Article on NuSkin Fraud in China


Today Citron Research released a report on the fraud being committed in China by Nu Skin Enterprises. NuSkin is a multi-level marketing company based in Utah, and it trades on the New York Stock Exchange under the symbol NUS. This report is a follow-up to an August 2012 report in which Citron revealed its basis for alleging that Nu Skin was perpetrating fraud in China.

Citron first points out how dependent on China Nu Skin is.  In the second quarter of 2012, revenues from China were $57 million. In the second quarter of 2013, Nu Skin’s China revenue grew to $197 million. That’s a 245% increase. Without the China revenue, NuSkin’s year-over-year growth would be negative.

An expose was published in China on NuSkin. A translation of the page can be found here. The article accuses Nu Skin of running a pyramid scheme, using endless chain recruitment to bring new marks into the fraudulent business opportunity. Distributors are encouraged to buy inventory in quantities they will never sell, all to move up in the pyramid and qualify for commissions. (Incidentally, this is the same way that Mary Kay Cosmetics has been successful.) Continue reading

Acquisition by Usana Health Sciences Gets Them Into China (Legally, This Time)


A few years ago, I was involved in an investigation of multi-level marketing company (MLM) Usana Health Sciences (NASDAQ:USNA).  One of the allegations that came out during that investigation was that Usana was illegally conducting business in China. China has strict laws against multi-level marketing, making it impossible for the company to do business there under its current MLM model.

Usana had legitimate business operations set up in Hong Kong, which does not have laws prohibiting multi-level marketing activities. It was alleged that Usana was using the Hong Kong employees to get access to people from mainland China, and show them how to circumvent the laws to participate in MLM. Continue reading

Usana Health Sciences Knows it Products are Being Sold Illegally in China


Almost three years ago, Barry Minkow and Fraud Discovery Institute released a report on Usana Health Sciences (NSDAQ:USNA), listing ten red flags of fraud he and his team (which included me) uncovered about the company. The report criticized the company’s business model, essentially calling it a pyramid scheme in which recruiting is the focus (rather than the actual sale of products) and pointing out how little money Usana distributors actually make.

For example, the company touts average income of $802.62 per North American distributor per month. But that’s very misleading. The income is very top-heaving, meaning a select handful at the top of the pyramid make a lot, and almost everyone else makes nothing. Further, this is gross income, not net. Associates have to pay all their business expenses out of this, leaving them with much less at the end. Continue reading

Government Officials in China investigating Usana


FDI: China Government Issues Official Interrogation Notice on Usana Health Sciences Inc. Associate for Alleged Multi Level Marketing Activities in Nanning, the Capital City of the Guangxi Province in Mainland China

FDI also releases several new Web sites that demonstrate that Usana Health Sciences Inc. (NASDAQ: USNA) is recruiting Chinese nationals for multi level marketing in down lines that are literally from Malaysia to Mexico. Continue reading