USANA Allows Their Top Distributors Dictate Which Rules and Foreign Laws are Followed. USANA Sends Three Confusing Letters To Their Chinese Distributors.

It is clear to me who really runs USANA; The top 1% of distributors.

I have received a series of letters from an anonymous source that USANA sent to their Chinese distributors. I believe these letters might shine some light on the recent executive resignations. What transpires in these letters is USANA trying to put an end to the underground recruiting of Chinese Nationals into USANA's business opportunity in Hong Kong. However, when USANA's leaders (top distributors) complain, USANA caves and changes their mind. As a reminder, it is against China's direct selling laws for their citizens to participate in a Multi-Level Marketing scheme. 

USANA has recently admitted to recruiting Chinese Nationals in one of the recent conference calls. However, USANA claimed these citizens from mainland China only signed up to consume the product (even though they joined as DISTRIBUTORS and not Preferred Customers). Here's the transcript & quote:

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. We expect many of these consumers will begin purchasing USANA products through BabyCare and either remain consumers or become entrepreneurs and build a BabyCare business.

So the following first two letters sent to their Chinese Distributors try to set rules to prevent this illegal recruiting. The third letter tells their Chinese distributors to cancel the effects of the first two letters! The first letter was sent before the 4 executive's resignations. The last two letters came after the resignations.

The letters were sent in English and Chinese together. For the purpose of this blog, I only included the English version. To view the three letters in their Chinese & English form, you can view the following PDF documents: Letter 1, Letter 2, Letter 3.

My Emphasis in Bold Red:

LETTER ONE – Sent May 8, 2011

USANA and BabyCare: 3 Steps to Long-term Success

Dear USANA Family,

The Management Team, Board of Directors, and I all eagerly looked forward to the day that we could announce that BabyCare and USANA would be working together to realize my vision of a world free from pain and suffering. After the indirect acquisition of BabyCare was finalized last year, we were incredibly excited to tell the world that the USANA family now had an opportunity to help even more individuals attain improved health and better wealth. The partnership with BabyCare has brought my vision one step closer to reality by allowing USANA to recommend the finest nutritional products and direct selling opportunity to China in a way that meets all local laws and regulations.

When Dave became aware of BabyCare, he was focused on the prospect of having a license to operate in China and thereby share the USANA products with the People’s Republic of China. After thoroughly reviewing the management, culture, direction, values, products, and performance of BabyCare, he and I came to the realization that we could take an even larger step forward by making BabyCare a part of our family. Today, we are confident that BabyCare is the way for Distributors in China to share in the success of USANA. To realize this ambitious dream, however, we have to complete several steps:

1. Provide the highest quality, science-based products to consumers in China. As I stated during the Asia Pacific Convention, BabyCare’s products are exceptional, and something we can proudly add to the USANA product line. Additionally, we have product approvals underway to expand the variety of USANA products offered in China throughout 2011.

2. Offer an excellent direct selling plan to Distributors in China. As many of you know, a binary multi-level plan is not allowed in China. Yet, USANA remains committed to ensuring that we offer the richest opportunity for everyone, regardless of the market. As such, I had Dr. Fred Cooper evaluate the direct selling plan offered currently by BabyCare to see if he could make any improvements to the commission-earning potential of current and future BabyCare Distributors while adhering to the Direct Sales Regulations in China. After careful consideration, I am pleased to announce that while the Integrated Sales Program (ISP) has remained unchanged, modifications have been made to enrich BabyCare’s current plan. So we encourage all Achievers and above who have not yet received their ISP certification to do so. A meeting for Gold Directors and above will be held in Beijing on May 21 to explain these changes.

3. Ensure full compliance of all market regulations. USANA enjoys a great reputation all over the world where we do business. We want to make sure that in China we have the same reputation with all governing bodies. To secure that reputation—and thus the long-term success of our products and direct selling plan—we must add some changes to the rules for those Distributors doing business in Hong Kong. Therefore, the following changes have been established and are effective for all Distributors:

Beginning May 21, 2011

New enrollment

1. New Hong Kong Distributors will be asked to prove their compliance with our residency requirement by presenting their original Hong Kong Permanent Identity Cards, or Hong Kong Identity Cards, in person. They must also provide a Hong Kong bank account matching the main applicant’s name for enrollment and payment.

Common address

2. A limit of only five (5) Distributorships will be allowed to enroll using any single Hong Kong address for any new enrollments.

Credit card usage

3. Distributors may use their credit cards for purchase on another distributorship only at the time of enrollment. Continual use of a credit card for multiple distributorships is not allowed.

Existing Hong Kong Distributors can continue to purchase products and participate in the USANA compensation plan, but restrictions will apply to those who fail to prove their Hong Kong residency.

Beginning June 4, 2011

Limit on ordering and collection

1. Existing Hong Kong Distributors who have not proven their compliance with Hong Kong residency requirements can only (1) place orders, and (2) pick up products, up to a total of 250 sales volume points in any given rolling four-week period. This includes Autoships, orders placed online, or orders placed over the counter.

Personal pick-up

2. Existing Hong Kong Distributors who have not proven their compliance with Hong Kong residency requirements can only pick up orders in person. They will no longer be allowed to authorize third-party pick-ups, nor can their orders be shipped to a designated address.

Restriction on new Autoships

3. Existing Hong Kong Distributors who have not proven their compliance with Hong Kong residency requirements will not be allowed to initiate a new Autoship.

 

Photo identification

4. All Hong Kong Distributors must produce photo identification when picking up their orders. USANA reserves the right to place a Distributor’s account on hold if he/she refuses to provide photo identification.

I know that change is difficult. We certainly do not want to add unnecessary rules or cause inconvenience to our valued Distributors. However, the above changes are essential if we are to maintain our reputation as a company that stands true to its principles and the rules of the governments around the world where we do business.

On behalf of all of USANA, I want to thank you for all you do to share USANA’s opportunity for true health and true wealth. With these changes, we will embark on a future for USANA that I feel is brighter than ever! To our new prospects and soon-to-be partners through BabyCare, I welcome you on behalf of both USANA and BabyCare to join the healthiest family on earth.

Sincerely,

Dr Myron Wentz

Founder & Chairman, USANA Health Sciences

“直銷商" refers to “distributor” as defined in USANA’s Policies and Procedures. The English version of this communication will govern in case of dispute or confusion due to translation.

For any enquiries, please contact us at our hotline (852) 2162-1812.

It seems very clear to me that this letter is directed towards Chinese Nationals (not to be confused with residents living in Hong Kong) who joined USANA's business opportunity in Hong Kong. The most important line out of "Letter One" was "the above changes are essential if we are to maintain our reputation as a company that stands true to its principles and the rules of the governments around the world where we do business." This line validates my ongoing claims that USANA has been illegally recruiting Chinese Nationals into their Hong Kong territoty and is responsible the explosive growth in Hong Kong. This letter was sent before the Executive Resignations. Now for letter 2.

LETTER TWO – Sent May 11, 2011 (after 4 executives resigned)

A Message From Deborah Woo & Dave Wentz

Dear Distributors,

I am honored to be appointed USANA's President of Asia Pacific.

I understand the responsibility that comes with this position, and promise that I will dedicate myself to helping all our Asia Pacific Distributors in USANA and BabyCare Distributors in China achieve true health and true wealth.

Dave and I received some feedback from leaders on the challenges which some Hong Kong Distributors will face in adhering to the new requirements we announced recently. Therefore, we are pleased to announce the following changes to the requirements which were due to be implemented on June 4:

For Hong Kong Distributors who have not proven their compliance with Hong Kong residency requirements,

(1) The 250-point limit for every rolling four-week period will still apply to order-placing, but no longer to order-pickup

(2) The requirement to pick up orders in person will be rescinded. This means that all Hong Kong Distributors will continue to be able to authorize third-party pick-up, as well as have their orders shipped to a designated address

However, the restrictions on new Distributor enrollment to those with Hong Kong Identity Cards, common address, and credit card usage from May 21, 2011 will remain.

Dave and I will continue to work to improve the BabyCare compensation plan to ensure that both BabyCare and USANA Distributors will enjoy a fair and lucrative way of building their future with the USANA family.

We look forward to working with you.

Deborah Woo

President of Asia Pacific

Dave Wentz

Chief Executive Officer

____________

A Short Summary of the Important Messages (Revised on May 11, 2011)

Beginning May 21, 2011

New enrollment

1. New Hong Kong Distributors will be asked to prove their compliance with our residency requirement by presenting their original Hong Kong Permanent Identity Cards, or Hong Kong Identity Cards, in person. They must also provide a Hong Kong bank account matching the main applicant’s name for enrollment and payment.

Common address

2. A limit of only five (5) Distributorships will be allowed to enroll using any single Hong Kong address for any new enrollments.

Credit card usage

3. Distributors may use their credit cards for purchase on another distributorship only at the time of enrollment. Continual use of a credit card for multiple distributorships is not allowed.

Existing Hong Kong Distributors can continue to purchase products and participate in the USANA compensation plan, but restrictions will apply to those who fail to prove their Hong Kong residency.

Beginning June 4, 2011

Limit on ordering

1. Existing Hong Kong Distributors who have not proven their compliance with Hong Kong residency requirements can only place orders up to a total of 250 sales volume points in any given rolling four-week period. This includes Autoships, orders placed online, or orders placed over the counter.

Restriction on new Autoships

2. Existing Hong Kong Distributors who have not proven their compliance with Hong Kong residency requirements will not be allowed to initiate a new Autoship.

The English version of this communication will govern in case of dispute or confusion due to translation.

For any enquiries, please contact us at our hotline (852) 2162-1812.

So it appears that "leaders" or those distributors who are Gold Directors and up (you know, the special ones who found out 4 executives resigned a day before shareholders found out) are upset with Myron Wentz's plan to ensure they are abiding by foreign laws. Now that Fred Cooper has jumped ship, Deborah Woo and Dave Wentz have begun erasing the necessary rules to abide by China Direct Selling Laws. Lets find out what Letter 3 is all about!

LETTER THREE – Sent May 13, 2011

Dear USANA Family,

It is a new era of growth and opportunity for USANA. Our success as a family relies heavily on our ability to listen and respond to feedback from our leaders and Associates. As a result, we have reassessed previous decisions in regards to Hong Kong policies announced last weekend that were attributed to Dr Wentz. We would like to formally announce that all policy changes that were recommended are being canceled.

There is a bright future for the USANA family through USANA China and BabyCare. We were gratified for the feedback and great suggestions we received from our leaders and those that took time to meet with us in person on how to complete this transition successfully.

Our strategy going forward will be to work with leaders individually to help them transition their teams when they are ready. The leaders have told us they understand the need to transition to China for the long term benefit of their Distributorships, but we want to allow each of them to have the necessary time and training to make this transition smooth and rewarding.

We apologize for the confusion and concern this has created. We remain focused on securing long-term success for you and your business.

Deborah Woo

President of Asia Pacific

Dave Wentz

Chief Executive Officer

Wait a minute! Didn't Myron Wentz's first letter state "the above changes are essential if we are to maintain our reputation as a company that stands true to its principles and the rules of the governments around the world where we do business." So because USANA's top distributors complain, USANA decides to scrap the rules for Chinese Nationals?

From the evidence I have seen, USANA has knowingly allowed citizens of mainland China to join USANA's Hong Kong territory for several years. They even admit that a LARGE SUM of USANA product ends up in mainland China (long before they even owned Babycare Ltd) as stated in this internal memo. They finally admit it in a recent conference call. And these three letters add to the evidence that USANA is fully aware of the restrictions mainland China has on their citizens joining a Multi-Level Marketing scheme, even if they cross the border and join in Hong Kong. 

How much longer will USANA get away with this? Shareholders should be demanding answers from USANA. Questions USANA should answer to shareholders are:

1) How many total mainland Chinese citizens joined USANA's business opportunity in Hong Kong?

2) How much of USANA's revenues came from the underground recruitment of Chinese Nationals into their Hong Kong territory over the past several years?

3) How much commission is paid to USANA "Leaders" (Gold Distributors and up) that came as a result of these Chinese Nationals who joined USANA's business opportunity in violation of China's Direct Selling Laws?