{"id":835,"date":"2007-07-13T11:34:03","date_gmt":"2007-07-13T16:34:03","guid":{"rendered":"http:\/\/www.sequence-inc.com\/fraudfiles\/2007\/07\/13\/most-usana-distributors-wont-get-their-money-back\/"},"modified":"2011-08-19T12:50:17","modified_gmt":"2011-08-19T17:50:17","slug":"most-usana-distributors-wont-get-their-money-back","status":"publish","type":"post","link":"https:\/\/www.sequenceinc.com\/fraudfiles\/most-usana-distributors-wont-get-their-money-back\/","title":{"rendered":"Most Usana Distributors Won’t Get Their Money Back"},"content":{"rendered":"

An article in New Zealand’s National Business Review<\/a> sheds new light on the fight to bring down Usana Health Sciences. Since Barry Minkow and the Fraud Discovery Institute<\/a> released the report on an extensive investigation of Usana, supporters of Usana have cited a profit motive on the part of Barry.<\/p>\n

Yet this article reveals that Barry has not made any money on short selling Usana stock, and that the “paying client” FDI had backed out. That’s right… the client who asked for the investigation and report didn’t even pay for the work. So much for a profit motive. (Not that I buy into the idea that a fraud investigator shouldn’t get paid for her or his work. Of course she or he should be paid, and a good fraud [tag]investigator[\/tag] maintains objectivity regardless of the paying client.)<\/p>\n

The NBR article does an excellent job of detailing the recruiting focus in Usana. The company representatives recruit unsuspecting marks with promises of “true health, true wealth” and the promise of being able to fulfill their dreams. Anyone is a viable recruit. No particular experience or characteristics are required.<\/p>\n

Unfortunately, Usana’s own documents prove that the vast majority of distributors don’t earn enough in commissions to pay for their monthly qualifying purchases. (Qualifying purchase = amount of product that must be bought to even be eligible for commissions.) And most distributors don’t even make any commissions at all. The article cites:<\/p>\n

According to several recruiting presentations NBR attended in New Zealand, each new Usana distributor must buy a minimum of about $445 worth of the company\u2019s business tools and health products, then continue to buy $290 worth of its health products every month thereafter in order to qualify for commissions.<\/p>\n

Usana\u2019s critics say these monthly qualifying purchases are the reason so many of its distributors fail to make a return on their investments.<\/p>\n

But Usana Executive Vice President of Operations Fred Cooper said most of the company\u2019s distributors don\u2019t think of themselves as failing \u2014 they\u2019re happy to get $290 a month worth of Usana products for their own use, whether or not they sell anything.<\/p>\n

In fact, Mr Cooper said Usana\u2019s research indicated that most of its distributors are \u201cnot interested in commissions.\u201d<\/p><\/blockquote>\n

Ah, yes. The old “they don’t want to make money anyway” argument. So Usana recruits people and encourages them to pursue dreams of financial freedom, but then says most don’t even want to turn a profi. That doesn’t compute.<\/p>\n

NBR asked government statistician Murray H. Smith to look at Usana’s business structure and compensation plan, and here’s what he said indicated that Usana is like [tag]pyramid schemes[\/tag]:<\/p>\n

–At any given instant, most members will not have made enough money to recoup what they’ve paid to participate in the company;<\/p>\n

–The people at the top of the company structure are more likely to make money than the people at the bottom of the structure; and<\/p>\n

–As more people join the company over time it will become harder for the majority at the bottom of the company structure to recruit others. Those people tend to become discouraged and drop out.<\/p><\/blockquote>\n

Dr. Smith said it was clear that the vast majority of Usana distributors would pay more to qualify for commissions than they’d ever actually receive in commissions. He says they won’t get back the money they put into Usana.<\/p>\n

Usana counters, and NBR replies:<\/p>\n

Usana\u2019s Vice President Mr Cooper said that many of the distributors who fail or drop out simply haven\u2019t worked hard enough. He also pointed out that all distributors get something for their money\u2014 a monthly shipment of Usana health products.<\/p>\n

If they don\u2019t like the products, he said, Usana has a generous return policy.<\/p>\n

That may not help a lot of distributors whose businesses have failed, however. Since Usana urges distributors to take the vitamins they have to buy each month, they\u2019re not likely to have any products to return.<\/p><\/blockquote>\n

And when all else fails, deny, deny, deny:<\/p>\n

Usana spokesman Joe Poulos brushed off the arguments about pyramid schemes, saying the concept doesn\u2019t even apply to Usana.<\/p>\n

\u201cThe company sells vitamins,\u201d he said.<\/p>\n

\u201cIn a pyramid scheme there\u2019s no product.\u201d<\/p><\/blockquote>\n

Yet Stuart Wallace of New Zealand’s Commerce Commission\u2019s Fair Trading Branch says hes investigated many pyramid schemes, and some of them sold products. He says New Zealand courts consider a number of factors in pyramid scheme cases, especially whether or not the plan is primarily aimed at selling products or recruiting new members.<\/p>\n

On Barry’s (our) investigation:<\/p>\n

Usana\u2019s troubles began when the company came to the attention of Barry Minkow, a former conman who spent seven and a half years in prison for perpetrating a multi-million dollar fraud in the 1980s.<\/p>\n

Since his release from prison in 1995, Minkow has worked with the FBI and SEC on numerous investigations, including the case of New Zealand\u2019s biggest-ever fraudster, Derek Turner. (see article NBR July 7, \u201cIt takes a thief to catch a thief,\u201d)<\/p>\n

In late February, Minkow sent the FBI and the SEC a lengthy report claiming Usana was a pyramid scheme that cheated most of its distributors out of their money.<\/p>\n

With a theatrical air, he also told the FBI, the SEC and several reporters that he\u2019d bought \u201cput\u201d options on the company\u2019s shares, so that he would make money if their price fell.<\/p>\n

Usana shot back with a defamation lawsuit against Minkow, accusing him of driving down the company\u2019s stock to enrich himself and others.<\/p>\n

\u201cWhat\u2019s mindboggling to me is that Barry Minkow has admitted he\u2019s short-selling the stock,\u201d Mr Poulos said.<\/p>\n

\u201cYou have this felon who\u2019s credited as one of the biggest fraudsters of the last century\u2026 shorting the stock and going around saying negative and misleading things about the company.\u201d<\/p>\n

Minkow said Usana\u2019s accusations are \u201ca joke\u201d because he hasn\u2019t made a penny on his put options\u2014he bought them too early. He said he doesn\u2019t even have a paying client for the case because his client backed out.<\/p>\n

Nevertheless, he has continued his efforts against Usana.<\/p>\n

Soon after Usana filed suit against him, he made a series of videos on YouTube in which he interviewed several failed Usana distributors, including Steve Estes, a blind man who claimed to have lost his life savings to Usana.<\/p>\n

\u201cIf I had known then what I know now,\u201d Mr Estes said, \u201cI would have run like the wind after the first Usana convention.\u201d<\/p>\n

Minkow also turned up some embarrassing facts about Usana\u2019s executives, including Usana board member Denis Waitley who was falsely claiming to have a master\u2019s degree, and Usana medical advisory board member Ladd McNamara who was falsely claiming to have a medical license after it had been revoked in two states.<\/p>\n

Both subsequently stepped down from their positions at Usana.<\/p>\n

Mr Poulos said both men made harmless mistakes that had not affected Usana\u2019s operations.<\/p>\n

\u201cThe most important point is that the company continues to grow sales year after year,\u201d he said.<\/p><\/blockquote>\n

Ah, yes. As long as Usana is expanding, there is no problem, right? Wrong. Very wrong.<\/p>\n","protected":false},"excerpt":{"rendered":"

An article in New Zealand’s National Business Review sheds new light on the fight to bring down Usana Health Sciences. Since Barry Minkow and the Fraud Discovery Institute released the report on an extensive investigation of Usana, supporters of Usana […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[827,184],"tags":[1513,1511,1512,51],"class_list":["post-835","post","type-post","status-publish","format-standard","hentry","category-public-companies","category-pyramid-schemes-mlm","tag-fred-cooper","tag-national-business-review","tag-qualifying-purchase","tag-usana"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p6Z0e-dt","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/www.sequenceinc.com\/fraudfiles\/wp-json\/wp\/v2\/posts\/835","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.sequenceinc.com\/fraudfiles\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.sequenceinc.com\/fraudfiles\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.sequenceinc.com\/fraudfiles\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.sequenceinc.com\/fraudfiles\/wp-json\/wp\/v2\/comments?post=835"}],"version-history":[{"count":0,"href":"https:\/\/www.sequenceinc.com\/fraudfiles\/wp-json\/wp\/v2\/posts\/835\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.sequenceinc.com\/fraudfiles\/wp-json\/wp\/v2\/media?parent=835"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.sequenceinc.com\/fraudfiles\/wp-json\/wp\/v2\/categories?post=835"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.sequenceinc.com\/fraudfiles\/wp-json\/wp\/v2\/tags?post=835"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}