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?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...
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… "
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 BrambleJim 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.
Dear blog owner,
ReplyDeleteI wish you could also include the following site to your
list of "Helpful MLM Resources" on the right.
ARIIX MLM Watchdog site
Best Wishes,
Sol
I have to admit that your site is truly interesting. I have spent a lot of my free time reading your content. Thanks a lot!
ReplyDeletehttp://www.justice.gov/criminal/fraud/fcpa/docs/lay-persons-guide.pdf
ReplyDeleteI wonder if purchasing a foreign company, with the intent of implementing an illegal sales structure in the foreign country, falls under the realm of this act. Maybe if a chinese govt official received money as the result of the purchase of babycare (ie was a shareholder of babycare)... could be a big stretch, but I find it interesting nonetheless.
Hi there, quick question. You state that close to 1 out of 12 people in Hong Kong are associates as reported by USANA. From their public disclosure, I estimate that approximately 78,000 active associates are from Hong Kong and based upon a total population of 7m, that is only about 1% of the total population. Still, that is very high and suspicious and cause for concern. If 1% of the US population marketed USANA products that would mean that there were 3m associates in the US. At its peak there were never more than 100k.
ReplyDeleteIs my analysis wrong? Thanks!
I state that USANA's "active associate" count for Hong Kong is such that 1 out of every 112 citizens in Hong Kong are USANA distributors. This is about 1% as you stated. This is also only counting Active associates. If figures are consistent around the world, and 66% of USANA associates in the US did not collect a commission and are likely inactive, then there are roughly 230,000 associates reported to have been in the Hong Kong territory.
ReplyDeleteAs you point out that if the Hong Kong ratio of 1:112 is true, and that same ratio applied in the US would yield about 3 million associates for the US alone. That is absurd in every country this ratio is applied to and is why it is a red flag for fraud.
I've been stating for years that USANA is illegally recruiting Chinese Nationals as USANA distributors in the Hong Kong territory. Eventually USANA admitted to this recruiting and refused to disclose the number of associates in Hong Kong that are actually Chinese Nation citizens. Stock Analysts questioning USANA about this accepted USANA's response and have since completely ignored the issue. There is a huge problem here and USANA is breaking China's laws because MLMs are banned from operating their pyramid scheme within China's borders. Simply recruiting Chinese Nationals (who reside in mainland China) in the same banned program but just across the border does not legitimize the scheme.
Some day this will all backfire on USANA. But right now, government agencies are not proactively looking for fraud. They are mainly reactive.
Your analysis is correct.
Thanks! One thing I didn't correct for is the number of USANA associates counted in 'Greater China' that are from Taiwan. If this is a high number then perhaps the 1/112 analysis isn't that high. It could be half that number, which would still be high relative to the U.S. and other markets.
ReplyDeleteYour point that there are several Chinese associates are posing as Hong Kong associates is clearly valid and probably true. But my contention would be that now that management knows this, can't they just tell those Chinese associates to continue marketing in Hong Kong? Yes it's against the law, but if they turn a blind eye those Chinese associates could keep doing it.
Hong Kong has been a huge growth market for USANA but as you pointed out the Company had -12% growth in revenue in the last quarter after several consecutive quarters of very high growth. Management stated that this is because of bad communication with HK associates. That's probably not true.
What do you think caused the large downturn in the Greater China business in the last quarter?