Usana’s “strong” return on equity numbers

Standard issued some upgrades and downgrades late last week, and had this to say about Usana Health Sciences:

Nutritional and personal care products developer USANA Health Sciences (USNACramer’s TakeStockpickr) has been upgraded to a buy from a hold. Its revenue increased by 16.9% in the third quarter compared with the same period last year. Earnings improved to 70 cents a share from 55 cents per share over the same timeframe.

The company’s return on equity improved to 184.53% in the third quarter compared with 78.97%, a signal of significant strength within the corporation. This return on equity greatly exceeds that of both the industry average and the S&P 500. USANA Health had been rated a hold since August 2007.

Somebody missed the boat when they said that the return on equity figure was a sign of “strength.”

Usana’s return on equity ratio has gotten so high because of the share buyback program. Usana has significantly reduced the shareholders equity figure on the balance sheet, so even if earnings remain at a constant level, the return on equity ratio will go up a lot.

And… they also failed to realize that at the same time shareholders equity is plummeting, the company’s debt level is skyrocketing. Not a sign of strength at all.

KPMG Trial Delayed


he trial of KPMG executives charged with creating and marketing illegal tax shelters has been delayed. 13 accused executives had all charges dropped after a judge recently ruled that it was illegal for the government to pressure KPMG to not pay the legal fees of the 13.In this latest twist, the trial is being delayed because of a claim that one of the defense lawyers has a conflict of interest. Judge Lewis Kaplan delayed the case (that was to begin on Tuesday) and removed Steven Bauer of Latham & Watkins, who was representing John Larson.

Larson did not waive his right to have an attorney without a conflict of interest. The alleged conflict came about because Bauer was the attorney for David Makov, formerly charged in the case. Makov is going to testify for the government in the case, so this may be a conflict in representing Larson.

Mannatech Fires Auditors Grant Thornton


Mannatech Inc. fired its auditors, Grant Thornton, after refusing to comply with GT’s demand that Sam Caster be removed from all duties. Caster is the founder of Mannatech and the current chairman of the board. He resigned as CEO two months ago after Texas started legal proceedings against the company for making illegal health claims about their products.The Board says it didn’t remove Caster from his duties because it wasn’t “in the best interest of shareholders.” Mannatech’s SEC filing regarding the firing of the auditors said that there were no disagreements about accounting principles, audit scope, or financial disclosures.

The new auditors for Mannatech will be BDO Seidman.

An American Hedge Fund


I have been remiss in my duties…. I promised Timothy Sykes that I’d review his book, An American Hedge Fund on FRAUDfiles. And I still haven’t gotten around to it, thanks to an upcoming move of my office and a dozen other work-related things that have needed my urgent attention.

I promise to do a real review soon, but for now, this is it. I read the book a couple of months ago, and it was fantastic. Timothy basically took $12,000 from his bar mitzvah and turned it into over a milllion dollars in three years. He started his own hedge fund and had lots of ups and downs.

But people working within the hedge fund industry have many regulations about what they can say about the industry. So in order to really be able to talk freely about the industry, Timothy has closed his hedge fund and is now promoting his book.

My full review of the book soon…

Usana tries to spin NASDAQ news into something else


When Usana lost auditors Grant Thornton, it filed an unreviewed 10-Q, prompting a delisting warning letter from NASDAQ. Following the hiring of PriceWaterhouseCoopers as the new auditors, Usana filed an amended 10-Q, which brought them back into compliance with SEC rules.

Yesterday, a NASDAQ panel determined that the company is compliant and in no current danger of delisting. In true Usana style, CFO Gil Guller added his own little spin to the NASDAQ decision:

“The Panel specifically recognized that USANA’s Audit Committee completed an investigation of the allegations made by third-party detractors, and that the Audit Committee found no merit to them.”

That was an excellent attempt at making it appear that NASDAQ says the allegations made by Fraud Discovery Institute and being investigated by the SEC are without merit. On the contrary, I think it really means that NASDAQ was informed that Usana’s audit committee has done their little “investigation.” That’s all.

I’m quite sure NASDAQ said nothing to the effect that they think the allegations have no merit. Nice try, Gil.

Mandatory Arbitration With Credit Card Companies


Last week, investigative journalist Gary Weiss wrote a article on credit card arbitration. It highlighted a process that I didn’t know a whole lot about. It seems that most (if not all) credit card agreements these days have some teeny-tiny print about mandatory arbitration. It basically means that if you have a dispute with your credit card, you can’t go to court. You’ve already agreed to go before an arbitration board (the National Arbitration Forum), and they are apparently often unfriendly to consumers. Continue reading

Can you really avoid an IRS audit? (Or at least reduce your chances?)


Yes and no. Great accountant answer, huh? The truth is that the Internal Revenue Service has some special red flags in place that help flag your tax return for an audit. Those super-secret red flags are revealed to no one. Apparently the IRS system takes your tax return data, runs its super-secret algorithm, and decides if your tax return is a high risk for problems.

So the usual way you get flagged for an audit is due to what you’ve reported on the face of your tax return. Home office deductions have long been dogged as items that increase your chances for an audit, and I tend to believe that’s true. Why would a home office be a red flag? It’s a much-abused deduction, and it can be closely tied to other questionable deductions like those from a multi-level marketing “business.” Continue reading

Local Lawyer Defending Wesley Snipes


It’s not often that a Milwaukee lawyer is hired to represent a Hollywood actor, so I have to mention this one. Wesley Snipes has fired Billy Martin, and hired Robert Bernhoft of The Bernhoft Law Firm. Bernhoft represented Snipes previously in a paternity suit, and is now on board to help defend against tax fraud allegations.

Snipes was in a bit of trouble though, because his tax fraud trial was set to start next week in Florida. The judge wasn’t too happy that he fired his lawyer and got a new one, and then asked for the trial to be continued. The judge thought it was all a ploy to delay the trial. Continue reading