent it is likely that any information we provide will continue to be criticized, not because of its insufficiency or its inadequacy, but simply because it is not in the interest of these people to accept anything that we say," Walsh said in an interview on Wednesday.
The disclosure, which Reuters reviewed before its posting, also mentions a "money-back guarantee" of 90 days for its "international business packs" and one year for return of resaleable inventory upon leaving the business.
It also says distributors are not paid for sponsoring new distributors.
The amount of money made from selling product, versus recruitment, is something regulators would consider in determining if a direct-sales company is a pyramid scheme.
Officials at the U.S. Federal Trade Commission have described pyramid schemes as arrangements where promised profits are based on recruiting others, rather than any real sale of goods to the public.
Herbalife is a 32-year-old company that sells products through a network of independent distributors, some of whom set up shops where customers go to have Herbalife diet shakes or tea. It has denied Ackman's claims, saying it is a financially strong and successful company.
Walsh said the company wants to give prospective Herbalife sellers and investors more information.
He said the company is also planning to hire a vice president of research, which will help it get a better sense of its market. The company recently initiated a search, Walsh said, and hopes to fill the position in a few months.
Compensation in 2012 ranged from average payments of $104 for 2,466 people at the lowest distributor level to average payments of $724,030 for 194 people at the top.
But the payments do not include money earned on actual sales of Herbalife products to others, or take into account expenses incurred by the distributor, which could include product and advertising costs, training, rent and travel costs.
As such, Herbalife cautioned that the figures are not actually representative of the compensation a distributor will receive.
Herbalife said in the 2012 disclosure that 88 percent of its distributors received no payments in 2012, as 71 percent of them did not sponsor other distributors. The remaining distributors did sponsor other distributors, but did not earn any money since the sponsored distributors did not have meaningful sales.
Herbalife also said that 73 percent its distributors join the network primarily to receive wholesale prices on the product, rather than to make money.
In addition to the more detailed data, Herbalife adopted a cautious tone in its statement, warning potential sellers that an Herbalife distributorship is "something like a gym membership: results vary with the time, energy and dedication you put into it".
"It is hard work," the statement said. "There is no shortcut to riches, no guarantee of success."
BATTLE OF THE TITANS
Herbalife shares tumbled nearly 39 percent in the days following the December news that Ackman's $11 billion fund Pershing Square Capital had a short position valued at around $1 billion. It more than recovered but then fell again in January on fears of U.S. regulatory action.
The shares closed at $35.75 on Tuesday, down about 40 percent from a year ago.
In preparation for a counter-attack, Herbalife has bought several domain names, including "billackman.biz," "billackman.info," and "billackman.net." But Walsh said the company has not yet decided what to do with them.
Aside from Ackman, the storm over Herbalife is attracting other influential investors. Third Point's Daniel Loeb has a stake in the company and has come out against Ackman's argument, and Carl Icahn is reported to have a stake though he has not publicly confirmed it.
Icahn had slammed Ackman's position and the two billionaires later faced off on live television in a bruising verbal scrap that included insults and expletives.
Earlier this week, Herbalife shares fell after a New York Post report said it was the object of a law enforcement probe, citing a disclosure by the FTC that was later described by the agency as containing inappropriate boilerplate language.
Federal and state regulators shut down direct-sales company Fortune Hi-Tech Marketing last month following complaints that the company was operating a pyramid scheme. (Reporting By Martinne Geller in New York; Editing by Tim Dobbyn)