Multi-level marketing companies (MLMs) are nothing but legalized scams. Make no mistake… they are pyramid schemes, but the government allows them to operate. Why are these obvious Ponzi schemes (which, by the way, the MLMs will swear up and down they are not… thou doth protest too much) allowed to operate? Who knows why the government will not crack down on this massive consumer fraud. The best thing we can do is educate consumers about the evils of multi-level marketing so they can avoid these companies… that means NOT becoming a distributor and NOT buying any of their products.
MLMs use products to make their companies look legitimate. They can’t be a scam if they are selling an actual product, right? WRONG. They absolutely can be a scam, because the product is simply a “front” for the scheme they are running. The product is meant to make the company look legitimate and hide the fraud.
The products from nearly every MLM are overpriced. That is, they cost more than comparable products available through legitimate channels (i.e. real retailers). The distributors will tell you it is because the products are very high quality!!! The magic juice has vitamins that are more bio-available! The make-up has better ingredients! The clothes are made better! The pills have super secret magical powers that cure all illnesses! These are all lies. The products are not better. Continue reading
Usana Watch Dog has been busy compiling more data about the Usana Health Sciences “business model” for distributors. He writes about what I already know from my years of research into multi-level marketing schemes: Nearly everyone loses money in these schemes, and those who do make living are almost always those at the top of the pyramid. 99% of the people lose money so that a fraction of 1% at the top can make the big money. That, my friends, is no legitimate business model.
Our friend Usana Watch Dog has compared the 2006 data compiled by Usana on their distributors to the data he was able to manually extract from what Usana currently publishes. You can see from the 2006 data that the vast majority of the distributors who are receiving commission checks are “sharers” or “believers,” and they were earning an average of about $200 per year. Incidentally, this $200 is not even enough to cover the minimum purchases the distributors are required to make in order to continue to be eligible to receive a commission check. Continue reading
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
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
Consumers are often left wondering why the Securities and Exchange Commission doesn’t heavily pursue allegations of fraud against public companies like Overstock.com (NASDAQ:OSTK), Usana Health Sciences (NASDAQ:USNA), Herbalife (NYSE:HLF), and the like. I’ve always said the answer is simple: There are not enough resources devoted to investigating and prosecuting fraud in public companies. Executives are free to use phony accounting measures and other false information to hype the company with little fear of action by the SEC. Continue reading
Back in April I told you that Usana Health Sciences (NASDAQ:USNA) would be rolling out a new “energy drink” at their annual convention:
The new product is an energy drink. Apparently, studies by Usana show that you could get a bigger kick from a cup of coffee, but they are counting on the cult mentality to sell the product. Usana-heads will believe management… If they say it gives you energy, then by golly, it gives you energy!
The details are set to be released to the sales force at the convention next week, but here they are… Continue reading
If you’ve ever been involved in a multi-level marketing (MLM) company of any kind, you know that one of the favorite recruiting grounds is churches. Especially with companies that supposedly promote “Christian” values (like Mary Kay), the church is the logical place to find recruits.
Sadly, many pastors have no idea how abusive the MLM business structure is, and the fact that 99% of participants in MLMs actually lose money. Oh sure, it sounds great to be self-employed and to help others be self-employed so they can find more time for their families… Fits right into a Christian lifestyle, doesn’t it? Continue reading
Behind Different Masks, the Same Face
Two companies, BurnLounge Inc.(1) and Usana Health Sciences, are in the spotlight of federal regulators, investors, fraud investigators and business journalists. The fundamental legitimacy of each company is in question. Both are being called calculated and sophisticated frauds. Tens of thousands of consumers are wondering if they have been duped by these schemes.
- Federal regulatory agencies have announced investigations or prosecutions of both companies. The United Securities & Exchange Commission (SEC) announced an informal investigation of Usana. Burnlounge is being prosecuted by the United States Federal Trade Commission (FTC) for unfair and deceptive trade practices. Continue reading
I feel like I’m playing Where’s Waldo… Does anyone know where Bradford Richardson went? He is the former VP of Asia Pacific for Usana Health Sciences, and he recently resigned. Rumor has it that he “went to work for a competitor.” I’m just dying to know if my November 14th prediction that he was going to work for Shaklee was correct…