Thursday, July 28, 2011

USANA Recruits Chinese Nationals To Participate and Build Their Business in Hong Kong in Violation of Chinese Direct Selling Laws.

I've been stating this for years now. USANA has been recruiting citizens from mainland China as distributors in a multilevel marketing company for their Hong Kong territory. I've pointed out in the past how USANA's Hong Kong distributor numbers are way out of proportion (now 1 in every 112 Hong Kong citizens are USANA distributors = RED FLAG) and that mainland China only allows their citizens to participate in SINGLE-level marketing companies.

Well, today USANA was asked during their dismal second quarter earnings results the following question by John San Marco at Janney Montgomery Scott LLC:
"Do you know what the percentage of your Hong Kong associates that are actually Chinese nationals?" - Transcripts

Finally, someone asks USANA a real question instead of the soft balls USANA usually receives. Dave Wentz's first answer was a very calculated "No, we do not". If Dave is being honest, then USANA's management team doesn't know their ass from a hole in the ground. But I'm sure USANA knows the answer but refuses to publicly disclose that number.

Better yet, Dave Wentz could have just simply quoted their own internal document that surfaced over a year ago!
"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…
Dave could have simply stated that he isn't sure of the exact percentage, but that a "LARGE SUM OF PRODUCT ENDS UP IN CHINA". But Dave is only the CEO, so why would he know any of this...

After John San Marco asked for USANA to at least give a ball park estimate on the percentage, 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."
 Really!? Chinese Nationals "building in Hong Kong"? Uh oh! Dave Wentz was not suppose to admit that. During the first quarter's conference call 3 months ago, USANA's Fred Cooper said "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 now USANA is in a pickle. Dave Wentz lets the truth come out and admits that the Chinese Nationals are actually building a USANA downline in Hong Kong. So USANA has been "Cheating in China". And of course they are having trouble "transitioning" these distributors over to BabyCare because they all know that without a downline they have no chance of making a dime. The product is over priced and over rated. There is little to no demand for USANA's product except as a required purchase to participate in a pyramid scheme. To transition these Chinese Nationals over to BabyCare would mean breaking apart their already formed downlines. And best of all, these downlines are attached beneath many of USANA's top distributors. That is why USANA's distributor leaders were upset about some changes USANA was trying to implement which forced USANA to quickly retract their plan. To split up the Chinese Nationals out from USANA would mean top distributors of USANA losing tens of thousands of dollars in commissions. Commissions which come from the mandatory product purchases by these Chinese Nationals in order to participate in the scheme.

Lastly, John San Marco asks USANA if there are any Chinese Laws that prevent Chinese Nationals from doing any sort of multilevel marketing outside their borders. Dave defers the question to Jim Bramble, USANA's legal officer. Jim dances around the question and John had to then be more specific. Finally, Jim makes the following statement:
"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." - Jim Bramble
Jim follows that up with a lot of rambling and back peddling. So in otherwords, Chinese Nationals are not legally allowed to participate in USANA's multilevel marketing business opportunity whatsoever. I have been making this claim for a while now USANA finally admits it. But wait a minute, in regards to Chinese Nationals, Dave Wentz had just stated that "We definitely have a number of people who are building in Hong Kong." I think we have a winner folks. USANA caught in a lie regarding Chinese Nationals as USANA distributors.

I want to thank John San Marco at Janney Montgomery Scott LLC for asking USANA his questions. Good job.

Wednesday, July 27, 2011

USANA Second Quarter 2011 Earnings Results Reveal Stagnant Distributor Base

USANA Health Sciences, Inc (USNA) released their second quarter financial statement on July 26, 2011 and they still can't seem to grow in the United States, Canada, Mexico, Australia, New Zealand, Japan, or Malaysia. In fact, USANA seems to be relying primarily on Hong Kong and mainland China. We have heard USANA's excuse for the lack of distributors for several quarters now, which is to blame the bad economy. However, if you read much about the MLM industry, it is said that the industry benefits from a down economy because people need jobs and are more likely to join companies like USANA. If you look at Herbalife (HLF), you'll see that they have been "increasing" their distributor base in North America and Mexico. So what is USANA's problem? Is the pyramid scheme becoming more clear in the eyes of potential recruits? Is it the fact distributors are unable to retail the product for more than their cost since it is over priced and preferred customers get it at the same price as distributors?

We'll soon listen to USANA's 2nd quarter conference call in the coming hours and doubt anything relevant will be mentioned by USANA. Maybe I will be surprised! I think the following question should be asked by stock analysts during the conference call:


USANA, is it true you terminated Lynn Allen Johnson & Duke Tubtim (Both are 5 star diamond directors) because they showed an interest in ARIIX (company started by former USANA president Fred Cooper). What about Steve Swartz & Tim Lewis (Diamond and 4 star diamond directors), were they "terminated" as well? All four of these members are now active members in ARIIX; have additional USANA distributors joined ARIIX following the ex-USANA leaders? Do you expect lower distributor figures for the United States in the third quarter as a result of ARIIX? And most importantly, do you expect these former USANA leaders mentioned above to sue USANA because they were terminated? How is this distributor termination any different than the one where USANA was forced to pay $7,000,000 to TWO distributors for wrongful termination?

I will be disappointed if analysts never mention the termination of their top distributors because investors should be made aware of this.

2010-Q2 2010-Q3 2010-Q4 2011-Q1 2011-Q2

United States 57000 55000 51000 49000 49000
Canada 26000 25000 24000 24000 24000
Mexico 12000 11000 11000 10000 10000

SE Asia Pacific 44000 46000 41000 40000 43000
Greater China 63000 89000 93000 82000 87000
North Asia 8000 8000 8000 8000 9000


United States 39000 37000 36000 38000 37000
Canada 15000 14000 14000 14000 13000
Mexico 3000 3000 4000 3000 3000

SE Asia Pacific 6000 7000 6000 6000 6000
Greater China 2000 12000 16000 8000 8000
North Asia 1000 1000 1000 1000 1000

Sunday, July 24, 2011

Top USANA associates leave USANA for ARIIX - a MLM founded by former USANA president Fred Cooper


Fred Cooper, Mark Wilson, Jeffrey Yates and Riley Timmer resigned from USANA on May 9th, 2011 launched their own multilevel marketing company called ARIIX. At the beginning of July, USANA discovered that several of their top distributors (and I mean very top) had joined ARIIX as founding distributors. USANA terminated these members and may have a much larger problem looming. I believe we have to wait until the Third Quarter financial results to see the damage if any ARIIX has on USANA's distributor numbers.

When top distributors leave one MLM company to join another, their devote congregation (Downline members) usually follow. These leaders were used in virtually all of USANA's literature as well. So who are these so called USANA leaders that joined ARIIX?

USANA Distributor #2111980 - Timothy Lewis - 4 Star Diamond Director - Millionaire Club
ARIIX Distributor #10138 - Timothy Lewis - 4DL Enterprises Inc. -

USANA Distributor #133412 - Lynn Allen Johnson - 5 Star Diamond Director - Millionaire Club
ARIIX Distributor #10146 - Lynn Allen Johnson - Vision is Power Inc.-

USANA Distributor #2119355 - Duke Tubtim - 5 Star Diamond Director - Millionaire Club
ARIIX Distributor #10198 - Duke Tubtim - Kaizen Support Group Inc. -

USANA Distributor #295671 - Steve and Myrna Swartz - Diamond Director - Millionaire Club
ARIIX Distributor # 10168 - Steve Swartz - Have it All, Inc. -

(There may be more leaders who joined ARIIX, and I will post them on here when I find them)

These members have all made over one million dollars in commission and bonuses at USANA and they decided to take a risk and join ARIIX instead. Interestingly enough, all four of these USANA distributors are placed at the very top of ARIIX's distributor hierarchy (because they were the first ones in). A couple of these members have written on the internet why they believe they were terminated by USANA and express their displeasure.
Lynn Allen Johnson letter
Duke Tubtim letter

Now USANA does have a policy in place that allows their distributors to join other MLM companies as long as the other company does not offer a competing product. Well, ARIIX markets vitamins and minerals just as USANA does. So none of USANA distributors can join ARIIX and remain a USANA distributor. So are other USANA distributors joining ARIIX? You bet!

As I find additional USANA members also with ARIIX, I will update the list below.

USANA Distributor #3704262 - Randy "Yosef" Katz - - Sabai Marketing Group
ARIIX Distributor #10247 - Randy "Yosef" Katz - Sabai -
See Randy Yosef Katz USANA resignation letter

USANA Distributor #3940012 - Pollawat Pankam -
ARIIX Distributor #11357 - Pollawat Pankam -

USANA Distributor #3936760 - Somboon Pongpruk -
ARIIX Distributor #11376 - Somboon Pongpruk -

USANA Distributor #7662974 - Edward Williams -
ARIIX Distributor #12996 - Edward Williams -

(added to this list Aug 5, 2011)
USANA Distributor #3053770 - Iris Lee - Team ASD -
ARIIX Distributor #10228 - Iris Lee - IS Health Enterprises Ltd. -

(Following added to this list Aug 20, 2011. These USANA Distributors were all part of the Team "Global Success Leaders" in USANA with Lynn Allen Johnson. Now they are all part of the same team and same name, but under ARIIX. )
USANA Distributor #2926598 - Rick Billings -
ARIIX Distributor #10727 - Rick Billings -

USANA Distributor #4154550 - Rick & Cynthia Evans -
ARIIX Distributor #10896 - Rick & Cynthia Evans -

USANA Distributor #2812402 - Mike Delevante -
ARIIX Distributor #10817 - Mike Delevante -

USANA Distributor #3909038, 4112764 & 4380414 - Anh Vongbandith -
ARIIX Distributor #12816 - Anh Vongbandith -

USANA Distributor #2127139 - Tatyana Sutherland -
ARIIX Distributor #11188 - Tatyana Sutherland

USANA Distributor #4086676 - John R. Parke -
ARIIX Distributor #11507 - John R. Parke - 11507

(Following added to this list Aug 23, 2011.)
 USANA Distributor #: 3250998 - Melissa Daniels -
ARIIX Distributor #: 11496 - Healthy 4 Life, LCC - Melissa Daniels -

USANA Distributor #: 128089 - Larry & Susie Sisson -
ARIIX Distributor #: 10547 - Larry & Susie Sisson -

USANA Distributor #: 2765838 - Tracee Gluhaich -
ARIIX Distributor #: 18696 - Tracee Gluhaich -

(Following added to this list Aug 29, 2011.)
USANA Distributor #:  - Sandy LV - Ruby Director -
ARIIX Distributor #: 19176 - Sandy LV -

USANA Distributor #: 8297220 - Debbie Turner -
ARIIX Distributor #: 20916 - Debbie Turner -

USANA Distributor #: 2479038 - Lucia Sanchez -
ARIIX Distributor #: 34596 - Lucia Sanchez -

(Following added to this list Sept 1, 2011.)
USANA Distributor #: 244097 - Arlene Hutchinson -
ARIIX Distributor #: 11578 - Ennis Hutchinson -

USANA Distributor #: 2320280 - Jean Amicarella -
USANA Distributor #: 3669898 - Jean Amicarella - (Yes, two USANA IDs with separate websites for this unique distributor)
ARIIX Distributor #: 17766 - Jean Amicarella -

(Following added to this list Sept 15, 2011.)
USANA Distributor #: 9638662 - Susan Hamilton -
ARIIX Distributor #: 34007 - Susan Hamilton, CHHC -

USANA Distributor #: 2137359 - Glenna and Richard Norris
ARIIX Distributor #: 59886 - Glenna and Richard Norris, CHHC -

USANA Distributor #: 2398784 - Maryann Cady -
ARIIX Distributor #: 38008 - Maryann Cady -

Monday, July 11, 2011

Finally, USANA Receives FDA certification for Pharmaceutical Good Manufacturing Practices.

 I have criticized USANA for many years for not seeking certification to back their claim that they adhere to "Pharmaceutical GMP". But after 19 years, USANA finally gets the certification and can now use this fact to bolster their product's manufacturing quality. The certification was done by none other than the United States Food and Drugs Administration. Finally, USANA does something right.

Now if they can fix their compensation plan to eliminate the pyramid scheme in which 99% of associates who joined the business opportunity with the intent to make money actually end up losing money. Those with no intent to make money sign up as preferred customers. All associates are required to continually purchase over $100 worth of product every 28 days in order to participate in the business venture. Those mandatory purchases pay out commission to the upline associates. However, the associate making those purchases receive no commission even if they retail the product. This is why I believe USANA is a pyramid scheme.

The FTC made the following statement regarding pyramid schemes:
"...a multi-level compensation system funded primarily by payments made for the right to participate in the venture is an illegal pyramid scheme." - Staff Advisory Opinion - Pyramid Scheme Analysis
Now one of USANA's very top associates who claims to have made over $4 million as a USANA distributor recently made the following statement when explaining to team members whether they should join as distributors or non-distributors:
"Our recommendation, unless you plan to make a lot of retail sales (which most Associates don’t, because of the USANA PC Program), would be to enroll as a non-Distributor Associate, since you would be charged sales tax on the lower, Wholesale, rather than Retail, prices of taxable items for your location." - Distributor or Non-Distributor Associate - by Pete and Dora Zdanis

So like I have pointed out many times, USANA's distributors cannot retail the product because the preferred customers get it at the same price the distributors do. Here we have a top USANA distributor who has been with the company for 18 years (since the beginning) admitting that most associates don't make a lot of retail sales because of the preferred customer program. USANA has 213,000 ACTIVE associates and 70,000 ACTIVE preferred customers. Since there are 3 associates for every 1 preferred customer, it doesn't take a genius to come to the conclusion that very little marketing of USANA products goes on beyond the associates.

I bring this up to make my point that USANA's commissions are funded primarily by their associates' required 4 week purchases which are made for the right to participate in the venture and be commission eligible. The FTC stated that commissions funded primarily by these required payments is illegal pyramid scheme. I believe USANA can do it legitimately by doing one of two things.

1) Either stop FORCING associates to purchase over $100 worth of products every 4 weeks in order to be commission eligible (you lose any sales points built by preferred customers or downline associates if you fail to make these purchases)


2) Stop paying commission to upline distributors from the FORCED purchases made by their downline distributors in order to fulfill business obligations. The associates are buying product from USANA, not each and every upline distributor above them.

Of Course, USANA will never consider doing either one of my suggestions because it would collapse the pyramid scheme and the company would go out of business in less than 3 months. This is because the only distributors who would continue to make product purchases would be those who actually want to product and not because it is a required business obligation.

So how about it USANA, would you like to make the next step in the right direction?