19 Oct

New York Post Story on Usana Cheating in China

Roddy Boyd at the New York Post has picked up the story about Usana illegally recruiting new associates in China.

Boyd explains China’s laws like this:

Since 2005, China has had very strict laws against multilevel marketing operations on the mainland. Usana, in its most recent annual report, said any entrance into the Chinese market would “require [Usana] to adjust our compensation and selling model.”

However, Hong Kong, which is controlled by China but has separate rules governing its economy, is Usana’s fastest-growing market, with sales growing at an 81 percent clip between the second quarters of 2005 and 2006, according to the company’s filings.

Here’s how Usana is cheating:

Minkow claims his investigators spoke to several Hong Kong-based Usana employees who discussed how they tell Chinese citizens interested in distributing the product that the first step to getting around the rules is to obtain an account at China Merchant Bank.

Minkow claims to have transcripts of phone calls between an investigator and another Hong Kong-based Usana employee, who also emphasized the importance of having an account at China Merchant Bank to set up Chinese distribution lines “[because] we will not send a check.”

And of course, Usana denies the hard evidence:

The spokesman said Usana has “zero tolerance for unethical behavior among the sales force” and that the company and its executives “instituted a strict compliance program to regulate all business activity, including adherence to all local market laws and regulations.”

Too bad Usana’s own employees are perpetrating this fraud, and they can’t push it off on some “rogue distributors.”

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