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USANA Endorses Manny Pacquiao or Vice Versa? Special Privileges For One Lucky Distributor

September 22, 2011, 9:02 pm
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How does a distributor obtain special privileges from USANA? Hundreds of thousands of individuals join USANA each year as an associate/distributor. 99% of them never manage to even see a profit. But once in a blue moon, USANA picks a winner. This winner is Tim Sladeck.

How does this work? Good question! I'm not really sure. What I have found is the following.

Tim Sladeck works on many of Manny Pacquiao's endorsement deals. Who is Manny Pacquiao? He is the first boxer in history to hold world titles in 8 different weight divisions. Manny endorses USANA  and takes USANA supplements. In fact, USANA has taken this endorsement to a whole new level. USANA now offers a special "Manny Basic Pack" and "Manny Advanced Pack". Both are considered a MyHealthPak deal, so they are nonrefundable (yes, not refundable because they are not resalable according to USANA). No big deal here, just smart advertizing.

But here's the fishy part: USANA customer service is instructed to sell these special Manny Packs through Tim Sladeck's distributor website! So the USANA distributor Tim Sladeck appears to make all of the sales! Think I'm kidding? Below is a screenshot of the USANA document that proves it.

Following the http://www.usana.com/webhosting/8662528 link takes you to Tim Sladeck's USANA website. So USANA has instructed their customer service to sell this "Manny Pack" exclusively through a USANA distributor named Tim Sladeck.

So is any USANA distributor allowed to make a special name for a "MyHealthPak" package, like "Obama Advanced Pack", and have the customer service direct all sales through that single distributor if anyone in the country calls about it? What a deal! Sign me up!!!
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USANA lost “Major Customers” to ARIIX, which may adversely affect 3rd quarter earnings

October 18, 2011, 10:00 pm
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USANA states in their own words the following in many of their 10-K SEC filings: My Emphasis in BOLDRed

Major Customers
 
Sales are made to independent Associates and Preferred Customers.  No single customer has ever accounted for 10% or more of net sales in any fiscal year.  Notwithstanding the foregoing, the nature of our business model results in a significant amount of sales to several different Associate leaders and their downline sales organizations.  Although no single Associate has ever accounted for 10% or more of our net sales, the loss of a key Associate leader or that Associate’s downline sales organization would adversely affect our net sales and our overall operating results.

That is exactly what has and is happening!


Back on May 9, 2011 I reported that four of USANA's top executives (Fred Cooper, Jeff Yates, Mark Wilson, and Riley Timmer ) resigned from their position. However, USANA released this information publicly on May 10, 2011. How did I know 1 day ahead of time? USANA sent out a private memo to all of their Gold director distributors and up. They were privy to insider information before shareholders. However, stock analysts completely dismissed this fact. So when USANA stated in a press release that these executives resigned May 10th, that is not the case according to the May 9th private memo.

Now I'm here to give shareholders heads up on the fact that USANA has lost many of their top distributors who quit their distributorship with USANA to join ARIIX, the multilevel marketing company founded by Fred Cooper and operated by the other three ex-USANA executives who resigned in May. USANA is falling apart and stock analysts covering USANA don't seem to have the shareholders in their best interests.

After some research, I have compiled a list of USANA distributors that have decided to join ARIIX (bottom of this posting). The list is incomplete since neither company publishes who their distributors are (so secretive). Most of the USANA distributor ranking I show below are as of October of 2010. I do not have any recent information of their rankings and USANA has taken great strides at keeping the information a secret.

2 - 5 Star Diamond Director
1 – 4 Star Diamond Director
*1 - 3 Star Diamond Director
2 – Diamond Director
1 – Ruby Director
2 – Gold Director
7 – Silver Director
1 – Bronze Director
1 – Director
2 – Achiever
6 – Builder
4 – Believers
3 – Sharers
 
*(Revised October 25, 2011: I must at one more 3-Star Diamond Director, Robert & Daryl Allen)

Five Six Diamond Directors are what I would consider KEY ASSOCIATE LEADERS. Many of the others were part of one of these key associate's “sales organization” and left USANA to follow their leader. These key leaders have been plastered all over USANA's website, sales material, training material and all over YouTube promoting USANA's business model and its product. However, these Diamond Directors left USANA even before ARIIX launched, which gaurantees these members key positions in the ARIIX compensation business model. This really says a lot about USANA's products and doesn't bode very well for the company. Also doesn't help that Dr. Ray Strand left USANA to join ARIIX. Recently Liz Strand (Ray's wide) had her USANA distributor page shut down as well.

That's not all. USANA terminated a couple of these key leaders (Lynn Allen Johnson& Duke Tubtim) when they were reported to USANA executives for being on a conference call with ARIIX and other interested individuals who wanted to find out more about ARIIX. Many should be very familiar with a recent 2008 arbitration that awarded an ex-USANA distributor $7,000,000 for being wrongfully terminated back in 2003. Well, now we are talking about a couple star-diamond directors that USANA terminated just a few months ago. So where are stock analysts on this issue?

Now I want to make a little prediction, but first I have to make the following very clear. I have no financial position on USANA's stock or any competitor to USANA. I have never traded USANA stock and never plan to. No one is paying me to write anything about USANA. I am volunteering my time to educate people. I do not like to see people lose their hard earned money because they were deceived or misled.

With that said, I believe USANA's active associate numbers will decline across most of their territories, with China being the exception. If USANA's own SEC filings state that “the loss of a key Associate leader or that Associate’s downline sales organization would adversely affect our net sales and our overall operating results.” Notice it doesn't use the term “might”,“maybe” or “possibly”. It states it “would” adversely affect their overall operating results

The following is a list I have compiled of USANA distributors who have joined ARIIX.

USANA Distributor #133412 - Lynn Allen Johnson - 5 Star Diamond Director
ARIIX Distributor #10146 - Lynn Allen Johnson - Vision is Power Inc.- http://www.myariix.com/lynnallenjohnson

USANA Distributor #2119355 - Duke Tubtim - 5 Star Diamond Director - Millionaire Club
ARIIX Distributor #10198 - Duke Tubtim - Kaizen Support Group Inc. - http://www.myariix.com/Kaizensupport

USANA Distributor #2111980 - Timothy Lewis - 4 Star Diamond Director - Millionaire Club
ARIIX Distributor #10138 - Timothy Lewis - 4DL Enterprises Inc. - http://www.myariix.com/4dl

USANA Distributor #33009 - Robert & Daryl Allen - 3 Star Diamond Director - http://robertallen.usana.com
ARIIX  Distributor #213647 - Robert Allen - http://www.myariix.com/robertallen

USANA Distributor #295671 - Steve and Myrna Swartz - Diamond Director - Millionaire Club
ARIIX Distributor # 10168 - Steve Swartz - Have it All, Inc. - http://www.myariix.com/steve

USANA Distributor #3053770 - Iris Lee - Team ASD – Diamond Director - http://teamasd.usana.com/
ARIIX Distributor #10228 - Iris Lee - IS Health Enterprises Ltd. - http://myariix.com/teamasd

USANA Distributor # - Sandy LV - Ruby Director -
ARIIX Distributor #19176 - Sandy LV - http://www.myariix.com/sandy

USANA Distributor #2127139 - Tatyana Sutherland - Gold Director - http://www.usana.com/webhosting/tatyana
ARIIX Distributor #11188 - Tatyana Sutherland

USANA Distributor #2765838 - Tracee Gluhaich - Gold Director - http://truehealthintl.usana.com/
ARIIX Distributor #18696 - Tracee Gluhaich - http://www.myariix.com/truehealthintl

USANA Distributor #3216982 - Phyllis Goodman - Silver Director - http://health4lifeinc.usana.com/
ARIIX Distributor #10847 - Phyllis Goodman - http://www.myariix.com/phyllisgoodman

USANA Distributor #2137359 - Glenna and Richard Norris - Silver Director
ARIIX Distributor #59886 - Glenna and Richard Norris, CHHC - http://www.myariix.com/gnr

USANA Distributor #3704262 - Randy "Yosef" Katz - Silver Director - Sabai Marketing Group http://www.usana.com/webhosting/sabaiARIIX Distributor #10247 - Randy "Yosef" Katz - Sabai - http://www.myariix.com/esuite/home/sabai

USANA Distributor #86832 - John & Carol Cliffe - Silver Director -  http://riskfree.usana.com/
ARIIX Distributor #11327 - John Cliffe -

USANA Distributor#2811720 - David & Monica Rendon - Silver Director - http://www.achievinghealth.usana.com
ARIIX Distributor #42887 - David & Monica Rendon - http://www.myariix.com/rendon

USANA Distributor #2554180 - Marlisa Hurt - Silver Director - http://www.usana.com/webhosting/marlisa
ARIIX Distributor #33636 - Marlisa Hurt


USANA Distributor #2320280 - Jean Amicarella - Silver Director -  http://www.usana.com/webhosting/jeana
USANA Distributor #3669898 - Jean Amicarella - Sharer -  http://www.usana.com/webhosting/jeanamic (Yes, two USANA IDs with separate websites for this unique distributor)
ARIIX Distributor #17766 - Jean Amicarella - http://www.myariix.com/ariixinfo

USANA Distributor #128089 - Larry & Susie Sisson - Bronze Director -  http://www.usana.com/distWeb/site/sisson
ARIIX Distributor #10547 - Larry & Susie Sisson - http://www.myariix.com/myfreedom

USANA Distributor #244097 - Arlene Hutchinson - Director - http://www.usana.com/webhosting/bhealthy2
ARIIX Distributor #11578 - Ennis Hutchinson - http://www.myariix.com/marketing

USANA Distributor #3940012 - Pollawat Pankam - Achiever
ARIIX Distributor #11357 - Pollawat Pankam - http://www.myariix.com/esuite/home/username/

USANA Distributor #2398784 - Maryann Cady - Achiever -  http://www.usana.com/webhosting/maryanncady
ARIIX Distributor #38008 - Maryann Cady - http://www.myariix.com/maryanncady

USANA Distributor #3936760 - Somboon Pongpruk - Builder -  http://how2success.usana.com/
ARIIX Distributor #11376 - Somboon Pongpruk - http://www.myariix.com/esuite/home/online

USANA Distributor #3909038, 4112764 & 4380414 (Builder) - Anh Vongbandith - http://www.dreamsmadeinc.usana.com/
ARIIX Distributor #12816 - Anh Vongbandith - http://www.myariix.com/DreamsMadeInc

 USANA Distributor #3250998 - Melissa Daniels - Builder -  http://www.usana.com/webhosting/mdaniels
ARIIX Distributor #11496 - Healthy 4 Life, LCC - Melissa Daniels - http://www.myariix.com/healthy4life

USANA Distributor #2479038 - Lucia Sanchez - Builder -  http://www.usanamexico.usana.com
ARIIX Distributor #34596 - Lucia Sanchez - http://www.myariix.com/ariixmexico

USANA Distributor #4202538 - Ed Walls - Builder - http://teamwalls.usana.com/
ARIIX Distributor #15538 - Edward Walls -

USANA Distributor #4086676 - John R. Parke - Builder - http://4086676.usana.com/
ARIIX Distributor #11507 - John R. Parke

USANA Distributor #4154550 - Rick & Cynthia Evans - Believer -  http://cevans.usana.com/
ARIIX Distributor #10896 - Rick & Cynthia Evans - http://www.myariix.com/rickevans

USANA Distributor #4446386 - Irv Segal - Believer - http://irvsegal.usana.com/
ARIIX Distributor #21328  - Irv Segal -

USANA Distributor #4353344 - Loredana Nuñez - Believer -  http://healthytime.usana.com/
ARIIX Distributor # - Francisco & Loredana Moreno -

USANA Distributor #4387858 - Ric & Carmen Goodson - Believer -
http://ricandcarmen.usana.com/
ARIIX Distributor #11387 - Ric & Carmen Goodson -
http://www.myariix.com/carmengoodson

USANA Distributor #3076606 - Angie Lee - Sharer
ARIIX Distributor #17818 - Angelica Lee - http://www.myariix.com/angielee

USANA Distributor #4202828 - Sou Fin Saechao - Sharer - http://4202828.usana.com/
ARIIX Distributor # - Sou Fin Saechao

USANA Distributor #3914138 - Jidbhong - Jayavasu - Sharer -
ARIIX Distributor #56076 - Dr Jidbhong Jayavasu - http://www.myariix.com/dr_jay

USANA Distributor #7662974 - Edward Williams - http://m3ister.usana.com/
ARIIX Distributor #12996 - Edward Williams - http://www.myariix.com/esuite/home/m3ister/

USANA Distributor #2926598 - Rick Billings - http://www.usana.com/distWeb/site/rickbillings
ARIIX Distributor #10727 - Rick Billings - http://www.myariix.com/RickBillings

USANA Distributor #2812402 - Mike Delevante - http://www.usana.com/distWeb/site/miked
ARIIX Distributor #10817 - Mike Delevante - http://www.myariix.com/mikedelevante

USANA Distributor #8297220 - Debbie Turner - http://turner.usana.com/
ARIIX Distributor #20916 - Debbie Turner - http://www.myariix.com/turner/

USANA Distributor #9638662 - Susan Hamilton - http://www.usana.com/webhosting/susanhamilton
ARIIX Distributor #34007 - Susan Hamilton, CHHC - http://www.myariix.com/SusanHamilton

USANA Distributor #9202660 - Chad zinda - http://www.usana.com/webhosting/9202660
ARIIX Distributor #  - Chad Zinda

USANA Distributor #9613734 - Lyn Clark -
ARIIX Distributor #37967 - Lyn Clark

USANA Distributor #7016988 - Emery Krahn - http://www.usana.com/webhosting/emery
ARIIX Distributor #36707 - Emery Krahn - http://www.myariix.com/emery
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USANA's Third Quarter Earnings for 2011 Decline Over Previous Quarter - ARIIX to Blame?

October 25, 2011, 9:46 pm
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FOR IMMEDIATE RELEASE:

USANA's Third Quarter Earnings for 2011 Decline Over Previous Quarter - ARIIX to Blame? 

Salt Lake City, Utah - October 26, 2011 - Net sales declined by $5,424,000 or 3.6% from the prior quarter. Earnings before income taxes declined $2,245,000 or 10.6% from the prior quarter. Several days ago I released a report showing many distributors leaving USANA to join ARIIX. Several of them were USANA's top distributors. I gave my prediction that associate levels will decline and as a result drop in overall earnings. Seems I was correct.

I'm not sure how USANA can keep a straight face while sending out a press release trying to make their third quarter earnings appear good. I predict this decline to continue due to ARIIX. Many of the USANA distributors that joined ARIIX did so during the third quarter and are still counted in USANA's active associate figures. As a result, active associates in the fourth quarter will likely continue to decline.

It's amazing that even after USANA's "Crazy Cash Contest" where associates receive huge points for recruiting additional distributors and miniscule points for signing up preferred customers, USANA still managed to lose more associates than they can recruit. I've always said USANA's business opportunity is all about selling the dream to make money instead of retailing product to customers, and this contest simply backs up my claims.

I still believe USANA has been violating China's laws by actively recruiting Chinese Nationals into their MLM business opportunity by encouraging them to open the account in Hong Kong. Mainland China has banned MLMs from operating within their country. Remember, Dave Wentz made the following statement last quarter "We definitely have a number of people [Chinese Nationals] who are building in Hong Kong. We do not have a percentage or have a number that we could point to with any accuracy." And then Jim Bramble follows that up with "Well if an individual does not have residency in Hong Kong and the ability to build in Hong Kong, then they can only build in China." So there is clearly something very sneaky going on and I believe analysts need to keep pressing USANA on this issue. I'm not sure how the SEC can continue to turn a blind eye by allowing USANA to continue breaking foreign laws.

The following are charts showing the Active Associate & Preferred Customer trends quarter by quarter. I believe they speak for themselves. The captions describe the result from Q2-2011 to Q3-2011

US Active Associates declined by 2000 or 4%
US Preferred Customers declined by 2000 or 5%

Canada Active Associates declined by 1000 or 4%
Canada Preferred Customers remained flat

Mexico Active Associates remained flat

Mexico Preferred Customers remained flat

SE Asia/Pacific Active Associates increased 4000 or 9%
SE Asia/Pacific Preferred Customers increased 1000 or 17%

Greater China Active Associates declined 9000 or 10%
Greater China Preferred Customers declined 1000 or 12%

N Asia Active Associates remain flat
N Asia Preferred Customers remain flat

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USANA and the Comparative Guide to Nutritional Supplements - A Symbiotic Relationship

December 24, 2011, 8:25 pm
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Since 1999, USANA and its distributors have used the Comparative Guide to Nutritional Supplements written by Lyle Macwilliam as proof that their supplements are the best in the industry. Every edition of the book granted USANA supplements #1 in the industry. I also found that many USANA distributors purchased the book to use as a sales tool when trying to persuade someone to join USANA. For several years this had seemed very odd to me so I did some research. Every time I looked into it, I found more and more ties between USANA and the Comparative Guide to Nutritional Supplements. Their relationship is truly symbiotic. The following are my findings.

There are 4 editions to the Comparative Guide to Nutritional Supplements. The First edition came out in 1999, Second edition in 2001, Third edition in 2003 and Fourth edition in 2007. USANA has been chosen #1 in every edition since the first edition. In fact, the first edition of the book chose USANA as the baseline to compare all other brands to.

One of the individuals listed on the book is Gregg Gies who was responsible for research, editing and layout for the Comparative Guides editions 1 through 4, was a USANA distributor #285320. I questioned Nutrisearch (Lyle Macwilliam's corporation for his books) about this and they informed me that before Gregg joined NutriSearch he purchased USANA product and at the time the only way to get the product was to sign up as a distributor (no preferred customer option). I was also told that he let the distributor lapse between ten and twelve years ago. Yet, the first edition came out in 1999, twelve years ago. It should be noted that this distributor ID achieved a leadership level of Sharer, which does not seem consistent with someone who only wanted product.

I think there is a conflict of interest here because Lyle Macwilliam basically hired a USANA distributor to perform the research for a book that ranks USANA #1 while trying to portray itself as an independent source of information regarding the nutrition industry. Gregg was also Co-Owner of NutriSearch at one point in time. Currently, he is only considered as a consultant. Although, when contacting NutriSearch, their replies to me also carbon copied Gregg at a NutriSearch email account. I'm not aware of companies giving their consultants email accounts.

Knowing that Gregg Gies was a USANA distributor around the time Lyle hired him to do research for the Comparative Guide, what do you think about the following statement made by NutriSearch?
"The research, development, and findings are the sole creative effort of the author and NutriSearch Corporation, neither of whom is associated with any manufacturer or product represented in this guide."

Another name listed on the Comparative Guide to Nutritional Supplements is Ian Black. He is responsible for the book's cover design. He is a professional graphics artist. He is also a Silver Director USANA distributor #90155 as is his wife, who is a 1-star diamond director #43050. How is it that Lyle Macwilliam wrote a book claiming to be an independent guide to the nutrition industry that chooses USANA #1 in all four editions ends up hiring a USANA distributor to do the book's cover design?

I asked NutriSearch if anyone there is a USANA distributor. They responded by telling me no one at NutriSearch is a USANA Associate. When bringing to their attention that Gregg Gies and Ian Black are USANA associates, NutriSearch responded stating that Gregg is a consultant and Ian is not and never was "employed" at NutriSearch.


Then there is Dr. Ray Strand. He is listed as one of the "Independent Nutritional Experts" used for the Comparative Guide's "Blended Standard". Ray Strand has been on USANA's medical advisory board since the 1990s, which isn't that big of a problem since the medical advisory board members are not paid a salary by USANA, but only stipends. However, Ray Strand and his wife were USANA distributors making hundreds of thousands of dollars off their downline. Their distributorship was called "AMARA Enterprises, Inc." This is a huge conflict of interest, especially when USANA mysteriously manages to rank #1 in every edition. During USANA's third quarter of 2011, Ray Strand has since left USANA to join a different MLM company, ARIIX. Their USANA distributorship appears to also have ended.

I questioned NutriSearch about Ray Strand's distributorship with USANA and NutriSearch's "independent nutritional expert" claim. NutriSearch stated that Ray Strand's recommended daily nutritional supplementation along with the eleven other authors used as references for the Blended Standard is published work in the public domain. So what? The problem I have is the usage of the term "Independent". To me, the term implies the twelve individuals used for the Blended Standard do not have a financial ownership with any of the companies listed in the book or financial motives on the outcome of the data represented in the book. Clearly, the fact Ray Strand was a USANA distributor even before the first edition of the book came out and the fact he contributed directly to the results presented in the Comparative Guide (USANA being #1 out of over a thousand choices) means Ray Strand is not an independent authority.

Yet, NutriSearch finished by stating that these independent nutritional experts are associated with different nutritional product lines and does not bias the scoring of any of the products listed in the Comparative Guide. I strongly disagree...


I should also point out that another one of the independent authorities used for Lyle's Blended Standard is Michael Colgan. He was also a USANA distributor in the 1990s. His distributor ID was #89201 and was listed under the account name "Colgan Institute". It is unclear when he left the USANA distributorship and it may be close to the time the first edition of the Comparative Guide was written.


Another interesting piece of evidence is that the 1st edition of the Comparative Guide To Nutritional Supplements (1999) appears to have been written for USANA distributors to use as a sales/recruiting tool. The following was written on Lyle's website macwilliam.net back in 2001:

Why is the USANA graph flat, with everything at 100%?


The reason the USANA graph appears as a series of yellow bars, all set at 100%, is because this represents the comparison standard. In other words, it represents USANA compared to itself. Why did we do this? The purpose was to establish a benchmark where all products would be compared to the USANA standard - this allows your clients to clearly see how the vitamin formulation they use stacks up to the USANA formulation.
I believe Lyle Macwilliam's response to the FAQ on his old website suggests he is answering a USANA distributor's question. The "your clients" refers to the USANA distributor's prospective customer/recruit. Seems quite obvious to me the motive behind the book - to sell it to the hundreds of thousands of USANA distributors.


From an archived copy of USANA's unitogether.com website which sells many books related to USANA including the 2nd edition of the Comparative Guide to Nutritional Supplements (2001), the following is the description for the book:
Fully revised and updated - Lyle MacWilliam's Comparative Guide puts the USANA Essentials against over 250 of the most common nutritional supplements on the market today. Through his incredible research, Mr. MacWilliam shows both how and why the USANA Essentials are second to none. This best seller was updated for the USANA 2001 9th Annual International Convention and it's better than ever.
So the book was updated for USANA's convention which I believe was so it could be sold to all of the participating distributors at the event. So of course the book will rate USANA #1.


On the back cover of the 3rd edition of the Comparative Guide to Nutritional Supplements (2003), there are five individuals praising the book. These five members are listed as doctors and authors of their own books. What is not disclosed to the reader is that these five doctors are also USANA distributors!

Dr. Christiane Northrup, M.D. - USANA Distributor ID# 2040175
Dr. Gerald Lewis, M.D. FRCP, FRACP - USANA Distributor ID# 203463
Dr. Laz Bannock, Ph.D. - USANA Distributor ID# 2290764
Dr. Denis Waitley, Ph.D. - USANA Distributor ID# 70541
Dr. Christine Wood, M.D. - USANA Distributor ID# 348

So out of the thousand plus supplements presented in the book, Lyle and his team were not capable of producing anyone else to praise his book other than USANA distributors? I find this very deceiving and dishonest. USANA associates would only need to tell the person they are trying to recruit to look at the back of the book and claim that five doctors trust the book and so should you, so join my downline today (before you find out the truth).


Then there is the fact that Lyle Macwilliam was on USANA's Medical Advisory Board from 2003 to 2006, the time the fourth edition to the comparative guide was being produced. I was quite vocal about this on the Yahoo USNA stock message board (where I began sharing my research since 2006). Finally after criticizing that fact for several months, Lyle Macwilliam left USANA's medical advisory board and USANA made the following statement on their Ask Andy website (which is no longer made available for some unknown reason):

"Lyle shares his expertise as a consultant with a number of nutritional manufacturers and, for this reason, was asked to join USANA's Medical Advisory Board after the release of the third edition of the Comparative Guide to Nutritional Supplements in 2003. He served on the Medical Advisory Board until 2006. Lyle decided to leave the position, in part, because he felt that that it might have created an impression of bias for his work. Lyle is neither an employee of USANA Health Sciences nor an Independent USANA Associate."
So Lyle finally figured out that after 3 years of being on USANA's medical advisory board, that it created an impression of bias for the Comparative Guide to Nutritional Supplements... Really!?


Do I need to mention that USANA received their NSF stamp only a few weeks before the fourth edition of the comparative guide came out awarding USANA the top rank again, only achievable by having a third party certification, i.e. NSF. Seems that while Lyle was on USANA's medical advisory board, information about what USANA had to do to keep #1 status was also coordinated. It was even admitted by Lyle that after the third edition, other companies adjusted their formulations and leapfrogged USANA. So how was it that USANA was able to then reformulate their product to be #1 again?

Lyle wrote the following after publishing the 4th edition: "In fact, for at least the last three years of the third edition’s run, it had been false to say USANA was ranked #1 in our research. Even though our guide still showed this product as the best in the field, other products had already eclipsed it, simply by adjusting their formulations to improve their score on our rating criteria, possibly with little or no regard for the scientific evidence supporting their changes. They simply wanted to be #1."

Yet, USANA regained that #1 position by reformulating their supplements. Lyle criticized other companies for doing reformulating their products claiming there was little or no regard for the scientific evidence supporting their changes. Gee, if that's really true, and these companies changed their formulation to be closer to this "Blended Standard", and Lyle calls that reformulation a change with no regard for scientific evidence supporting their changes, then shouldn't the same be said about the Blended Standard? Seems very hypocritical to me.


Lyle Macwilliam claimed the following regarding USANA and the Physicians Desk Reference:
"USANA nutritional products are listed in the Physician’s Desk Reference, one of a select few nutritional supplement manuacturers to merit such high recognition of product quality." - FAQ
What Lyle does not understand is that the PDR does not endorse nor offer any type of credibility for the products listed in their book. In fact, all the products listed are paid advertisements. USANA had to pay a fee to have their products listed and USANA got to chose which book to listed it in (PDR for drugs or the PDR for Herbs & Supplements). USANA chose the book for drugs. Then USANA claims their supplements are better than the rest of the vitamins because they are listed in the PDR for Drugs. Because of Lyle Macwilliam's lack of understanding regarding the PDR, he decided to repeat the same nonsense USANA did. So much for any real research. But of course the research for the Comparative Guide was done by a USANA distributor (Gregg Gies).


In Conclusion: I believe Lyle Macwilliam chose USANA to be #1 in his book from the very beginning back in 1999.  Lyle hired a USANA distributor "Gregg Gies" to do research for his book. For the past 12 years, USANA has remained #1 in every edition of the Comparative Guide to Nutritional Supplements. Yet, USANA spends less than 1% of their net revenue on Research & Development (incredible if you ask me). Why research when the author of the Comparative Guide is on your medical advisory board. From the research I have done, I believe there is a symbiotic relationship between USANA and NutriSearch where one is dependent on the other. USANA's main source of praise for their product is the Comparative Guide. I have no doubt the main source of Lyle Macwilliam's sales comes from USANA distributors themselves. If one looks back at the way Lyle sold his Comparative Guide, he did so priced as bulk purchases.

According to Macwilliam.net 9 years ago regarding their 2nd edition:
1-9 books    $15.95 per copy
10+ books    $14.95 per copy
25+ books    $13.95 per copy
50+ books    $12.95 per copy

And where can you get a copy of the book? Lyle suggests buying from him directly or from USANA's website "Unitogether.com" which was a site used to sell sales tools and other books to USANA distributors. This book was intended to be sold to USANA distributors as a sales aid. Any time a USANA distributor recruits somebody into their downline, you can be almost certain that the Comparative Guide to Nutritional Supplements was used to claim USANA was #1 in the industry. Lyle also appears at just about every USANA event as a key speaker. I would like to know what other vitamin manufacturers Lyle is a key speaker for.
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USANA Announces Fourth Quarter and Full Year 2011 Financial Results.

February 7, 2012, 9:08 pm
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USANA releases their Fourth Quarter 2011 Earnings today. In a nutshell, it is business as usual. Declining United States active associates, declining preferred customers world wide, and increasing Asian active associates. USANA made an error on the number of customers in China and took them an entire year to correct it. USANA continues to claim they are working hard with North American distributor leaders to stop the declining numbers, but they make these claims almost every single quarter. USANA has contests every quarter to encourage associate recruiting. It's all about the active associate data.

I don't think the fourth quarter was much to brag about. Here are some interesting facts:
Year over year, USANA lost 12000 customers (active associates & preferred customers combined) for a 4% decline. However, USANA managed to make $8.4 million more in revenue for a 6.1% gain. I believe this is due to USANA's increase in associate fees to activate a business center. USANA calls it a product purchase, but distributors are required to personally purchase over $200 worth of product before they can participate in the compensation plan and receive commissions. Many associates purchase the Professional Package for $1200 in hopes their business can make them rich.

Quarter over quarter, USANA gained 6000 customers for a 2.1% increase. USANA also made $2.4 million more in revenue for a 1.7% increase. Doesn't seem like much, but at least from quarter to quarter the revenue seems proportional to the number of active customers. Certainly nothing to brag about

My favorite line out of USANA's press release announcing their fourth quarter 2011 earnings report is this little footnote at the end that states the following:
3. The Preferred Customer count as of January 1, 2011 has been updated to correct an inaccuracy reported for BabyCare under Greater China. The Preferred Customer count previously reported for BabyCare was 14,000, which brought the Preferred Customer count for Greater China to 16,000. These numbers have been corrected to 7,000 for BabyCare, and 9,000 for Greater China. This correction represents a change of 7,000 to total Preferred Customers reported as of January 1, 2011.
USANA overstated their Babycare preferred customers by 100%. That is a huge error. They claimed they had twice as many preferred customers for their newest territory than they actually had. Their preferred customers for that territory has been declining ever since. Interesting that USANA used the excuse last year when their Babycare numbers had declined and blamed it on Chinese New Years. Where were USANA's auditors, sleeping??? It took USANA an entire year to correct this error. Can we trust USANA when they claimed they had 12,000 BabyCare associates during that same time?

Here's some information stockholders may not hear about but could have unseen consequences. USANA's latest contest "USANA in China: Rewards for Referrals" is one that pays associates for referring a Chinese National who joins BabyCare. I thought it was illegal to pay MLM distributors for recruiting. Has the Direct Sellers Association lobbied for that change as well? Here is a quote from this contest:
You have to be a Chinese National Citizen to build a business with USANA in China, but you can still benefit from the lucrative bonus possibilities available to other USANA Associates. With the USANA Partnership Program, you will receive a residual bonus for every qualified person you refer to USANA in China who begins building a business.

The USANA Partnership Program is better than anything you’ve seen in the past—instead of a one-time bonus, you will receive an ongoing percentage of everything your referrals generate. Although you can’t add Chinese National Citizens to your own downline, you can still make residual income from the points they generate as they build their own businesses in China!
It is against China's law for MLMs to recruit Chinese Nationals into the downline of these pyramid schemes. So USANA has devised a way to circumvent China's laws. Instead of these Chinese Nationals being placed into a downline, they are simply left out of their sponsor's downline while still generating “residual income” for that sponsor. So a USANA distributor in the US can recruit a Chinese National into BabyCare in China and still collect commission from that Chinese National. However, China has outlawed MLMs from participating in their country. I believe this is breaking China's law. Plus, I believe it breaks US laws by paying a commission to the distributor for simply recruiting the Chinese National. Paid to recruit...


I still hold true to the belief that USANA is operating an illegal pyramid scheme where associates are forced to purchase overpriced product (that cannot be retailed for any kind of profit) in order to collect commissions. The majority of revenue made by USANA and the majority of commissions paid (mainly to the top 1% of associates) comes from the hundreds of thousands of distributors who are all purchasing product in order to be "commission Eligible" and participate in the business venture. If USANA did either (1) removed the requirement to personally purchase any product in order to collect commission, or (2) did not pay out commissions to upline members for the product personally purchased by distributors (because they are forced to purchase the product in the first place), then USANA would no longer be a pyramid scheme. However, if USANA actually did either of those two things, the company would go out of business in just a couple months because only those who actually want to purchase product would, which I believe most would not.

Most associates would stop purchasing product because almost every associate that has quit the business has also stopped purchasing the product. In fact, most people who have either tried USANA's business opportunity or joined as a preferred customer have stopped purchasing USANA's product and left the company. That says a lot about the company and the product.
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USANA First Quarter Earnings Release After Markets Close

April 24, 2012, 5:56 am
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USANA's first quarter earnings come out today: April 24, 2012. As usual, I believe the United States, Canadian, and Mexican active distributors to remain flat or even decline further. I think the only area that will increase will be China / Hong Kong. Preferred Customers will continue to decline across the world. With the opening of several European markets for preferred customers only, there might be some small increase there, but that remains to be seen since I think they opened after the quarter ended anyways.

More comments to come after earnings are released.
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Ex-USANA Associates Need To File A FTC Complaint If They Feel USANA Operates A Pyramid Scheme.

May 28, 2012, 8:57 pm
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If you believe you have been victimized by USANA and believe they are operating a pyramid scheme, then you need to file a complaint with the FTC. This is very important.

Most people who have joined USANA's business opportunity have lost time and money. I strongly believe USANA is operating an illegal pyramid scheme. According to the a FTC letter: "...a multi-level compensation system funded primarily by payments made for the right to participate in the venture is an illegal pyramid scheme." It should be noted that 90% of USANA's net revenue comes from their distributor's own purchases. It should also be noted that USANA requires their distributors to purchase about $1560 each year for a 1-business center account and about $3120 each year for a multi-business center account. These required purchases give the distributor the right to participate in the business venture and be eligible for commissions. If the payment is not made, the associate will lose all group sales volume accumulated (converted to commission when enough points accumulate). Seems like a pyramid scheme to me!

The federal agency responsible for investigating Multi-Level Marketing (MLM) companies is the Federal Trade Commission (FTC). The only way the FTC will investigate whether USANA is a pyramid scheme is for "enough" victims to file a complaint. So the most important thing anyone can do who believes they were swindled is to file a complaint with the FTC. It is very simple to file a complaint, although the task may seem daunting. I will provide a step by step walk-through to help guide you through the process.

Click on the following: FTC Complaint Form. This will open into a new window. You may receive an annoying popup from the FTC regarding a survey, just close that window. (That's just one of their attempts to annoy you and prevent you from actually filing out a complaint)

Fill out your contact information and whether you are submitting this complaint on behalf of someone else. Lawyers or attorneys might fill out the form on behalf of their client. However, since there are no actual instructions with this complaint form, I'll assume anyone can fill out this form on behalf of a friend or family member who is being or has been swindled by USANA.





Next, answer whether you are a member of the armed forces or a dependent. Not sure how this is relevant to the complaint, but whatever.




The next step is to choose what type of complaint you are filing. The correct option on this screen is to choose "OTHER" because none of their initial options have anything to do with business opportunities.






Now choose "Business Opportunity and Employment Offers" in the upper menu box. After a few seconds, you'll be able to choose "Multi-Level Marketing/Pyramid Schemes" in the lower box. I find it interesting that the FTC groups those two terms together.


Choose ow you were first contacted regarding USANA's business opportunity. Your choice will will result in a different set of follow up questions. "Email" contact will ask many questions regarding emails. "Phone" with its own set of questions.





Eventually you will come to the question that asks if you know the name of the company or individual in your complaint, or have additional information about them? This option should be chosen as "YES"




This part of the form asks that you tell the FTC about the company (USANA). Company Name "USANA Health Sciences". Address is "3838 West Parkway Boulevard | Salt Lake City, UT 84120". Phone: 801-954-7200.






Additional information is desired but not mandatory. Questions such as how much money you spent on the business opportunity, When you were first contacted, The name of the individual who contacted you, etc...







Now you are asked about "Consumer Information". Here is where you enter who the victim is. It may be the same information as the one entered earlier for the contact info, or may be the person you are filing this complaint in their behalf (Friend, Family Member, Client, etc...)




This next part is the meat of the complaint form. Here is where you get to explain how you were victimized. Perhaps you were told by your upline that you must stay on autoship for the business to work. Maybe you were told only quitters fail. Perhaps you were told you could make millions and were shown pictures of fancy houses and cars in their literature. The FTC needs to know your story.


Finally, you will see a confirmation screen where all the information you entered is displayed. Once you have confirmed the information is correct, click "SUBMIT" at the bottom of the form.

While the FTC complaint form seems long and tedious, it is very important to do. Many people might not file a complaint because they feel embarrassed or ashamed to have been suckered into a scam. Perhaps you were told over and over that USANA is not a scam because they have been in business since 1992 and are a publicly traded company. Perhaps you are told that it was your own fault you couldn't make any money and that you shouldn't blame others for your failure. These are all very serious statements that the FTC really needs to know about. I have received many emails from people who feel this way. Don't blame yourself. 99% of USANA participants lose money. The compensation is actually designed to fail this many people.

If you know someone who lost money in USANA, encourage them to file a complaint.
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Evidence of USANA Inventory Loading Their Distributors

June 6, 2012, 8:47 pm
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Inventory Loading is a key sign of a modern day product-based pyramid scheme.

USANA requires their associates to purchase a MINIMUM of 100 points worth of product every 4 weeks. This comes out to about $120 in product purchases. Each "active" associate made such purchase. But why? Every active associate who I have conversed with on the internet has claimed that they "wanted" the product, so the purchase was okay. But are those claims true, or just something USANA has conditioned these active associates to say to make excuses for these ongoing purchases?

If active USANA associates were just consumers of their own product and is why they purchase about $120 worth of product every 4 weeks, then why is it that Preferred Customers (those who are actually consumers who "want" the product) only purchase on average $70 worth of product every 4-weeks? Perhaps you are wondering where this $70 figure comes from.

According to USANA's latest financial SEC filings 67,000 Preferred Customers were responsible for $15.4 million in net sales, which is 10% of USANA's total net sales (associates accounted for the remaining 90%!). This works out to an average of $70 per preferred customer every 4 weeks. I use a 4-week calculation because USANA requires purchases from their associates on a 4-week cycle (13 times a year).

To me, this is proof that associates are primarily making these ongoing $120+ purchases every 4-weeks so they abide by USANA's rules and remain "commission eligible" for the 4-week period. If the associate fails to make this mandatory purchase, that associate is no longer considered "active", is stripped of all accumulated groups sales volume generated from their preferred customers and downline associates, and unable to collect any commission. That's a pretty severe penalty, especially when upline associates (typically the leaders) are continually pressuring their downline to remain on "autoship" and make those $120+ payments every 4-weeks.

Since most product purchases from USANA are from the active associates (219,000 of them), and each of them has to purchase about $120 worth of product every 4-weeks in order to participate in USANA's compensation plan, and the fact that preferred customers only account for about $70 on average, it is no wonder the primary focus in USANA is to market a business opportunity rather than product. The product is only a disguise as well as "tokens" used in a grand elaborate modern day product-based pyramid scheme.

This mandatory requirement for associates to purchase USANA products is known as "Inventory Loading". That is, the associates are being forced to purchase more product than they can actually resell. Assuming the associate only really consumes at most $70 worth of their $120 purchase, they are left with $50 sitting in their cupboards. USANA claims they can "retail" this product to make a profit. However, preferred customers obtain the product "at the same discounted price as the associates do". This means, there is no chance that any associate can resell their personally purchased product for more than they paid themselves. Unfortunately, the associate is also stuck with a nice shipping charge as well. To top it all off, many USANA associates resort to EBAY to "dump their inventory loaded purchases". These typically auction for 50% less than the associates own cost. Inventory Loading is one of the key indicators of a product-based pyramid scheme.

So if active associates were telling the truth, and that they really wanted $120 worth of product every 4-weeks ($1560 a year), then why does USANA have this "Mandatory" purchase in the first place? What would happen if USANA could no longer be allowed to "force" their associates to make these $120 purchases in order to participate in the compensation plan and be eligible for commissions? I think the answer is obvious. USANA would go out of business in a matter of months because associates would only purchase the amount of product they actually wanted. I would go as far to claim that most associates would not purchase any product at all.

So here's a challenge to USANA. Why not be one of the first MLMs that does not require their distributors to personally purchase the product they are trying to sell? What would USANA be afraid of, reality???

If you are an ex-USANA associate or know someone who is, I suggest filing a complaint to the FTC if you feel you have been cheated out of your money. I have an blog posting that explains how to go about filing a complaint and why it is extremely important to do so. See my Filing FTC Complaint Against USANA posting.
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USANA Should Answer The Following Questions During Their July 24, 2012 Second Quarter Earnings Release and Conference Call.

July 22, 2012, 12:33 pm
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(Updated July 26, 2012 at bottom of posting)

USANA's second quarter earnings will be released Tuesday July 24, 2012 and a follow up conference call will take place on Wednesday at 11:00 AM. I have a few very simple and important questions analysts or shareholders should ask USANA during the conference call for the second quarter earnings release. It is in the best interest of the shareholders that USANA answer the following questions.

1) How much (or percentage) of the distributor incentives was the result of active associates purchasing the minimum requirement every 28 days in order to be commission eligible? (VERY IMPORTANT QUESTION)

2) Of the distributors that USANA considers "Full Time" (Gold Directors and up), ON AVERAGE how much (or percentage) of the commission paid to them comes from preferred customers and how much (or percentage) comes from downline distributors? (VERY IMPORTANT QUESTION)

3) How many active associates and preferred customers are in each of USANA's territories? (Australia, New Zealand, South Korea, Japan, Malaysia, Philippines, Hong Kong, Mainland China, United States, Canada, Mexico, etc...) Please break it down by territory and not region.

4) How many distributors either renewed their distributor membership or purchased a Business Development System (BDS) in the last 12 months? (Will tell shareholders how many TOTAL distributors USANA has)

5) What percentage of USANA's net revenue was the result of product being retailed to customers outside distributor membership program? (If there are no retail sales, then why are associates being lured into the distributorship?)


Questions 1 & 2 are extremely important and shareholders and analysts should demand an answer to them. Its about time USANA explain where the commission comes from that pays tens of millions of dollars to their Full-Time (Gold Directors and up) distributors while leaving the remaining 99% of distributors profitless.

I challenge at least one of these USANA analysts to ask the above questions.

Scott Van Winkle - Canaccord Genuity, Research Division
Rommel T. Dionisio - Wedbush Securities Inc., Research Division
John P. San Marco - Janney Montgomery Scott LLC, Research Division
Frank A. Camma - Sidoti & Company, LLC
Timothy Ramey - D.A. Davidson & Co.
Per Osland (ph)– Jefferies & Company
Mimi Noel - Sidoti & Company
Doug Lane - Jefferies & Company
Diederik Basch– Canaccord Adams
Madeline Miller -- D.A. Davidson & Company


(Updated July 26, 2012)

Of course important questions like the ones I proposed above do not get answered and USANA continues to hide falling distributor numbers in many of their territories. Beginning last quarter, USANA decided to stop disclosing United States, Canada, and Mexico distributor numbers and instead just grouped them all together. Okay, not a big deal. However, USANA now includes their newest territories from EUROPE in the North American distributor numbers. For those that don't know, the United States and Europe are separated by about 3000 miles of ocean. So it is completely irrational for USANA to combine the European segments along with the North American segments because they are so incredibly geographically different. The only reason for USANA to have done this is to mask the continuing dismal distributor numbers in the US and Canada by including a new territory that is expected to have somewhat rapid growth. I call this sleazy and USANA's stock analysts are too blind to have noticed.

If you wanted to take the United States revenue and divide it by the number of active associates for the United States territory, then you can forget it.
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Time For a Name Change? USANA's Failure in the United States May Leave No Other Option.

August 7, 2012, 5:24 pm
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USANA has failed miserably in the United States territory for many years now. Even after all the contests designed to increase the recruiting efforts of their distributors in an attempt to increase their "Active Associate" numbers in the US have failed. Even after USANA added a "Matching Bonus" to their compensation plan, their US territory has failed. Even after dishing out all sorts of bonuses for recruiting distributors and becoming platinum pace setters, USANA has failed in the US market. USANA even stopped publishing their Active Associate numbers for their United States territory because they are so bad and instead give a combined total with Canada, Mexico and even Europe. So what else is left for USANA to do? Change their name - Amway did it in the past with Quixtar.

With a name change people in the US wouldn't know they are still dealing with USANA. In other words, get the bad taste out of everyone's mouth. However, 99% of distributors would continue to lose money... Doing almost any kind of Google search on USANA brings up my blog and my website "www.mlmpyramid.com", which certainly is a problem for USANA distributors trying to mislead others into joining a pyramid scheme.

USANA announced that shipment of any USANA product will be on hold between August 10 and August 14 until after the convention due to a big announcement at their annual international convention. Either USANA is understaffed and nobody will be at their facility to ship product, or USANA simply doesn't want the product shipped due to a major change. It should be noted that Diamond Directors make a lot of money during this convention because USANA pushes attendees to purchase a lot of product for their business.

I have seen many cars advertising Monavie, Herbalife and other MLM companies, but never have I seen anyone driving around with a USANA advertisement. Other MLMs have been expanding in the United States, except for USANA. There isn't much left for USANA to do to improve the US distributorship other than to pull an Amway and change their name. Better yet, USANA should just move their headquarters to a foreign country since the majority of sales is outside the US. Not only that, but the founder had renounced his US citizenship in the 90s and moved his assets to Lichtenstein, which is considered a method of tax evasion. So USANA is simply a foreign owned company.
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USANA Rebrands Themselves and Makes Impossible Promise To Their Distributors

August 16, 2012, 9:17 pm
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Get ready for the new USANA! After 20 years, USANA announced at their 2012 International Convention that it was time to re-brand themselves. They are starting with the United States first. USANA redid all their packaging, sales tools & literature, website, and even their logo!

USANA's New Logo






USANA states that their new Brand Promise is the following: "We promise everything we do will help you love life and live it — and that will help you help others do the same."

 I think USANA's new logo actually looks like something out of a nightmare. Maybe the Mirror Prison in the first Superman movie.

Unfortunately, 99% of USANA's distributors never make a profit. In fact, according to USANA, less than 1% of distributors are even considered "Full Time" working associates (0.76% to be exact). USANA considers a distributor full time if they are a "Gold Director" or higher. To get to Gold Director, a distributor must max out their "Business Center" four weeks in a row. To max out a business center, the distributor must accumulate 5000 "Group Sales Volume" (GSV) on their "Left Leg" and 5000 on their "Right Leg". The distributor accumulates this volume of points from either "Preferred Customers" or recruited distributors in their "Downline".  There are over 3 distributors for every preferred customers, so obviously preferred customers are not relied upon for this volume points.

In order to accumulate 5000 GSV on a leg, they need their downline to personally purchase at least 100 "Personal Sales Volume" (PSV) worth of points through an "autoship" plan. These aren't really sales however, they are personal "Purchases" made by each "active distributor". A distributor is active as long as they personally purchase 100 PSV every 4 weeks (13 times a year). These personal purchases count as GSV for each distributor in their "upline".

So, 5000 GSV can count for 50 distributors who each personally purchase over $110 worth of product. This needs to happen on both left and right legs of the downline. So to max out a business center, it may take 100 distributors to do it. Doing it once only makes you a Silver Director. When you do it however, you get a new business center at the bottom of your one of your legs so you can continue recruiting more distributors and make more money. So to max out four weeks in a row, you need to time when you recruit your distributors so they order at different times during a 4 week period. So maxing out 4 weeks in a row may take over 400 recruited distributors.

Now the reason each distributor makes these 100 (some cases 200) PSV purchases every 4 weeks is because it is a business requirement by USANA. If the distributor fails to make that personal purchase, then that distributor will lose any GSV they may have accumulated and can not qualify or collect any commission that may have been owed to that distributor.

Imagine what it must take to become a Diamond Director, or 4-Star Diamond Director, or 10-Star Diamond Director. A Diamond Director must have 4 business centers all maxed out four weeks in a row. A 10-Star Diamond Director needs to max out 14 business centers four weeks in a row! That takes upwards of tens of thousands of distributors in their downline, balanced between the legs, and actively personally purchasing 140,000 volume points of product (about $154,000) each week!

Now how many downline distributors does it take to cover the cost of these personal purchases? About 10 actively purchasing distributors. So 10 would give about 1000 GSV (500 on left leg, 500 on right leg) which pays out $100 in commission. You only get paid a commission when you accumulate enough GSV according to USANA's pay plan. This $100 still doesn't cover the $110 + shipping for something like the Healthpak100. So lets just say it takes about 11 distributors to cover the cost to participate as a USANA distributor. Right off the bat, USANA has designed the compensation plan to fail 11 out of 12 distributor.

Unfortunately there are many other problems with the compensation plan and how USANA pays out commission as well as other factors that cause about 99% of USANA's distributors to lose money and never make a profit. So only about 1% distributors even have a chance to make a profit. These are fixed percentages designed into USANA's Binary Compensation Plan. It's even evident by USANA's own statistical figures that show only 0.76% of distributors are Gold Directors or higher.

And now we have USANA stating that "we promise everything we do will help you love life and live it — and that will help you help others do the same."

Here's what I think would be a more appropriate logo for USANA:

I call it "Suffering MLM Distributors Trapped in a Web of Deception and Misfortune"

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USANA Executives Sell Millions of Dollars Worth of Stock

September 11, 2012, 6:26 pm
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Myron Wentz sells $4,735,010 worth of stock in the last couple days (Sept 12 and 14). So I will update the figures below with the latest data. Someone should ask USANA to disclose what days the company repurchases the stock. Today it appears Myron Wentz sold his stock at the last 15 minutes of trading. (Update Sept 14, 2012)

Over the past couple weeks USANA's CEO Dave Wentz sold $2,960,088 of his stock.

Since the beginning of 2012, USANA executives have sold a total of $14,573,605 in stock. They have purchased $0.

Wentz Dave $2,960,088.00
Wentz Myron W $8,616,930.00
Macuga Daniel A. $515,973.30
Woo Deborah $500,436.24
McClain Jerry G $103,737.70
Guest Kevin $970,099.00
Iiekking G Doug $348,718.20
Fuller Gilbert A $164,095.00
Bramble James $196,329.00
Truett Roy $197,199.00


And I'd like to remind the readers how Dave Wentz responded during a past conference call:
John San Marco at Janney Montgomery Scott LLC:
"Do you know what the percentage of your Hong Kong associates that are actually Chinese nationals?"

Dave Wentz replies back with:
"We definitely have a number of people who are building in Hong Kong. We do not have a percentage or have a number that we could point to with any accuracy."

Also this Internal USANA Memo that admits to sending product to mainland China:
"IV. What is the biggest market that buys our products that we are not eligible to operate in?

i. Once again I couldn’t give you an exact answer on this. Since I work with our Asian markets, I know that a large sum of product ends up in China, but I’m sure product somehow gets shipped to other unauthorized markets as well…"

And also what USANA's ex-president Fred Cooper stated:
"we have a large group of Asian Associates who are involved with USANA only because of the products and are buying in Hong Kong for consumption only."


So USANA executives are fully aware of the Chinese Nationals that are recruited into USANA's MLM compensation plan through Hong Kong China. And has I have written about for years, the ratio of USANA distributors in Hong Kong to citizens in Hong Kong is about 1 in 100. That's a major red flag. Now USANA admits to the recruiting of mainland China citizens. The problem here is, it is AGAINST CHINA'S LAW for any of their citizens to participate in MLM. Why is that? MLM is against the law in China. So USANA is knowingly circumventing foreign laws and the SEC should investigate this matter.

As I have stated before, I believe that if you remove the net revenue generated by these illegal distributors, USANA would no be growing, but actually declining!. Thus, the stock price would be far lower. I believe the stock price is grossly inflated because of the illegal recruiting of Chinese Nationals and believe the executives selling their shares at these inflated prices could land them in hot waters.

It would be very interesting to find out how many USANA distributors are illegal recruits from foreign territories that restrict MLM from operating in their own borders. 
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If Nu Skin Loses Their China License, USANA Might Lose Their China License As Well

September 25, 2012, 8:55 pm
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There might be a very good reason Citron Research made the following Twitter comment today:


I can think of several USANA "China issues" that I have mentioned on my blog over the last several years. The biggest one that stands out is the illegal recruiting of Chinese Nationals into USANA's Hong Kong MLM compensation plan. It is illegal for any Chinese National to participate in Multilevel Marketing companies. China has outlawed MLM because it is a pyramid scheme.

I have pointed this out many times to my readers over the past several years. USANA's Hong Kong market exploded in growth a couple years ago and when the active associates in that market represented 1 out of every 100 Hong Kong citizens, it seemed pretty obvious to me that something is wrong. I have pointed out an internal USANA memo that admitted to sending a "LARGE SUM" of product to mainland China. There is no reason for a large sum of product to be sent to China unless they were going to distributors over there.

Then Dave Wentz and Fred Cooper actually admitted they have people signing up from mainland China in USANA's Hong Kong market. When a stock analyst asked USANA what percentage of USANA's Hong Kong market were Chinese Nationals, USANA refused to answer claiming they did not know (and never provided an actual answer). The analyst was satisfied with the non answer and dropped the subject.

I believe USANA has had tens of thousands of Chinese Nationals join USANA's MLM compensation plan. I believe USANA knows about it and is even training their associates to recruit Chinese Nationals into the MLM plan. The Fraud Discovery Institute uncovered this 5 years ago! According to the Fraud Discovery Institute (FDI), they had an undercover couple go into USANA's Hong Kong office and one of USANA's employees told that couple (who claimed they were from mainland China) to open up a bank account at the China Merchant Bank and use an address in Hong Kong. Also according to FDI, the USANA employee claimed there were 30,000 Chinese Nationals signed up in Hong Kong. Remember, this was 5 years ago. I believe this to be true.

Shortly after this China Report came out, FDI settled a lawsuit with USANA for an undisclosed amount and all the FDI material on USANA was removed from the internet. Then several years later Fred Cooper and Dave Wentz admit that Chinese Nationals signed up in Hong Kong.

Let it also be known that I brought this information to the attention of PriceWaterhouseCooper (USANA's Auditors) regarding the "LARGE SUM" of product being sent to mainland China as well as the recruiting of Chinese Nationals. PriceWaterhouseCooper ended their communications with me after I sent them all the information. Seems they didn't really care. But just for the record, they cannot claim they weren't informed about it years ago.

If there are tens of thousands of Chinese Nationals in USANA's Hong Kong distributorship, that could represent a very large portion of USANA's net revenues. Without this China recruiting, USANA's net revenues could have been on the decline like their United States market is. With such a decline, USANA's stock would be drastically lower. Which gets to my point about USANA executives selling their stock recently for millions of dollars with a stock price over $45. If these insiders know about the Chinese National recruiting scheme, then they know the stock price is grossly inflated because of the inflated earnings. I believe this is a form of stock manipulation.
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Dr. Mehmet Cengiz Oz, The USANA True Health Foundation, and The Sanoviv Medical Institute

October 1, 2012, 8:28 pm
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Updated October 9, 2012:
The "USANA True Health Foundation" charity may be violating IRS laws regarding "Self Dealing" by having tax deducted donations pay for Sanoviv medical treatments in which Myron Wentz, Dave Wentz, and Elaine Pace all have a direct financial interest in.
 USANA's True Health Foundation charged 200 of their distributors $150 each to have their picture taken with Dr. Mehmet Cengiz Oz during the 2012 USANA distributor Annual Convention in Salt Lake City, Utah. That's a wonderful thing, $30,000 right there going toward USANA's new charity. Also on April 28, 2012 guests paid $150 to the USANA True Health Foundation to have their picture with Dr. Oz at the USANA Healthy Living Summit.


Dr Mehmet Cengiz Oz does not endorse USANA or its products. I am repeatedly told that Dr. Oz endorses USANA, but that is not true. USANA issued the following statement to their distributors and those who had their pictures taken with Dr. Oz. My Emphasis in bold red.
How to use your photo
Do:
  • Show your friends and family and let them know you got to meet Dr. Mehmet Oz in person!
  • If they missed the event, let them know Dr. Mehmet Oz will be attending and speaking at USANA’s International Convention in Salt Lake City, Utah, August 15–18, 2012
  • Share your support of and information about the USANA True Health Foundation and its exciting sponsorship of HealthCorps
Don’t:
  • Use your photo for commercial or advertising purposes, including using the photo on Facebook, Twitter, or any other social media sites
  • State or imply that Dr. Mehmet Oz endorses, certifies, partners with, sponsors, supports, is affiliated with, etc., any product or company, including USANA Health Sciences and its product line
  • Copy, modify, reproduce, upload, post, transmit, display, distribute, disseminate, broadcast, or circulate the photo in any way. It is for your personal use only.

Now about this USANA True Health Foundation that Dr. Oz is supporting and having his picture taken for.


The USANA True Health Foundation is a charity run by Myron Wentz (Founder of USANA and Sanoviv Medical Institute), Dave Wentz (CEO of USANA), and Elaine Pace (President of USANA True Health Foundation and President of Sanoviv Medical Institute).
The following is stated on the USANA True Health Foundation website regarding the donations. My Emphasis in bold red.


How is the USANA True Health Foundation making a difference?
Your donation to the USANA True Health Foundation will go to one of three areas: Area of Greatest Need, the Sanoviv Medical Assistance Program, or Children’s Hunger Fund.

A donation to the Area of Greatest Need will, in part, be used for organizations or causes that require immediate aid, such as worldwide disaster relief.

Many friends of Sanoviv Medical Institute have expressed interest in helping others benefit from the world-class medical care Sanoviv provides. This program allows for those who would not be able to afford Sanoviv’s services to experience care and healing in this special environment. Please note that donations to this program cannot be designated for a specific individual.

The USANA True Health Foundation also expands and further deepens USANA’s support of Children’s Hunger Fund.

Through the USANA True Health Foundation, USANA Health Sciences also provides support to HealthCorps, which provides health education to children.

When someone goes to the Sanoviv Medical Institute, they are put on a dietary regimen. Of course it's USANA's own dietary supplements. Need proof? Check out the Sanoviv website regarding USANA's products: My emphasis in red.
Dr. Wentz recommends all of the great products offered by USANA. He personally uses them every day, and they are used as the base of treatment in every Sanoviv program. 
Dr. Wentz even explains it further on his blog regarding USANA's products used at Sanoviv back in a 2009 posting. So now that I have established the fact Sanoviv uses USANA products for all their treatments, I will like to show how much it costs to be treated at Sanoviv.
How much does it cost to come to Sanoviv?


Complete Health Assessment (CHA)
The current price for the CHA is $3,875 per person.
Detoxification and Regeneration Program
First week (includes the CHA/Complete Health Assessment) $4,950
Second week $3,500

Comprehensive Medical Program  (includes the CHA/Complete Health Assessment)
First two weeks (per person) $10,500
Subsequent weeks (per person) $4,700

Intensive Medical Program (includes the CHA/Complete Health Assessment)
First three weeks (per person) $21,800
Subsequent weeks (per person) $6,000

Companions
Companions: permitted to accompany individuals on the CHA, Comprehensive Medical Program, and Intensive Medical Program.
Companion rate includes meals, classes and use of pools. (per night) $100.
Many of the holistic treatments at the Sanoviv Medical Institute cost the patient several thousand dollars. Many of these treatments are banned in the United States (which is why Sanoviv is in Mexico).

So to sum everything up:
  1. Myron Wentz founded USANA.
  2. Myron Wentz and Dave Wentz founded Sanoviv
  3. Elaine Pace becomes president of Sanoviv
  4. Myron Wentz and Dave Wentz founded USANA True Health Foundation
  5. Elaine Pace becomes president of USANA True Health Foundation
  6. USANA True Health Foundation uses charitable funds to help pay for Sanoviv medical treatments
  7. Dr. Mehmet Oz partners with the USANA True Health Foundation
Don't get me wrong, I'm all for charitable givings to help others. However, something here is not right. You can draw your own conclusions here. I'm just surprised Dr. Oz supports a charity that is used in this questionable fashion.
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Citron Research Reveals Evidence of USANA's Illegal Activities In Mainland China

November 29, 2012, 8:14 pm
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Citron Research has just backed up everything I have written about USANA's fraudulent China activities. They even have undercover investigative evidence! Be sure to read the full investigative report! Allegations are that USANA has been illegally recruiting Chinese Nationals into their Hong Kong MLM compensation plan.

For additional information regarding the allegations of USANA's fraudulent China activities, read through my blog and you will find several years of information revealing it all!
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USANA - Myron Wentz Sells $30 Million in Stock In Last 30 Days

December 14, 2012, 9:13 am
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USANA Health Sciences, Inc (USNA) took a dive today dropping $4.43 (10.58%) to $37.44. In the last 30 days, Myron Wentz (Founder of USANA) sold $30.3 million in stock. No mention of this has been made in the news, but I think someone has been selling on insider information. Also don't forget about the Citron report on the illegal recruiting of Chinese Nationals into USANA's MLM business opportunity. That could very well play a role in this drop today as well.
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USANA Sticks It To Their Distributors With Product Price Increases - Merry Christmas!

December 19, 2012, 9:28 pm
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As if the U.S. economy hasn't suffered enough, now USANA Health Sciences, Inc (USNA) claims they are forced to raise the price of their products because Vitamin E Succinate is becoming very expensive. This will be in effect on January 5, 2013. Even though USANA has never experienced any problems maintaining a "large profit" every quarter for the last 20 years, USANA feels they deserve more by raising the price of their products. They must do whatever they can to get their overall revenues and profits up without regard for their distributors. Consider this the equivalence of a tax increase on distributors since they are the only ones who will suffer from this.
  
PRODUCT2008 PricesCurrent PriceNew PriceNew Price Increase% IncreaseTotal Vitamin E (IU)
HealthPak100$107.00$110.00$114.00$4.003.6%11200
Essentials$39.95$42.50$45.45$2.956.9%11200
Body Rox$17.95$19.95$22.50$2.5512.8%5600
Usanimals$12.50$12.50$13.95$1.4511.6%2800
Mega Antioxidant$30.95$32.50$35.50$3.009.2%11200
Mega Antioxidant without Vitamin KNA$30.95$35.45$4.5014.5%11200

Poor distributors just got through experiencing a price increase and now they are faced with another. Good thing shipping is free. Oh wait, it's not? So add on about $8 to $10 in shipping and you got yourself a product nobody is going to pay for, except distributors. Looks like USANA simply pulled some numbers out of a hat and thought nobody would notice their inconsistency. USANA even increased the price of the Usanimals by 11%, and you thought it was all about the children.

I believe the reason they increased the Usanimals by 11% is because distributors will continue to buy it as part of their "Charitable Donation". USANA makes a killing on this one. Charge the distributor full price ($13.95) and claim it as a "Charitable Donation". USANA then sends a single bottle of Usanimals to the Children's Hunger Fund charity at their cost (about $2). USANA pockets the rest of the money. That's very sleazy and is proof enough to me that it isn't about helping children. USANA should send $13.95 worth of Usanimals to the Children's Hunger Fund, which might be about 5 or 6 bottles, not just 1.

Now 90% of USANA products sold are purchased by USANA distributors who are paying over $110 to $220 every 28 days to meet their personal sales volume "Personal Purchase Volume" business requirements. Only 10% of product is actually purchased by someone outside the business opportunity. The only people who are going to suffer from these higher prices are the hundreds of thousands of USANA distributors that make up the lower 99% of the distributor force who are unable to turn a profit. They are the ones who have no chance at ever making a profit and now they have to fork out even more money to participate in USANA's compensation plan.

In order to participate in USANA's business opportunity, distributors must "personally purchase" a certain amount of product every 4 weeks (13 times a year). If the distributor fails to make this personal purchase, that distributor loses (stolen back by USANA) any points they may have accumulated from their preferred customer sales or from their downline distributor's own personal purchases (who also face the same dilemma). The distributor is also no longer eligible to collect any commission. This is the main premise of USANA's pyramid scheme. Your not paid upfront to recruit. However, you are paid commission from your recruit's required personal purchases, which is still a pyramid scheme. USANA would collapse if they removed this personal purchase requirement.

There is some good news though. Retail customers do not need to worry about these price increases because they (the retail customer) do not exist. So at least there is one group of people who will not suffer, imaginary as they are.


I'm all for capitalism and believe companies have a right to succeed and profit. But they should be required to do it legally and legitimately. Running a pyramid scheme is illegal. According to the FTC "...a multi-level compensation system funded primarily by payments made for the right to participate in the venture is an illegal pyramid scheme." It then goes on and states "Modem pyramid schemes generally do not blatantly base commissions on the outright payment of fees, but instead try to disguise these payments to appear as if they are based on the sale of goods or services. The most common means employed to achieve this goal is to require a certain level of monthly purchases to qualify for commissions." So USANA would be a pyramid scheme by this definition.
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The Number One Product USANA Distributors Sell is the Business Opportunity Membership. Is This Worse Than Herbalife and Amway?

January 9, 2013, 10:09 pm
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USANA distributors' number one selling product is not a vitamin supplement or skin care product. It is actually the business opportunity membership. That's right, a $19.95 startup fee someone pays when they are recruited into USANA's business opportunity and placed in the distributor's downline. This might sound unbelievable but I believe it is true. USANA product cannot be retailed for a profit because 1) “preferred customers” get the product at the same cost as distributors and 2) the product is absurdly overpriced because of the percentage of “distributor incentives” paid out, so there is zero demand for the product above the distributor's cost. So the only thing reasonably priced is the actual membership fee to join as a USANA distributor. All the distributor has to do now is convince others that they too can become rich by signing up in USANA's business opportunity.

USANA claims distributors aren't paid commission from this signup fee and claims that doing so would make them an illegal pyramid scheme. USANA claims that if commissions are paid based on product sales, then it is not a pyramid. However, this $19.95 fee alone doesn't let the newly recruited distributor even start their USANA business. Their business venture does not begin until they “activate” a business center. To do this, the new distributor must “personally purchase” over $220 worth of product, which is 200 “personal sales volume” (PSV) as USANA calls it. Once activated, the new distributor can take part in USANA's compensation plan.

USANA considers this required personal purchase to activate the new distributor's status as a “sale”. Did the distributor who recruited this new member sell the product to the new distributor? Absolutely not. Did the new distributor purchase the product from the person who recruited them? Not at all. The only product that was sold by the distributor was a membership (recruitment). So USANA gives Group Sales Volume (GSV) points to every upstream member above the newly recruited distributor based on the $220 worth of product purchased. These GSV will travel all the way up to the very first USANA distributor if it needs to. Once enough GSV points are accumulated, they are converted into commission dollars.

After the newly recruited distributor has activated their business center, they must now personally purchase 100 points worth of product ($110) every 4 weeks to remain active. If the associate fails to make this personal purchase, that distributor is no longer considered active, is no longer able to make any commission, and loses all their accumulated GSV points (if they had 10,000 GSV, they now have 0).

Now imagine over 220,000 USANA active distributors all making their required personal purchases in order to stay active. Many are required to personally purchase 200 PSV since they have multiple business centers. That's a lot of product purchased from USANA but none actually sold by USANA distributors. Again, the primary product sold by USANA distributors is the membership. So why should any of these distributors make any commission whatsoever from these “required” product purchases made by every active distributor?

The only real customers are the USANA “preferred customers”. There are around 64,000 of them. In 2011, preferred customers only account for 10% of USANA's net revenue, which is virtually insignificant. 10% of $589 million is only $58.9 million. The amount of commission paid out is 45% of net revenue. So preferred customers only account for around $26 million in commission paid out. However, USANA paid a total of $265 million total. Where did the remaining $239 million in commission funds come from? USANA distributor's required personal purchases.

The FTC wrote a letter tothe Direct Selling Associationback in 2004 the states the following: (my emphasis in bold)
QUOTE
...a multi-level compensation system funded primarily by payments made for the right to participate in the venture is an illegal pyramid scheme.
…
Modern pyramid schemes generally do not blatantly base commissions on the outright payment of fees, but instead try to disguise these payments to appear as if they are based on the sale of goods or services. The most common means employed to achieve this goal is to require a certain level of monthly purchases to qualify for commissions.
UNQUOTE

There is no question about it, USANA is operating as a pyramid scheme. Federal regulators have completely ignored complaints from thousands of MLM distributors and critics and have instead made it easier for these kinds of scams to exist (FTC's business opportunity rule exempts multilevel marketing business opportunities). Hopefully the recent attention Herbalife has been receiving from pyramid scheme allegations of their own draws enough attention to the MLM industry that federal regulators are forced to investigate frauds like USANA. Hundreds of thousands of USANA distributors are losing money and never even had a chance to make a profit. A 99% failure rate cannot and should not be ignored. And don't forget, USANA's #1 product sold by its distributors are memberships into the business opportunity.
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USANA Allows Distributors To Sign Up Under The Same Home Address and Credit Card - Recipe For Circumventing Foreign Laws

January 31, 2013, 5:00 am
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USANA Health Sciences, Inc (USNA) has virtually expanded their Multilevel Marketing (MLM) operation from about 19 markets to every market in the entire world.

A recently written internal USANA document reveals a secret policy that only insiders and several top distributors are aware of. This hidden policy allows over 15 active associates to use the same home address as well as using the same credit card. I cannot find this sort of policy mentioned anywhere on the web or through distributor literature. This policy essentially allows USANA distributors to sign people up into their MLM downlines within any country in this world including unauthorized markets such as mainland China, which has laws preventing their citizens from participating in MLM schemes.

Internal USANA document regarding address and creditcard enhancements states the following:
QUOTE
         Address and Credit Card System Enhancements
    - System enhancements took effect starting as of January 26, 2013.
    - As each of you are aware, in order to enroll as an associate in any market where USANA does business an associate must provide their correct address in country to show residency and to allow us to contact them.
    - In addition, downline purchasing is strictly forbidden, meaning an associate must pay for his or her own orders.
    - These policies are difficult to enforce at times because an associate may “lend” the use of his or her address to downline members allowing enrollments that do not meet residency requirements.  Likewise, an upline may use the same credit card to pay for all orders in an organization, thus causing compensation plan manipulation.
    - The compliance team has been charged with enforcing these rules but has found it difficult.
    - With project upgrade complete IT has been able to help this situation with two new enhancements.
    - First, as of January 26th the online enrollment system will not accept any address as a home address if that address has already been used by more than 15 other active associates.
          - Limited to main addresses only
          - however will not catch spelling or abreaviation differences
                - example: 123 Jon Boulevard vs. 123 Jon Blv.
          - The example would read as two different addressses
          - This will need to be evaluated and reported to compliance when noticed
          - This prohibition can be manually over-ruled by a DSR so that in the extremely rare circumstance that more than 15 associates truly do share the same address they simply need to enroll by phone.
          - A DSR will then verify that the address is really their address and can complete the enrollment.
    - Second, as of January 26th our online product order system will not accept as payment for product any credit card that is already in use on more than 15 active distributorships. 
          - This rule will not apply for the time being in Mexico or the Philippines until we are comfortable that we have a working solution in those markets for distributors who do not have a credit card. 
          - In addition, this prohibition will not apply to an associate’s first order as it is common for a sponsor to lend his or her credit card to a new associate and take cash as payment for the first order.
          - As with the first system enhancement, this prohibition can also be manually over-ruled by a DSR where the DSR speaks to the associate and the upline and verifies that the associate has paid cash to the upline and the upline authorizes use of the card.
    - Note that these enhancements do not represent a change in policy.  The policy remains that each associate must pay for his or her own orders and provide a legitimate address to enroll.  These enhancements simply will allow us to better enforce rules that were previously more difficult to enforce.
    - Kevin Guest and Deborah Woo informed each of the IDCs about this new enhancement in November and there were no complaints.
    -  Brent Neidig will be writing a compliance corner article to remind associates of these policies.
    - In addition associates who have previously had a practice of signing many people up at one address or with one credit card will notice the restriction.
    - Please make sure you are prepared to respond to these associates and help them understand the restrictions and that your DSRs, compliance and field development staff
UNQUOTE

DSR stands for Distributor Services Representative
IDC stands for Independent Distributor Council

USANA's 2012-2013 Independent Distributor Council (IDC) is made up of the following distributors:

Zak Ross – 10 Star Diamond Director
Simon Chan – 3 Star Diamond Director
Tony and Tammy Daum – 2 Star Diamond Director
Daniel and Paige Hunter – 2 Star Diamond Director
Jordan Kemper – Diamond Director
Tom and Lorie Mulhern – Diamond Director
Jared Creds – Ruby Director
Soomin Kim – Ruby Director

USANA is only talking about restricting their ONLINE ENROLLMENT SYSTEM from allowing associates to sign up more distributors under the same address if they already have 15 active associates sharing that address. Obviously distributors have been doing this or else USANA would not have to put in place a limit on the online enrollment. Does it really matter though since all the associate has to do is call USANA's customer service to get an override.

This policy outlined in the internal memo about allowing over 15 associates sharing the same address contradicts USANA's published policies and procedures which states the following:
QUOTE
3.13 One Distributorship
 
An Associate may operate, receive compensation from, or have an ownership interest, legal or equitable, as a sole proprietorship, shareholder, trustee, or beneficiary in only one USANA Distributorship. However, notwithstanding this rule, your spouse may become an Associate and operate a second distributorship as long your spouse’s distributorship is placed below one of your business centers and not in a cross line sales organization. The second business must be a bona fide independent business that is operated by the person listed on the agreement and not by the owner of the first business.
UNQUOTE

Now unless USANA executives have been watching too much "Sister Wives" on The Learning Channel, there is no way somebody has 4 spouses let alone over 15! So aside from polygamy, USANA's policies and procedures limits a household to only two distributor accounts. The policies and procedures USANA publicly publishes serves as nothing more than lip service to federal regulators. USANA's unpublished set of policies shown in these internal memos are the real policies that the federal regulators should be interested in.

A couple years ago there was another internal USANA document regarding compliance and training for their employees that makes the following contradictory statements:

QUOTE (my emphasis in red)
VII. Questions from DSR
II. When can we get the computer to list accounts with same address, phone, ssn, etc.
 
i. We already have access to most of that information, it just doesn’t automatically show us it. We have spoken with IT and the more actions we place on the system, the more burdensome it becomes and the slower it  operates. So for now, we have to run our own little reports to try and find multiples.
UNQUOTE

At the time why would USANA be interested in finding distributor accounts that share the same address? USANA admits they have access to the information and is fully capable finding these "multiples". Obviously there was a problem back then with associates using the same home address.

Lets look at another quote regarding credit card fraud and usage.

QUOTE (my emphasis in red)
III. Fraud
iii. Credit card usage

1. If someone is trying to use a card other than their own, do not let them. There have been several instances of fraud lately where people’s cards have been stolen and used to purchased product.

2. A good response would be: “I noticed that the name on this card is different than your own. You may not be aware of this, but recently there have been several instances where credit card fraud has taken place. Because of this, we are trying to increase our associates protection by only allowing the account holders credit card to be used  on their account. So unfortunately I can’t let you use this credit card. I know it may be a bit inconvenient, but I’m sure you would be glad if we
stopped someone else from using your card on their account without  your authorization.”

VII. Questions from DSR
III. How rampant is credit card fraud in the system?
i. Lately we have had several issues with Fraud. I don’t have an exact  number on how many issues we have, but it is a growing concern. As a result, we are currently working on changing our credit card policy to ensure an added level of protection for our associates.
UNQUOTE

According to USANA's 2010 internal document, credit cards can only be used on the card holder's own distributor account. Here USANA discusses trying to tackle credit card fraud. Yet, in their latest internal document just recently written they allow over 15 active associates to all use the same credit card.


So why does any of this matter at all? For starters, it allows a distributor to recruit anyone from anywhere into their downline. All they have to do is use the sponsoring distributor's address and credit card. The sponsoring distributor is simply reimbursed by those in his or her downline who reside in countries that are not authorized to participate in MLM companies. This leads me to China.

For several years now I have been writing on my blog about mounting evidence that USANA has been signing up Chinese Nationals into their MLM compensation plan. It is against the law for Chinese Nationals to own or operate a MLM distributorship. USANA is not authorized to conduct MLM activities within mainland China.

So one possible way USANA can circumvent China's laws is to sign up Chinese Nationals in other countries such as Hong Kong and use the sponsoring distributor's Hong Kong address. By doing so, it removes any paper trails within USANA's computer system and from auditors eyes. The shareholders simply see USANA's Hong Kong market rise sharply while the rest of USANA's markets hold steady or even decline. This sharp rise in sales and distributorships in Hong Kong sends USANA's stock price soaring. When the price is right, insiders dump millions of dollars worth of stock (Myron Wentz sold over $30,000,000 in November and December).

In November, Citron Research released evidence of Chinese Nationals being recruited in USANA's MLM compensation plan by a distributor from Hong Kong. Each of the Chinese Nationals used the address of the distributor from Hong Kong. They were also instructed to open up bank accounts in Hong Kong as well. This internal memo is strong evidence that USANA has in place a policy that allows for such questionable recruiting activities. USANA filed a response with the SEC regarding the Citron report and simply stated that they operate BabyCare Ltd. in mainland China and do it legally. USANA's response diverges from the actual issue, which is the recruitment of Chinese Nationals into USANA's MultiLevel Marketing plan through Hong Kong, not the BabyCare SingleLevel Marketing plan already established in mainland China.

With unethical hidden policies like these it's no wonder USANA executives are leaving like rats on a sinking ship. Someone should ask USANA during their financial conference call next week "how many associates share the same address with three or more other associates and what percentage of net sales did they account for."

I'll finish with one of my favorite non-disclosures by USANA revealed in the older internal USANA document:
QUOTE
IV. What is the biggest market that buys our products that we are not eligible to operate in?

i. Once again I couldn’t give you an exact answer on this. Since I work with our Asian markets, I know that a large sum of product ends up in China, but I’m sure product somehow gets shipped to other unauthorized markets as well…
UNQUOTE

A Large Sum sounds like a lot to me.

Now that the FTC has shut down MLM company Fortune Hi Tech (FHTM), could USANA be next in their sights? I will discuss this in my next article.

Disclosure: I have no stock position in USANA or any of their competitors. I have never and will never hold a stock position with USANA. I am not paid to write this article. I make no money from this blog. I have never and will never be a USANA distributor or a distributor of any other MLM company.
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USANA Q4-2012 Earnings - Questions USANA Should Answer for Shareholders and Federal Regulators

February 4, 2013, 9:05 pm
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USANA Health Sciences, Inc (USNA) Fourth Quarter Earnings for 2012 are released at the end of the day today. I'll give my two cents followed by a series of questions I think USANA should answer.

Flat to declining United States, Canada, and Mexico active associates. However, USANA might show a gain in North American active associates which could be due to European associate recruiting. USANA continues to combine Europe with United States associate numbers even though the market territories are over 3000 miles apart.

Greater China will see the biggest increase of active associates, which I attribute to mainland China citizens signing up primarily into USANA's MLM opportunity through Hong Kong rather than joining BabyCare which is only a singlelevel marketing company. As of mid-September 2012, I counted roughly 38,000 Babycare distributor IDs issued. It is unknown how many of those are actually considered "active" and how many have already dropped out.

Philippines will probably show gains since my blog is getting a lot more hits from that area of the world. This seems to be a good indication that recruiting is on the increase. Most of the Google searches that come to my website are searching the term "USANA Scam". Typically new recruits or those who have been approached by a recruit search these such terms. I also receive a lot of emails from concerned family members and friends from the Philippines.

Future sales will probably be forecast higher, which is no surprise since USANA increased the price of several top selling products. Shipping charges have been increased as well.


Questions USANA should answer during their 2012 fourth quarter earnings conference call on February 6, 2013.

New distributors who purchase a Professional Enrollment Pack for $1250 get a $100 commission check sent back to them from USANA. No customers were necessary to receive this commission check.

Question 1)How many Professional Enrollment Packs were sold to new sales reps during the 2012 year?

This answer would give investors an idea of just how much in Net Sales USANA makes upfront from newly recruited sales reps. It will also reveal what percentage of the distributor incentives was paid as a result of a phoney commission payout.


USANA has two classes of sales reps: Distributors and Associates. USANA states that "distributors" must satisfy the 5 customer rule by either having either Preferred Customers, Retail Customers, or a combination of the two. USANA goes on to further state that "associates" must satisfy the 5 customer rule by having only Preferred Customers (typically the terms are used interchangeably, except when referring to the 5 customer rule). There were only 64,000 Preferred Customers during the Q3-2012. This amount of preferred customers can only satisfy up to 12,800 active associates. USANA also states that 1 in 3 associates receive a commission check. There were 242,000 active associates in Q3-2012. So according to USANA's numbers, 80,600 active associates received a commission check.

Question 2) How many active associates received a commission check during the last quarter and how many of them are considered "Associates" and how many are considered "Distributors"?

If more than 12,800 sales reps who collected a commission check are officially classified as "associates", then USANA is not enforcing their own 5 customer rule policy.

Question 3) How many retail customers combined do the active associates who collected a commission check have?

It has to be over 339,000 to cover the remaining active associates who collected a commission check.


Over 200 of USANA sales reps are part of the million dollar club. 10 of them are part of a $5 million dollar club. So over $240 million in commission has been paid out to roughly 200 associates since USANA joined the stock market in 1996. That is over 13% of all commission ever paid out.

Question 4) Are the million dollar club members (who have received over 13% of all commission ever paid out) audited to ensure they have 5 or more customers and if so, how frequently are they audited?


USANA's Asia markets have exploded with distributor growth over the last several years. During that time, i have shown on numerous occasions how unlikely these numbers are real. In fact, according to USANA, 1 in every 100 Hong Kong citizens is a USANA distributor. Citron Research uncovered USANA distributors recruiting Chinese Nationals and training them on how to circumvent US and Chinese laws by opening a bank account in Hong Kong and signing up under their sponsor's home address. Recently I have uncovered a USANA document that shows how USANA has no limit to the number of distributors that can sign up under the same address let alone the same credit card.

Question 5)How long has USANA allowed three or more associates to sign up using the same address?

Question 6)How many USANA associates share the same address with 3 or more other associates?

Question 7)How many USANA associates share the same creditcard with 3 or more other associates?

Question 8)How many Chinese Nationals who live in mainland China have joined USANA's MLM business opportunity in other markets such as Hong Kong, Australia, Philippines, Malaysia, etc...? (Not related to BabyCare)


USANA has defined an "Active Associate" two different ways. In the SEC filings it states that an active associate has purchased product at anytime during the most recent three months. In every single other publicized location regarding USANA's business opportunity, an active associate is defined as one who personally purchases over 100/200 PSV points in order to qualify for commissions.

Question 9)What exactly is an "active associate" as described in your SEC filings. Is it an associate who could have simply purchased a single tube of toothpaste for $7.50, or is it an associate who has met the 100/200 PSV point requirement ($110 to $240) to be commission eligible?


The FTC has made the following statement in a letter to the Direct Selling Association: "a multi-level compensation system funded primarily by payments made for the right to participate in the venture is an illegal pyramid scheme."

Question 10) What percentage of net sales was the result of the distributor's PSV purchases to be commission qualified and remain as "active associate" status?

The FTC letter further states that "Modem pyramid schemes generally do not blatantly base commissions on the outright payment of fees, but instead try to disguise these payments to appear as if they are based on the sale of goods or services. The most common means employed to achieve this goal is to require a certain level of monthly purchases to qualify for commissions. While the sale of goods and services nominally generates all commissions in a system primarily funded by such purchases, in fact, those commissions are funded by purchases made to obtain the right to participate in the scheme."


USANA has never published a worldwide statistic of their distributor's leadership ranking and the percentage of distributor incentives paid out to each of those rankings. Doing so I believe would raise a red flag to federal regulators like the FTC as it would reveal just how little USANA distributors make.

Question 11)How many distributors in 2012 were in each of the Leadership Rankings from plain "associate" (commissionless) to "sharers" (bare minimum) to "#-Star Diamond Directors" (yes, each of the star rankings listed separately)?

Question 12)How much distributor incentives was paid out to each of the leadership rankings during the 2012 year?


It has been stated for many years now that MLM companies (including USANA) have a 99% distributor failure rate, meaning they did not make a profit. Based on my years of research into USANA I also have come to the same conclusion based on available information I have been able to find. However, USANA could clarify this issue once and for all and answer the following:

Question 13)What percentage of USANA sales reps make a "profit" after expenses are subtracted?


USANA states in their SEC filings "we experience a high turnover among new Associates from year to year". This is very vague and could mean 10% or it could mean 90%. This needs to be clarified with a real value.

Question 14)What is USANA's distributor turnover rate in 2012 among new associates from year to year in terms of a percentage? 


USANA claims to have about 242,000 active associates as of Q3-2012. Last year at this time it was said to have 222,000 active associates (Q4-2011). This would lead investors to believe USANA recruited 20,000 more active associates. However, because of a high turnover rate, it is actually unknown how many new associates joined.

Question 15) How many unique individuals were USANA Active Associates during the 2012 year (total)?

Question 16)How many associates left their distributorship and cancelled their membership?


I believe many USANA associates stay as a member because upline leaders discourage their members from cancelling memberships and tell them that one day they may have a downline under their business center. So the idea is that all these associates who didn't drop out have to do is keep paying a yearly renewal fee of $20. As of mid-September 2012, I have counted over 1.3 million USANA distributor IDs.

Question 17)How many distributor's paid a $20 renewal membership fee during the 2012 year?

Question 18)How many Business Development Systems (BDS) were sold or given to new distributors throughout 2012?


All of these questions are useful in continuing to build the case that USANA is a product-based pyramid scheme similar to the MLM Fortune Hi-Tech Marketing (FHTM) which was recently shut down by the FTC. It may be that the FTC chose to go after Fortune Hi-Tech first, build a strong case, and then apply that case and the judges rulings to other MLMs in the industry like Herbalife (HLF), Nu Skin (NUS), Amway, Monavie, Ariix, and hundreds of others that all have a similar business model.


Disclosure: I have no stock position in USANA or any of their competitors. I have never and will never hold a stock position with USANA. I am not paid to write this article. I make no money from this blog. I have never and will never be a USANA distributor or a distributor of any other MLM company.
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