USANA's distributor Hall of Fame reveals their elaborate recruiting pyramid scheme

USANA's October 2010 Distributor Hall of Fame
Compiled and Analyzed

By: USANAWatchDog

October 2010

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USANA Health Sciences, Inc. does not publicly publish their distributor figures. So I must take it upon myself to compile and publish the information. It becomes very apparent why USANA refuses to disclose the distributor numbers; almost everyone is unable to make a profit!

Of course if this information were made available to prospects before they join USANA's business opportunity, the outcome may be very different. Who would join a failed business where 99% of USANA's sales representatives lose money? It is easy to see how bad the failure rate is when comparing the leadership levels in this diagram to USANA's last average distributor earnings figures: USANA's 2006 North American Distributor Earnings Statement. USANA has not published a relevant report since then.

In the diagram, I represent USANA's distributors in a pyramid chart. The pyramid on the lower left represents all of USANA's distributors that have at one time or another received a commission check. Since the higher ranks represent such a small percentage of the total, the middle pyramid is a zoomed-in representation of the lower left pyramid's tip. The same goes for the upper right pyramid, which is a zoomed-in representation of the middle pyramid. The diagram does not even include the other 600,000+ distributors that have never received a commission check! USANA also only considers what is represented in the upper right pyramid as "Full Time" distributors (Gold Directors and up). Everyone else are just part timers according to USANA.

So what is USANA's response to this? I would love to know. USANA cannot claim that most distributors join only to receive discounts on the product because USANA's Preferred Customers pay the same price as distributors. All of USANA's distributors joined with the intent to "Make Money" (otherwise they would only be preferred customers). Distributors are forced to purchase over $100 worth of product every 4 weeks in order to receive their commission check. Just imagine each level of distributors making these required product purchases. Those purchases pay commission to the higher levels. What we have here is a very elaborate pyramid scheme.

The Security Exchange Commission, Federal Trade Commission, Stock Analysts, Shareholders, Distributors and Prospects should all be aware of the information presented in the diagram.

How is USANA a Pyramid Scheme? Prospecting Associates Should Read This Before Joining.

How is USANA a Pyramid Scheme?

In short, I believe USANA Health Sciences, Inc. is a pyramid scheme because associates can recruit an endless chain of new associates into a downline and are paid commission from the required product purchases made by each of the associates in the downline. Retailing USANA's products are unachievable due to the associates's exorbitant cost for the products. USANA associates resort to recruiting more sales representatives as their primary focus instead of retailing the product for a profit margin. The product is overpriced in order to fund the top recruiters in the pyramid scheme. As a result, 99% of USANA distributors never make a profit and lose a lot of their time and money.

   Required Product Purchases

The following is a statement from USANA's SEC filings regarding the requirement for associates to purchase product:

"To be eligible to earn commissions, an Associate must purchase a certain amount of product each month ("Qualifying Purchases"), which they may resell to consumers or use personally. Associates do not earn commissions on these Qualifying Purchases. Associates only earn commissions on the purchase of products by Associates in their down-line organization and Preferred Customers." - USANA's 10-K SEC Filing

First of all, the SEC Filing states that a certain amount product must be purchased each month, which is false. A certain amount of product must be purchased every 4 weeks, which happens 13 times a year instead of 12. USANA calls the amount of products associates are required to purchase as the "Personal Sales Volume" (PSV). It is very interesting that USANA chose the term "Personal Sales Volume" when in fact it is a "Personal Purchase Volume". The upline associates receive commission from the associate that makes these required purchases even in the product is never retailed to a customer. However, if the associate chooses to retail the product, that associate is not paid commission on the sale. Because the product is over priced, retailing for a profit margin is practically unheard of. What is actually happening here is that every associate is required to purchase about $110 worth of inventory every four weeks (13 times a year) and those inventory purchases pay commission to the associates who joined earlier.

What was left out of the SEC filing are the consequences of failing to purchase a certain amount of product every 4 weeks.

"If, at any time, an Associate’s PSV falls below the minimum requirement to remain active, the Associate will no longer be eligible for commission checks or bonuses or to advance in rank. The Associate will also lose any Carryover Volume, and he or she will not carry over any volume until re-activating the BC(s). The Carryover Volume will start again at zero." - USANA's Ask Andy

This rule threatens associates to continue purchasing inventory. A real business would not have such ridiculous hoops to jump through. Put it this way, if an associate were to sign up 10,000 preferred customers who purchase product on a regular basis, this associate will not be paid a single penny for their work unless the associate purchases $110 worth of inventory every 28 days. Why should a USANA associate be forced to purchase their own product if they don't need to? USANA would collapse if they did not force their distributors to purchase product every four weeks.

   Recruiting Associates Instead of Retailing Product

Associates can make far more money by selling the dream of becoming rich rather than selling USANA's vitamins or skincare products. In fact, as long as you sell the dream, the product sells itself!

USANA Pure Rest™

Example: USANA's Pure Rest(TM) melatonin product

Costs USANA associates $14.95 and retails for $17.94.

Each bottle Contains 56 tablets and each tablet contains 2 mg of melatonin.

So USANA's melatonin product costs associates 13.3 cents per milligram.

Most melatonin products retail for less than 3 cents per milligram - See for yourself!

All of USANA's products are overpriced like the above example!

However, when taking all of USANA's perks into consideration, USANA associates can potentially receive $20 in commission every 28 days from each associate in their downline simply from the required product purchases! Of course, what gets left out of their promotional material are the vast amounts of rules that prevent most all associates from making a dime. This is why is pays to recruit instead of retailing USANA's products.

   Endless Recruiting is How it Works

Most distributors do not remain in the pyramid scheme and drop out after only a few months. This is because reality sets in and they soon discover that nobody wants to purchase overpriced vitamins or skincare product. Not only that, but most of their family members, friends, and co-workers do not support their venture after being asked to join their downline. Because of this, there is a very high dropout rate for new associates in USANA's business opportunity. In fact, an estimated 81.5% of new associates drop out within their first year!

USANA knows that most associates drop out soon after they join and has developed a means to extract most of the money from the associate before they drop out. They do this two different ways. 1) in order for new associates to initially activate their business center and be eligible to collect commission, the associate must personally purchase about $220 worth of product. 2) Alternatively, a new associate can purchase one of four special enrollment packages ranging from $300 to $1250, which contains product and recruiting material.

   What Does The FTC Say About MLM and Pyramid Schemes?

In 2004, the Federal Trade Commission wrote a letter in response to a question the Direct Selling Association's president Neil H. Offen asked. The letter is titled "Staff Advisory Opinion - Pyramid Scheme Analysis". Mr. Offen requested a staff advisory opinion regarding the FTC's analysis of pyramid schemes.The response does not bode well for Multilevel Marketing companies like USANA. I recommend reading the memo for yourself.

"A multi-level compensation system funded primarily by such non-incidental revenues does not depend on continual recruitment of new participants, and therefore, does not guarantee financial failure for the majority of participants. In contrast, a multi-level compensation system funded primarily by payments made for the right to participate in the venture is an illegal pyramid scheme." (My Emphasis in Bold) - FTC Memo

USANA makes most of their net revenues from the money distributors pay in order to participate in the business opportunity. According to FTC's statement, it is very likely USANA is conducting an illegal pyramid scheme. 89% of USANA’s net revenue comes from distributors who purchase product and services from USANA.

"The Commission’s recent cases, however, demonstrate that the sale of goods and service; alone does not necessarily render a multi-level system legitimate. 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. Each individual who profits, therefore, does so primarily from the payments of others who are themselves making payments in order to obtain their own profit. As discussed above, such a plan is little more than a transfer scheme, dooming the vast majority of participants to financial failure." (My Emphasis in Bold) - FTC Memo

According to this quote, simply because USANA has a product to market does not mean render the company legitimate. It goes on to explain that Modern Pyramid Schemes require a certain level of monthly purchases to qualify for commission and these schemes call the required purchases a "sale of goods". The majority of USANA's commissions paid out comes primarily from the associate's required inventory purchases. If an MLM company makes the majority of their net revenues from the payments made by distributors to qualify for commissions, then the company is an Illegal Pyramid Scheme.


   Conclusion

Based on the information I have provided above, I believe that USANA conducts an illegal pyramid scheme. 99% of USANA distributors lose money due to this scam. The FTC needs to investigate USANA and put an end to the fraud. USANA currently operates this pyramid scheme in Australia, New Zealand, Canada, the United Kingdom, the Netherlands, Hong Kong, Japan, Taiwan, Korea, Singapore, Mexico, Malaysia, Philippines, and the United States. I recommend any prospecting distributor from these countries to consider what I have written above and do your own research before making a decision whether to join or not.

USANA'a Hong Kong active associate numbers may begin declining because of BabyCare Ltd.

Now that USANA Health Sciences owns BabyCare Ltd in China, will USANA continue to recruit Chinese Nationals into their Hong Kong market?  Currently, China has outlawed Multilevel Marketing because they consider it to be a pyramid scheme. Only Single Level direct selling is allowed. Distributors are not allowed to recruit additional distributors.

It appears that USANA and their distributors have been recruiting people from mainland China into their Multilevel Marketing business opportunity through their Hong Kong market. As I pointed out in a previous blog posting regarding USANA's active associates per territory, USANA's Hong Kong territory reveal that 1 in every 135 Hong Kong citizens are active distributors in USANA's business. That's very suspicious when you consider that USANA's United States market has 1 in every 5436 American citizen as an active Usana distributor.

So if USANA's Hong Kong territory has been used to funnel profits to USANA through illegal means (recruiting people from mainland China), and now USANA owns BabyCare Ltd, will those mainland Chinese distributors who joined USANA illegally leave USANA and join BabyCare Ltd instead? I believe this may be the case. This would mean that USANA's Hong Kong active associate figures will begin to drop. Keep in mind, people living in Hong Kong would not be able to join BabyCare Ltd because Hong Kong is not part of mainland China. Now if USANA believes their Hong Kong active associate numbers are going to decline as a result of BabyCare Ltd, then USANA has a responsibility to inform their shareholders since it is a material matter.

Regardless, I firmly believe there is sufficient evidence for a SEC investigation of USANA's distributor recruiting in their Hong Kong territory. I believe this is a SEC issue because if illegal distributor activities within a foreign country such as China is confirmed, it may account for a very substantial amount of USANA's net revenues and gross profits. If this is truly the case, then shareholders may suffer massive loses in their investment in USANA's stock. Another consequence will be a damaging blow to the auditing firm PriceWaterHouseCoopers' reputation since they have been notified of this matter almost a year ago.

I would ask that anyone with additional information or evidence please email me. Your identity will not be revealed.

UPDATED September 21, 2010 at 7:47 PM:
If USANA's management HYPOTHETICALLY told an investment firm that they are expecting Hong Kong active associate numbers to be lower because of BabyCare Ltd, but did not make this statement publicly to all shareholders, does this violate SEC laws due to insider trading?

USANA Purchases BabyCare Ltd for its Direct Selling License in China for $62,716,000

USANA recently purchased a company based in Beijing China that has been unprofitable. However, this company had something USANA has not been able to obtain; a direct selling license in mainland China. USANA paid a whopping $62,716,000 for a company that only had $15,000,000 in annual net sales and $19,000,000 in total assets. The transaction took place in the Cayman Islands, so it is questionable whether or not either party had to pay any US or Chinese tax.

USANA Health Sciences, Inc. is successful for one reason, Multilevel Marketing (MLM). USANA distributors can recruit more distributors, and because any distributor who wants to participate must personally purchase over $100 worth of product every 28 days, there is no need to retail product. Commission is paid to upline distributors from those mandatory product purchases made by their downline. So in MLM, selling the dream of making money and recruiting new distributors is what makes 1% of distributors a lot of money and make USANA very profitable. However, mainland China does not allow MLM compensation plans!

Mainland China only allows single level marketing compensation plans. So the only means for a distributor to make any money would be to retail product to real customers, which is really what direct selling is suppose to be about. For USANA to bring their product into China, USANA must at least drop the price of their product line in half (or more). This would allow its distributors in mainland China to retail the product and make a “Profit Margin”. This profit margin in currently unheard of with USANA's products around the rest of the world because the distributors already pay a premium retail price for the product and cannot resell it for more than they paid. Also, USANA's preferred customers pay the same price as the distributors. USANA would also have to reward those Chinese Nationals that actually retail product unlike those around the rest of the world which are rewarded for recruiting more distributors instead of retailing product. In case this isn't clear, distributors in mainland China would not have a downline! These distributors would also only be recruited by USANA's corporate office (or BabyCare for now) and not by distributors inside or outside the country.

There are good reasons for USANA to make this move however. They will try to use it to encourage the rest of their markets to recruit like crazy. USANA can put in their promotional material that they are only 1 of 25 companies in the world that have a direct selling license in mainland China, which is now the second largest economy in the world. If USANA distributors thinks USANA will be able to grow a large distributor base in China and maintain those distributors, then those distributors are in for a surprise. Again, what incentive is there for Chinese Nationals to join a distributorship with BabyCare/USANA? Unlike MLM where distributors think they work as a team, single level marketing means that each distributor is a competitor to one another. So the more distributors in a single level marketing plan, the less each distributor has to potentially make. Because of this, the number of Chinese distributors not rise as much as some believe. If the numbers grow too big, Chinese distributors will not last very long and will drop out even quicker than MLM distributors do.

Goodluck to USANA though. If USANA brings their product line into mainland China, they'll be forced to drastically lower the price of their products. Then the Chinese National distributors will pay about $50 USD or less for a USANA HealthPak100 and resell it for about $70 USD and make a $20 profit from each box sold, unless USANA refuses to lower the price. Oh, and if you think the product sent to Chinese Nationals would only be resold in China, think again. USANA has been unable to police Ebay and other auction sites for USANA distributors who have been reselling massive amounts of product at half the price that it costs distributors to purchase; all for the sales volume points (MLM point game)! What would stop Chinese Nationals from using ebay to resell all their product world wide and do it for a real profit while still reselling it for a cheaper price than any other USANA distributor elsewhere in the world could even buy it for.

Bottom line, MLMs have not been successful in mainland China and that is because MLMs were never about retailing product. MLM's like USANA are in business to sell the opportunity to make money (the dream). China is smart because they know a pyramid scheme when they see one; MLM. Companies in mainland China with a direct selling license can only succeed if the product is very affordable and competitive against those on store shelves. With a LIMITED distributor base, the product line can make the company and its distributors a lot of money. But if the product is too expensive, customers will not buy, and distributors will leave.

USANA's Active Associate Per Territory, Evidence of Illegal Recruiting in Mainland China, and Misleading Philippines Associate Figures.

The following table shows the number of reported Active Associates for USANA Health Sciences, Inc. 2nd quarter financial results in 2007 and 2010. Also included is a ratio of the number of USANA active associates to the population for the given territory. The results of this chart reveal what I believe is strong evidence that supports the notion that illegal associate recruiting is taking place in mainland China. I've been saying this for quite a while now, but the SEC needs to investigate this matter.

Territory	06/30/07	07/03/10	USANA Associates Per Citizen
North American Region
United States	63,000	57,000	1 : 5,436
Canada	27,000	26,000	1 : 1,315
Mexico	14,000	12,000	1 : 9,268
SE Asia/Pacific Region
Australia-New Zealand	21,000	18,000	1 : 1,476
Singapore	8,000	5,000	1 : 998
Malaysia	11,000	14,000	1 : 2,022
Philippines	0	7,000	1 : 13,140
E Asia Region
Hong Kong	13,000	52,000	1 : 135
Taiwan	15,000	11,000	1 : 2,095
N Asia Region
Japan	4,000	4,000	1 : 35,855
South Korea	2,000	4,000	1 : 12,190

1. It is very interesting that over the past 3 years Hong Kong gained 39,000 active associates, which is a 300% increase. How is this possible when the rest of USANA's markets did so poorly? And to top it off, Hong Kong has 1 USANA associate for every 135 citizens! This is a huge red flag and should easily prompt an SEC investigation into the illegal recruiting of Chinese Nationals. USANA is forbidden to recruit associates from mainland China because China has banned MLM from operating in their country. Any recruiting of people from mainland China breaks foreign laws. USANA is fully aware of the associates they are recruiting from mainland China. In a leaked USANA internal document from October 2009, USANA admitted that a "large sum" of product ends up in mainland China. USANA has never disclosed this information to shareholders. Besides, according to a long time USANA distributor, over 5 years ago USANA already had some problems with about 1400 of their distributors that were all Chinese Nationals who joined illegally, so it isn't like this would be the first time.

2. Also revealed by this chart is the fact that after three years USANA is losing active associates in most of their territories. Are shareholders aware of just how saturated USANA's markets are? USANA only reports in their SEC filings the active associate results for each region (North American, E. Asia, N. Asia, SE Asia). Investors have no idea how bad each of USANA's markets are doing because they are grouped together as a whole. After three years, US down 6000, Canada down 1000, Mexico down 2000, Australia/New Zealand down 3000, Singapore down 3000, Taiwan down 4000. Japan remains the same. Malaysia went up 3000 and South Korea went up 2000. The Philippines have 7000, but didn't exist 3 years ago. And finally, Hong Kong went up 39,000! Red Flag???

I believe the massive recruiting situation in Hong Kong and this large sum of product that is being sent to mainland China are signs of fraudulent activity. It is also evident that USANA's management is fully aware of the situation since they acknowledge it in their internal document. Without this situation in Hong Kong, USANA's stock would be in the toilet.

3. Another thing to point out are the number of active associates in the Philippines. If stockholders followed USANA's press releases after the Philippines market opened, they would expect the number to be much higher!

USANA Q1-2009
"the addition of 5,000 Associates in the Company’s newest market, the Philippines"


USANA Q2-2009
"Additionally, the Company’s newest market, the Philippines, added 5,000 Associates during the quarter." 

USANA Q3-2009
"Additionally, the Company’s newest market, the Philippines, added 6,000 Associates."

USANA Q4-2009
"Additionally, the Company's newest market, the Philippines, added 4,000 Associates."

USANA quit reporting the Philippines numbers during Q1 and Q2 of 2010, and never mentions any increase or decrease in the Philippines market. So shareholders and distributors are left to believe USANA has at least 20,000 active associates in the Philippines. However, according to my chart above, USANA only has 7,000 active associates in that market! What kind of management runs a publicly traded company with such irregularities like this?

Why is USANA management trying to fool investors? Is it so the stock price will rise? What does the SEC think about all of this? Someone should ask them.

USANA's 10 Reasons Why You Should Join USANA and My 10 Responses To Them

USANA Health Sciences, Inc. has a section on their website that lists 10 reasons why to have a home-based business with USANA. I will list each one of them and explain why I believe they are not true.

1. Low Start-Up Costs
To start your own home-based USANA business, there is very little upfront investment and no qualifying volume or inventory requirements. The only required purchase is USANA’s Business Development System. For as little as $30 US, you get a tried and tested system for creating an income-generating business that can last a lifetime.

FALSE
- New associates are also required to activate their business center(s) before they are considered “Active” and be eligible to collect commission. To activate a 1-Business Center plan, associates need to personally purchase about $180 worth of product. To activate a 3-Business Center plan, associates need to personally purchase about $540 worth of product. These Personal Sales Volume (PSV) purchases do not pay out any commission to the new associate even if resold to a retail customer, however the associate's upline will get paid a commission from your purchase.

- While USANA claims there are no inventory requirements, there are mandatory PSV purchases that associates must make every 28 days depending on the number of business centers they have. For a single business center, this is about $120 every 28 days that the associate must personally purchase. If the associate fails to make this purchase, the associate loses their "Active" status, is stripped of any Group Sales Volume (GSV) that has accumulated up to that point, and is not eligible to collect any commission from their preferred customers or downline associate's purchases. So yes, there is an inventory requirement. This is why it pays to recruit new associates instead of retailing product.

2. Simple Compensation Structure
No previous experience is necessary for you to be successful with USANA—just bring a willingness to learn and a passion for helping others improve their lives. It only takes your efforts and two individuals to do the same for you to start building a profitable downline organization. And, depending on your ambition and efforts, you can start earning commissions in your first week simply by sharing the products with others and ordering some for yourself.

FALSE
- USANA's compensation plan is extremely complex, contains vast amounts of requirements that are difficult to follow and understand, and is designed to fail over 90% of participants no matter how hard they try.

- USANA's claim that you can start earning commissions in your first week "simply by sharing the products with others and ordering some for yourself" is not true. Sharing the products with others implies the associate is giving away samples or even selling product from the associate's own inventory purchases. Don't be fooled however! Associates are not paid any commission from the PSV purchases that USANA requires them to make every 28 days. If a new associate joins, activates a single business center by personally purchasing $180 worth of product, and shares these products with others, that associate will not be paid a dime in commission. In order to be paid a commission like USANA claims, you would have to recruit at least 2 new associates in your downline who spend over $250 each, or find about 5 preferred customers who each purchase $100 worth of product during your first week (Both scenarios will pay you $40 in commission). BTW, there are 1 active preferred customer for every 3 active associates. Good luck on the preferred customers because they have been on a downward spiral!

3. Incredible Earning Potential
Unlike a traditional job that gives you only one way to earn income, USANA’s award-winning compensation plan offers an incredible six ways to earn income, providing a realistic opportunity to leverage your downline’s efforts to earn an above-average commission check every week. To help you succeed, unpaid volume carries over every week, there are no group sales requirements, and you are not limited to levels. In addition, you could potentially save thousands of dollars with home-based business tax deductions*.

FALSE
- 99% of USANA associates never make a profit. This incredible earning potential only applies to those who inact boiler room recruiting tactics, unethical doctors peddling USANA products to patients, and those who have gotten in very early on. Of course someone can join today and make a fortune by recruiting their church's congregation into their downline by placing undue pressure on the church members (See Operation Promise Land).

4. Your Business Fits Your Life
It’s your business. You work where, when, and how you want. Generally, if you put in a little bit of work, you’ll earn a little bit of income. If you put in more work, your earnings will increase. And, you’ll be free from the typical workweek irritations—no alarm clock, no schedule, no rush hour traffic, and no boss.

FALSE
- It is not a business unless you are out retailing USANA's products. Unfortunately, very few associates do so. The real operation is to sell the business opportunity and recruit more and more associates into the scheme. You can be sure that all of USANA's big shot associates making hundreds of thousands of dollars are all doing so because they have a massive downline of associates in their business centers, not because they retail millions of dollars worth of product to customers. It's not about selling the product, it's about selling the dream of making money. You sell the dream of becoming rich and the products are purchased automatically because it is a requirement to purchase in order to participate!

5. You’re in Business for Yourself, Not by Yourself
USANA is behind you every step of the way. You will receive expert training and have access to a wealth of tools to make your life easier: a full Associate-only web site where you can get the latest news, training, free downloads, and business management services; frequent Web conferences; unforgettable events; eye-catching sales aids, professional multimedia productions; exciting publications; and much more. Our enthusiastic and experienced customer service team is available to help in six languages. And, with our Autoship program, you’ll never have to handle inventory—we’ll ship everything directly to you or your customers on a schedule that’s convenient for you.

FALSE
- USANA is in front of you every step of the way. USANA associates must purchase overpriced product every 28 days in order to participate in the opportunity. Because the distributor's prices and the preferred customer's prices are the same, there is no profit margin that can be made on selling the product retail. Then USANA takes 45% of the money you just paid them and gives the vast majority of it to the 1% of associates that are at the top of the pyramid scheme. However, the bottom 99% of associates never make enough of see a profit. USANA's heading for this section would be more accurate if it read "You're in Business for Your Upline, Not for Yourself".

6. A World of Possibilities
If you’ve always wanted to travel the world, USANA is your ticket to a successful international business. USANA responsibly expands by choosing promising markets around the world in which to open for business. With our seamless compensation plan, you can build your organization in multiple countries without having to worry about different compensation plans or currency conversions. USANA takes care of everything while you work in exotic locations, discover exciting cultures, and make a world of new friends.

FALSE
- New associates don't stand a chance at doing business internationally. This is because the big shot associates (top 1%) already have their feet planted firmly in new territories just prior to the official openings. What USANA really means by their statement here is that there are no territorial boundaries in which you can recruit preferred customers or new associates. In other words, everyone in your neighborhood could become an associate just like you, and if they are not in your downline, then you are pretty much out of luck. But consider this, if 25 different McDonalds restaraunts existed on a single block, would any of them make a profit? No, of course not. In fact, they would all go out of business except one. That last remaining McDonalds would then be able to profit and stay in business. This dilemma is known as over saturation. USANA wants to pretend as though saturation does not apply to their recruitment operation.

7. Growing Health & Wellness Industry
For many years, wellness-related businesses have been one of the fastest growing segments in direct selling. Renowned economist Paul Zane Pilzer identified wellness products and programs as the economy’s next trillion-dollar industry. As a large portion of the world population ages, they are looking for products that make them look and feel better, and younger generations are looking for ways to maintain their health and energy levels to meet the needs of their busy lives. USANA is poised to meet those needs.

FALSE
- About 99% of the world cannot afford USANA's expensive products. If USANA did not force its associates to purchase over $100 worth of product every 28 days to participate in the compensation plan and be eligible for commission, then USANA would vanish because the people who would purchase the product would be those who actually want it. Associates who quit the business opportunity also quit purchasing USANA products. Over the past 18 years, USANA has had over one million associates. However, only 210,000 are considered "Active" as of July 2010. Most of these currently active associates joined within the past year. Thus, over 80% of USANA associates left the business opportunity and also stopped purchasing the product. This is indicative of the fact that the net sales for USANA change proportional to the number of currently active associates. USANA is NOT poised to meet the world's needs.

8. The Leader in Quality and Innovation
USANA’s quality products are formulated by a world-class scientific team based on cutting-edge, proven science and Dr. Myron Wentz’ expertise in keeping cells healthy through optimal nutrition. The company also collaborates closely on research with the Linus Pauling Institute and other notable institutions. Additionally, most products are manufactured and packaged in USANA’s own state-of-the art facility, allowing USANA to guarantee the quality and potency of every product.

FALSE
- USANA spends less than 1% of net sales in Research and Development. Simply readjusting dosages in their products is not innovative. As far as quality goes, USANA claims to manufacure according to Pharmaceutical GMP. However, USANA refuses to allow any agency or organization to test USANA's facility according to Pharmaceutical GMP. Only the standard Food GMP has been tested at USANA's facility. Manufacturers like USANA can claim to manufacture according to drug standards, but never have to prove it because they are not required to. You cannot call yourself a leader in "Quality" when you refuse to allow testing of your products to the Pharmaceutical GMP quality like USANA claims. BTW, in order to be Pharmaceutical GMP like drugs have to be, USANA's ingredients would have to be exactly 100% to what they claim is in the pills. Not 10% over or 10% under. Can you imagine a prescription drug that calls for exactly 30 mg is slightly over or under the printed dosage

9. Worldwide Credibility
A member of the Direct Selling Association, USANA is a solid, publicly traded company that has attracted people of all ages, genders, and education levels from across the globe. World-class athletes, best-selling authors, respected scientific institutions, leading health and wellness experts, and experienced business professionals across the globe have all recognized USANA’s commitment to excellence.

FALSE
- The Direct Selling Association has no credibility. The DSA board members consist of executives from Multilevel Marketing companies, not Direct Selling companies. The hijacking of the association has destroyed the credibility of network marketing by promoting product-based pyramid schemes called Multilevel Marketing. And just because individuals from all walks of life join USANA does not mean anything. Some people will do anything for a buck. Credible people also recommended and stood behind Enron, Worldcom, and Bernie Madoff's scheme.

10. Experience You Can Count On
Founded in 1992, USANA has years of experience in perfecting not only products that set the gold standard in the industry, but also a duplicable home-based business model that is stable in a good economic climate or bad. Under the direction of USANA’s solid and experienced management team, the company is positioned for a future of continued growth and success.

FALSE
- Whether constantly changing dosages in their vitamins constitutes a perfecting of the product or whether it is done just so associates cannot return the product for a refund after 3 months (instead of 12 months as required), I guess USANA does have experience, but you don't want to count on it. The claim that USANA set the "Gold Standard" in the industry was given by Lyle Macwilliam's Comparative Guide to Nutritional Supplements. I have written much on this subject.

- Pyramid Schemes can sustain themselves as long as you can attract new participants. Pyramid Schemes are successful in both good and bad economical times. Probably more so in bad economical times because people are desperate and looking for ways to make some money. Currently, USANA is growing only in their Asian market, mainly their Hong Kong region. Over the past several years, USANA has NOT been able to grow in their United States Region, Canada Region, Mexico Region, New Zealand Region, Australian region, South Korea Region, Japan Region, Taiwan Region, or United Kingdom Region. So much for continued growth.

USANA Doctors Peddling Product To Their Patients - Violation of Ethics

Many associates in USANA Health Sciences, Inc. try to recruit doctors into their downline. However, most doctors turn down the USANA distributor due to ethical reasons. Most doctors are familiar with something known as Code of Medical Ethics. So what ethical issue do doctors have with becoming a USANA distributor? They are the following:

The following links are from the American Medical Association's (AMA) Code of Medical Ethics:
- Opinion 8.063 - Sale of Health-Related Products From Physicians' Offices

and

- Opinion 8.06 - Prescribing and Dispensing Drugs and Devices

Here are a couple quotes from the Code of Medical Ethics:

"In-office sale of health-related products by physicians presents a financial conflict of interest, risks placing undue pressure on the patient, and threatens to erode patient trust and undermine the primary obligation of physicians to serve the interests of their patients before their own."

"Physicians may not accept any kind of payment or compensation from a drug company or device manufacturer for prescribing its products."

"Physicians should not urge patients to fill prescriptions from an establishment which has entered into a business or other preferential arrangement with the physician with respect to the filling of the physician’s prescriptions."

Doctors who choose to peddle USANA products to their patients break the Code of Medical Ethics. Because these doctors choose to put the interest of their personal business before the patient's own medical interest, it ruins the trust between the patient and the doctor. This becomes even a bigger violation of ethics when the doctor recruits their patients as distributors into their downline. It is all out of the financial interest of the doctor and not the interest of the patient.

How do doctors that sell USANA products to their patients keep their medical license?

Unless the doctor's patients file a complaint within their state, the practice of peddling will continue. Personally, if I go to a doctor for something and their recommended treatment is to purchase a specific brand of vitamins that the doctor is a distributor for, I would never go back to that doctor again. Would you? Most people would not go through the enormous hassle of filing a complaint. So the doctors peddling their own product never get in trouble. Ethical doctors do not place their own personal financial gain ahead of their patient's health.


Is there a way doctors can prescribe USANA products in an ethical manner?

Doctor's who want to recommend USANA product can do so ethically. This ethical option is for the doctor not to become a distributor, and to simply tell their patient to go to USANA's website and order the recommended product directly from USANA. By doing this, it removes the "conflict of interest" out of the equation. By doing this, it removes the "undue pressure" that would be placed on the patient. There are ethical ways for doctors to recommend USANA product, but the doctor cannot be financially connected, otherwise their would be a conflict of interest and violate the code of ethics.

USANA Announces Their Intention to Enter China - They're Already In China!

USANA announced that they have intentions to enter China. They made this announcement during their Hong Kong convention. Who are they trying to fool? USANA's already conducting their pyramid scheme in mainland China. They already admitted in an October 2009 internal document that a LARGE SUM of product ends up in mainland China. That's because they are allowing illegal recruiting to take place in mainland China.

MLM is banned in China, and the only way for USANA to enter China is to do away with their MULTI-LEVEL marketing structure. USANA will have to design a SINGLE-LEVEL marketing compensation plan just for China. But why bother? USANA's products are designed to be overpriced and forced to purchase by their distributors in order to participate in the pyramid scheme. Without the incentive to recruit large downlines, there is no reason to purchase the product. Investors might see this announcement as a positive, and the stock will probably go up. However, everyone will soon find out that no entrance into China will happen. USANA will lose money if they change to a single level marketing structure.

So when will stockholders demand USANA to disclose how much product and how many active distributors are a result of illegal China recruiting? When will PriceWaterhouseCoopers do their job according to their code of ethics and require USANA to comply with SEC filing rules and disclose this "Large Sum" of product that was illegal sent to mainland China?

Reference: USANA Health Sciences Announces Its Intention to Open in China

USANA, PriceWaterhouseCoopers, and China - Post on Yahoo Forum

The other day a gentleman asked me a question regarding USANA and China. The Following is a copy of my response on that forum: Yahoo Posting

"it is so surprise as all know USANA is doing sales to china. how can hong kong do sales of so many sale with only small number of population." - Stevechu6264

Good observation. It does seem a bit odd that so many people in Hong Kong want to join USANA's MLM.

"what if someone tell china customs." - Stevechu6264

Fraud Discovery Institute did a couple years ago. They even have video of a USANA "employee" in Hong Kong trying to show how someone from mainland China can set up bank accounts in Hong Kong to hide under the radar.

"so risk to USANA distributor if usana is stop in china. why does sec care. is it illegal to stock because it keep going up? did company lie? why cant they get license to do legal job?" - Stevechu6264

China has banned all MLM companies from doing business within their country. They do not allow "Multi-Level" compensation plans because they are not stupid. China understands that it is a pyramid scheme. So because USANA is a Multi-Level business, they are not welcomed in China.

USANA can get a license to do business in China if they designed a Single-Level compensation structure for mainland China. But if USANA did that, they would never sell any product because the product is overpriced. The only reason USANA is able to sell product is because it is a requirement for all distributors to purchase at least $100 USD worth every 28 days if that distributor wants to participate in the compensation plan. So without the Multi-Level structure, USANA would never stand a chance.


Would you buy a $112 USANA Healthpak from a USANA distributor that lasts only 28 days when you can get the same exact USANA Healthpak off EBAY for $50 from USANA distributors who can't sell it? Both boxes are unopened and brand new.

The SEC should care because USANA has stated in an internal company document that a "LARGE SUM" of product ends up in mainland China. And the only way product is sold is to "Distributors". So USANA is recruiting distributors from Mainland China into their MULTI-LEVEL compensation plan. And doing so violates China's Laws. The SEC should care because USANA is breaking foreign law. Because USANA admitted a "LARGE SUM" of product goes to China, then USANA is knowingly withholding this information from their stockholders.

PriceWaterhouseCoopers is USANA's financial auditor, and it is their duty to make sure USANA complies with the SEC filing rules. It is PWC's responsibility to either force USANA to comply and report the amount of sales that went to mainland China, or PWC must resign as USANA's auditors. Because PWC was notified of this document many months ago and has not done anything about it, then PWC is now as guilty as USANA is.

So if the SEC ever decides to do their job and investigate this matter and finds USANA guilty, then PWC should also be held accountable.

Investors are being misled by USANA's E. Asia growth. No where else in the world is USANA expanding their distributor force. However, they are doing so in areas with small populations. I would bet the growth is from mainland China. 

USANA's 1st Quarter Earnings Boosted by incredible E. Asia Recruiting - Mainland China Recruiting???

USANA's 1st Quarter Earnings Boosted by incredible E. Asia Recruiting

East Asia increased distributors from 35,000 to 57,000. That is a 63% increase. However, the rest of the world stayed the same or dropped. See USANA's 1st Quarter 10-Q.

USANA's preferred customers also continued to decline, no surprise.

I have been claiming that USANA's growth is because of illegal activity in Mainland China. I have good reason as well. An internal USANA document even says so!

http://www.sequenceinc.com/fraudfiles/wp-content/uploads/2010/01/usanacompliance100609.pdf
"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…"

In  case you missed it:
"large sum of product ends up in China"

When will the SEC investigate this issue. If USANA's Asian Market growth is from illegal recruiting in mainland China (and I believe it is), then USANA should be held accountable. USANA admitted that there is a LARGE SUM of product being sent to mainland China. When the SEC is done looking at porn on your tax dollars, I suggest they start doing their job and investigate USANA's China fraud.

USANA's auditor PWC ignores USANA's fraudulent China revenues

 USANA is breaking foreign laws by allowing their distributors to conduct business within "Mainland China" (Recruiting distributors and/or selling product). USANA admitted in an internal document that a "large sum" of product ends up in China, which is a restricted region. USANA is required to disclose this activity to their shareholders. Because this activity is a violation of foreign laws, it does not matter how significant or insignificant the amount of product that is illegally being sent to China, it has to be disclosed to shareholders.

USANA's auditor PriceWaterhouseCoopers was notified of this on November 16, 2009 and has had plenty of time to investigate the matter. The fact that USANA's recently filed 2009 10-K did not make any mention of product being sent to China leads me to believe PWC did not take the matter seriously.

This is a violation of PWC's code of ethics and is now subject to lawsuits by USANA shareholders. PWC should have required USANA to disclose the amount of product being sold in Mainland China, and if USANA refused, PWC should have resigned.

PWC's main office should investigate this issue. The SEC should too.

USANA's Overdosing Antioxidants May Be UNPROTECTING Your Body To Fight Cancer!

After I read today's latest scientific discovery regarding aging, I found the following quote extremely interesting!

"The research, published by the journal Molecular Systems Biology, shows that when an ageing cell detects serious damage to its DNA – caused by the wear and tear of life – it sends out specific internal signals.

These distress signals trigger the cell’s mitochondria, its tiny energy-producing power packs, to make oxidising “free radical” molecules, which in turn tell the cell either to destroy itself or to stop dividing. The aim is to avoid the damaged DNA that causes cancer."

If I'm not mistaken, this means that free radicals are important in protecting your body from developing cancer! But according to USANA's entire regimen, free radicals are bad and your body must receive megadose amounts of ANTIOXIDANTS to help protect your body from cancer.

This is a startling discovery because if proven without a doubt, the entire "MEGADOSE" vitamin industry is dead.

If USANA actually does what they claim, which is to adjust their supplement formulas to the latest scientific research, then USANA should drastically cut back the amount of antioxidants they overdose your body with.


The following is the link to the entire article titled "Scientists discover the secret of ageing"

USANA Admits Products Are Sold Illegally In China

This one is a great one. Please visit the article at Usana Health Sciences knows it products are being sold illegally in China

Here is the internal document that states so: USANA Internal Document

"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… "


So Barry Minkow was right about this all along. This also explains the unusual growth in USANA's Asian market. Their growth is due to illegal activities! I believe the SEC should investigate this matter. If USANA's knew for years that illegal activity in China accounts for a "Large Sum" of product, then they knowingly deceived shareholders and used this to keep the stock price propped up. All this while the insiders keep selling millions of dollars worth of stock.

USANA Becomes Official Supplement Provider of AFC Bournemouth - Sign me up!

USANA's latest press release titled "USANA Health Sciences Becomes Official Supplement Provider of AFC Bournemouth" is another desperate attempt to make news out of nothing.

Stated on the article is the following: “As a 37-year-old professional footballer, it is vital that I look after myself to the best of my ability,” said AFC Bournemouth Striker Steve Fletcher. “With USANA’s nutritional program, I have never felt better.”

What is not mentioned in the article is that Steve Fletcher is a USANA distributor. He is a salesman for USANA. His Distributor ID number is 4245360. So when you become a USANA distributor, it would also benefit you to have USANA create a press release about your "partnership" with the company. It is just too bad most of USANA's distributors have never made a profit in the business opportunity. And you can get brand new USANA product off Ebay at less than half the price that it costs distributors to buy it!

USANA's Announced Partnership with Kathy Kaehler is Not a Partnership at all

USANA recently made a press release announcing their partnership with Kathy Kaehler. However, this is not a partnership at all!

Kathy Kaehler simply joined as a USANA Distributor. Her USANA distributor number is 4236366.

Since when did USANA distributors start being defined as "Partners" with USANA?

According to Wikipedia: "A partnership is a type of business entity in which partners (owners) share with each other the profits or losses of the business."

USANA does NOT share their "Profits" with their distributors. Unless this is an actual partnership, USANA should stop writing untruthful press releases just to give an appearance of substantial news. Distributors are recruited every day. Why are they not receiving the same special treatment from USANA as Kathy Kaehler has?