Carl Icahn, reviving a decade-old feud with hedge-fund manager William Ackman, said the founder of Pershing Square Capital Management LP is taking “inordinate” risks in a wager against Herbalife Ltd. disclosed last year.

Icahn, who spent more than seven years wrangling with Ackman in court over $4.5 million, said in an interview yesterday that Ackman’s assertion that he was shining a spotlight on Herbalife, the marketer of weight-loss and nutritional supplements, was “disingenuous.” In a statement today, Icahn said he would never invest with Pershing Square, citing Ackman’s short sale of more than 20 million Herbalife shares.

“Selling short 20 percent of the shares of a company such as HLF with limited partners’ money that can be withdrawn, in my opinion, leaves much to be questioned,” Icahn said. Noting that Ackman yesterday called him a “great investor,” Icahn said, “I thank him but unfortunately I cannot return the compliment.”

Ackman’s wager had already pitted him against Daniel Loeb in a rare public dispute among hedge-fund managers over whether Herbalife is a legitimate enterprise or a fraud. On Jan. 10, three weeks after Ackman disclosed his bet against Herbalife, Loeb’s Third Point LLC reported in a regulatory filing that its hedge funds held 8.9 million company shares at year-end.

Herbalife had about 108 million shares outstanding as of Oct. 24, according to the company’s latest quarterly report.

Sohn Presentation

Speaking at the Sohn Investment Conference in New York on Dec. 20, Ackman detailed his short-selling strategy through a presentation that lasted more than three hours, including a question-and-answer period, and featured more than 340 slides. Accompanied by Pershing Square’s chief attorney, Ackman said Herbalife uses inflated pricing, misleading sales information and a complicated incentive structure to hide a pyramid scheme

Icahn, in an interview yesterday with Trish Regan on Bloomberg Television, said he doesn’t “like” or “respect” Ackman and questioned his motives for publicizing the Herbalife short sale. In a short sale, an investor sells borrowed shares in anticipation the price will drop, providing a profit when the trade is closed out.

“You don’t go out and get a room full of people to bad- mouth the company,” Icahn said. “If you want to be in that business, why don’t you join the SEC,” Icahn added, referring to the U.S. Securities and Exchange Commission.

Legal Dispute

Icahn, like Ackman, has been accused of using aggressive tactics to squeeze profits from his investments. During a takeover battle for Trans World Airlines in the 1980s, TWA Chairman C.E. Meyer Jr. famously described Icahn as “one of the greediest men on Earth.”

Ackman said yesterday in an interview that the falling out between the two dates to 2003, when his Gotham Partners LP and its affiliates agreed to sell Icahn a 15 percent stake in Hallwood Realty Partners at $80 a share. The contract included a provision that Icahn called “schmuck insurance,” according to Ackman: if Icahn sold the stake at a higher price within three years, Ackman’s investors got to share in the added profits.

A year later, Hallwood was sold for about $136 a share and “Carl owed my investors about $5 million,” Ackman said in the interview. Icahn refused to pay and Ackman sued, starting a court battle that would last until 2011, according to Ackman, when his investors finally got their money.

‘Never Asked’

“Eight years after he was supposed to pay, we got justice and Carl paid,” Ackman said. “He called me to congratulate me for winning and said, ‘Now we can be friends.’ I told him I had no interest in being his friend.”

Icahn disputed that version of events in today’s statement.

“To get the record straight, I never asked Ackman to be my friend,” he said.

Icahn said he was helping Ackman “out of a jam” in the 2003 transaction. Hallwood was acquired in a merger rather than through an outright sale, Icahn said, adding that his firm voted against the deal.

“We did not believe that the agreement covered such a situation,” he said. “However, Bill sued and was able to convince New York courts” not to follow precedents set in other states.

After Herbalife (HLF) closed at $42.50 on Dec. 18, the day before Ackman’s wager against the stock was first reported by CNBC, the shares dropped more than 12 percent the next day. By Christmas Eve they closed at $26.06, down 39 percent in four trading sessions.

Charity Pledge

Herbalife shares have rallied since the conference after the company and other investors rebutted Ackman’s case. The stock rose 0.8 percent today to close at $43.59 in New York.

During the conference, Ackman said he had turned over more than a year’s worth of research to the U.S. Federal Trade Commission in support of his contention that Herbalife is a pyramid scheme, adding that he would give any profits from the short sale to charity. After Third Point questioned the basis of Pershing Square’s thesis in a January note to clients, Ackman said his goal was to “shine a spotlight” on Herbalife “so that the world better understands” the facts about the company.

In yesterday’s interview, Icahn questioned Ackman’s motives and said the money manager was being “completely disingenuous” about shedding light on the company. “But I think Bill Ackman is disingenuous,” he said.

New Fund

Regarding Ackman’s plan to donate any profits from the trade, Icahn asked during the interview, “Is he giving the money he makes for all his limited partners to charity?” If his investors profit, the billionaire said, Ackman “becomes famous” and “gets more money in” for new hedge funds.

Pershing Square is seeking at least $3 billion for a new fund that will eventually be publicly traded on the London Stock Exchange, according to a November investor letter. The firm had raised $2.2 billion, according to the letter, primarily from existing clients who converted some or all of their holdings in the firm’s other vehicles.

Icahn and Ackman have a similar approach to investing. Both short stocks they deem overvalued and both buy shares in companies they view as under-performing and then agitate for changes designed to drive the company’s value up.

Icahn’s returns have been getting a lift from the 10 percent stake in Netflix Inc. (NFLX) he reported holding in September. Netflix shares soared 42 percent yesterday after the world’s largest online-video service reported an unexpected profit, leaving Icahn with a $490 million one-day paper gain on his investment.

Fund Returns

Ackman’s funds have been hurt by the 18 percent stake Pershing Square acquired in retailer J.C. Penney Co., last year’s fifth-worst performing stock in the Standard & Poor’s 500 (SPX) Index. Ackman ended the year with a 13 percent gain, according to an investor briefed on the returns, compared with the 16 percent return by the S&P 500, with reinvested dividends.

Pershing Square averaged annual returns of 16 percent from its inception at the end of 2004 through November, said the investor, who requested anonymity because the information is confidential. The returns are net of the fees Ackman charges clients, listed as 1.5 percent of assets under management and 20 percent of profits in Pershing Square’s registration with the SEC.

Icahn’s Gains

Icahn, who returned capital from outside clients in 2011, said on CNBC today that his investments generated a 28 percent return last year. He had a 5 percent return after expenses through the first nine months of the year, according to a quarterly report filed by Icahn Enterprises Holdings LP with the SEC on Nov. 13.

In 2011, Icahn generated a 35 percent return before fees, according to Icahn Enterprises. Icahn’s annual returns averaged 13 percent from the inception of his hedge funds in November 2004 through September, the holding company’s filings show. The average annual figure is before fees that Icahn collected from outside investors until two years ago.

Icahn, in yesterday’s interview, wouldn’t confirm a New York Post report from earlier this month that he had also acquired shares in Herbalife after learning of Pershing Square’s trade, a move that could help drive the stock up and thereby reduce Ackman’s profits.

“It’s no secret I don’t like Ackman,” Icahn said. “But that doesn’t mean I am going to go in and buy stock in a company necessarily just to get him.”

To contact the reporter on this story: Miles Weiss in Washington at mweiss@bloomberg.net

To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net