USANA First Quarter Earnings for 2013 - What About Those Undisclosed Statistics? What Should USANA Disclose?

USANA Health Sciences, Inc. (NYSE:USNA) releases their first quarter 2013 financial earnings after the market closes today. Through my research over the years I have found the following statistics about USANA which I believe are pretty accurate and should be considered while reviewing USANA's quarterly result:

Over the last 21 years of USANA's existance, they have recruited about 1.5 million associates.

Over 99% of USANA's associates never made a profit, and instead lost money.

At the beginning of the quarter, USANA had about 247,000 associates who have purchased product during the previous three months. This means 83% of USANA's associates have stopped doing business with USANA when considering the total ever recruited.

Roughly one third of USANA associates, or 82,000 are “active associates” as defined by their policies and procedures (having personally purchased over $100 worth of product during a four week period in order to qualify for commissions). This contradicts their 247,000 active associates as defined and reported in their SEC filings (having simply purchased a USANA product).

USANA recruited about 60,000 new associates during the first quarter of 2013. In order for new associates to begin, they must activate atleast one business center which requires over $200 worth of products to be personally purchased by the associate on top of a $29.95 startup fee. This amounts to about $13.8 million just for these 60,000 new associates to get started.

The majority of USANA associates are not permitted to resell product to retail customers because they are classified as "non-distributing" associate. These same associates are still required to personally purchase product over $100 worth of product every four weeks as part of their obligation toward USANA if they want to be eligible to collect a commission as well as grow and keep their downline and/or preferred customer purchase volume points. This is a blatant case of inventory loading as these associates are stuck with product they are not allowed to sell.

USANA classifies a “full-time” associate as one who has reached the leadership rank of “Gold Director” and up. After 21 years in business, USANA has about 2900 full-time associates which is only 0.8% of their active associates as defined by their SEC filings.

The majority of distributor incentives paid to their distributors goes to this top 0.8% which are Gold Directors and up. Two thirds of USANA associates never received a single penny in commissions.

There aren't enough preferred customers to cover the 5 customer rule (anti-pyramiding rule) to justify paying commissions to the majority of those associates who collected a commission. Most associates who collected a commission are still losing money.

I believe there are more Chinese Nationals who are USANA associates (illegally participating in Multi-Level Marketing) than there are Chinese Nationals who are Babycare Associates (legally participating in Single-Level Marketing). I believe Chinese Nationals joining USANA account for the majority of USANA's growth in both sales and distributorships as the recruiting in mainland China into USANA's MLM has been in overdrive. I believe these Chinese Nationals are counted toward growth in many of USANA's MLM territories.

USANA should disclose during their first quarter earnings conference call:

1. the number of associates that received a commission during the quarter and of those how many are non-distributing associates. Dividing the number of reported Preferred Customers by 5 will give you the maximum number of non-distributing associates USANA can pay a commission to.
2. Number of newly recruited associates during the quarter.
3. Number of full-time associates currently active with USANA.
4. The percentage of distributor incentives paid to these full-time associates.
5. The number of active associates as defined by their policies and procedures.
6. The actual associate turnover rate (instead of simply stating that it is high).
7. The percentage of net sales that was the direct result of associates activating or keeping active their business centers.
8. The amount of sales USANA received as a result of new associates purchasing a $1250 professional enrollment package.
9. Number of associates that cancelled their distributorship.
10. Number of USANA distributors (not Babycare) living in mainland China.
11. Number of associates who share the same home address as two or more other associates (possible Chinese Nationals using an address from Hong Kong or other USANA territories).

USANA May Be Operating an Illegal Pyramid Scheme By Primarily Paying Associates To Recruit Rather Than Selling Product To Customers.

USANA Health Sciences, Inc. (NYSE: USNA) is a multi-level marketing company that pays out commission to their associates who are suppose to have at least 5 customers. USANA admits that paying associates who do not have customers would technically be paying associates to recruit and acknowledge that doing so is illegal.

I have written a report that shows how USANA is paying associates to recruit and have asked USANA to disclose the number of active associates that received a commission check and of those how many are non-distributing associates.

Read The Report: USANA Watchdog Report on USANA - Paying To Recruit

An Untrue Statement in USANA's 2012 10-K Financial Statement - "Target of False and Misleading Statements Regarding China"

USANA makes untrue statement in their 2012 Form 10-K SEC filing. USANA stated the following:

"More recently, in November 2012, we were again the target of false and misleading statements concerning our business practices, particularly in China and Hong Kong. This adverse publicity also adversely impacted the market price of our stock and caused insecurity among our Associates. There can be no assurance that we will not be subject to adverse publicity or negative public perception in the future or that such adverse publicity will not have a material adverse effect on our business, financial condition, or results of operations."

USANA's claim about being the target of “false and misleading statements concerning our business practices, particularly in China and Hong Kong” is a lie. USANA does in fact illegally recruit Chinese Nationals from mainland China into USANA's multilevel marketing compensation plan through Hong Kong (and possibly other USANA territories), which is a direct violation of China's law. Dave Wentz even admitted Chinese Nationals are signing up in the MLM compensation plan during the July 27, 2011 financial conference call:

John San Marco at Janney Montgomery Scott LLC asks:

“Do you know what the percentage of your Hong Kong associates that are actually Chinese nationals?”

Dave Wentz, CEO of USANA Health Sciences responds after trying to avoid answering the question:

“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.”

This violation of the law is not just the problem from a couple associates, but an organized circumvention of Chinese foreign laws conducted by USANA. This violation could (and should) cause USANA to lose their direct selling license in mainland China and possibly face serious fines by regulatory agencies both domestic and foreign. Again, USANA's CEO Dave Wentz already admitted the fraud exists.

USANA Associates Pay More Than Suggested Retail Price For USANA Products

USANA Health Sciences is a multilevel marketing company that recruits sales reps into an endless binary hierarchy where each person receives points based on the personal purchases (noticed I did not write "sales") of those associates below their position. One of the biggest factors in determining if a MLM is legitimate or simply an illegal pyramid scheme is whether their products are being resold to retail customers. Lets take a look at USANA's hottest selling products and see if it can be retailed.

USANA's suggested retail price for their Essentials is $54.54.
USANA's wholesale price of Essentials is $50.50.

The shipping and handling (UPS Ground) is $10.94 to have one Essentials shipped.
It costs a total of $61.44 which is $6.90 over the suggested retail price! How are associates suppose to retail the product?

Lets try three Essentials. Wholesale price would be $151.50 and shipping is $11.77 which comes to a total of $163.27. However, the retail price on three Essentials if $163.62. Again, there is no chance for the associate to make a profit even after purchasing three Essentials.


What about Autoship prices? Autoship is a term USANA uses for an automated product purchase of 100 points ($114-$137) made by the associate every 4 weeks. This personal purchase allows the associate to be "commission qualified" (Again, notice I did not write "sale"). Now that associate can collect commissions from the personal purchases made by the associates below their position in the endless binary system as well as their preferred customers. Being on autoship also allows the associate to receive a 10% discount from the wholesale prices.

If the associate purchases one Essentials at the autoship price, it will cost them $45.45 plus the $10.94 shipping for a total of $56.39. That is still $1.85 higher than the suggested retail price if you can believe it!

However, if the associate purchases three Essentials at the autoship price, it will cost $136.35 plus $11.77 in shipping for a total of $148.12. If the associate can manage to retail all three boxes at USANA's suggested retail price, the associate will make $15.50 profit, which is only $5.17 per box. This dilemma causes inventory loading, the other ingredient to be an illegal pyramid scheme.

So there is no possible way USANA associates are retailing product because there is no money to be made by reselling the product. There is no reason to become an associate or preferred customer either because in the end they'll be paying the retail price anyway. Plus, associates have to fork out an additional $30 to join and $20 each year to renew.

So not only are USANA's products grossly overpriced (in order to fund the pyramid scheme), but associates end up paying the same price for the product whether they joined or not. In fact, USANA's product (new condition) sells for half the autoship price on Ebay.

USANA Associates Do Not Want Their Prospects To Read This Blog. I Wonder Why?

I got a kick out of a message someone posted on the USANA distributor team Integritas facebook page. Unfortunately the message was removed (no surprise), but not before I commented on it and took a screen shot.

http://www.facebook.com/IntegritasGroup

Anthony ***** - How can associates protect themselves from usanawatchdog.com when a prospect decides to research the company on their own?

Usana WatchDog - Really? USANA Associates need to protect themselves when prospects decide to research the company on their own? This is priceless.

USANA May Have Misled Shareholders During Fourth Quarter Earnings 2012 Conference Call Regarding BabyCare, China, and Hong Kong

USANA Health Sciences, Inc. (USNA) appears to have misled shareholders during their fourth quarter 2012 earnings conference call on February 6, 2013 as well as several other calls in the past.


When USANA purchased BabyCare Ltd. in August 2010 (an already established direct selling (single level marketing) company in mainland China) it added 12,000 Active Associates and 7000 Active Preferred Customers to USANA's "Greater China" region. Over the last couple years USANA has attributed any of Hong Kong declining active associates to BabyCare, claiming that leaders would re-evaluate where to go (USANA Hong Kong, or China BabyCare).

Today (over two years later), BabyCare has about 17,000 Active Associates and about 2000 Active Preferred Customers. That's a net gain of ZERO customers since USANA purchased BabyCare! So all this talk about BabyCare being a hot market is simply untrue. All this talk about BabyCare siphoning off Hong Kong distributors was a farce. Truth be told, BabyCare is an utter failure and has virtually no growth.

I have datamined USANA's BabyCare distributor IDs and found there to be 38,000 issued ID numbers as of September 2012. If there are only 17,000 active associates in Babycare right now, then over half of all the associates recruited in BabyCare have quit since USANA purchased them.

As for Preferred Customers, what a utter failure. USANA doesn't explicitly state what the figure is this quarter, but since there are 4000 total preferred customers in Greater China, it seems like a safe bet that BabyCare accounts for 2000 active preferred customers. If this figure is accurate, then Babycare has lost 70% of their active preferred customers.

That's a huge problem if Active Associates in Babycare are required to have a certain number of customers to be qualified to earn a commission check.


What is hot right now is the growth in Hong Kong, which is largely attributed to Chinese Nationals from mainland China being illegally recruited into USANA's MLM Hong Kong market (instead of in BabyCare). They are recruited from mainland China and put in USANA under an address from someone living in Hong Kong. This way Auditors, shareholders, and federal regulators can be fooled. USANA allows this to happen and even has a policy set up that allows for over 15 distributors to share the same home address and the same credit card when signing up with USANA.

Stock analysts refuse to address these BabyCare issues with USANA and really don't seem to have a clue about what USANA is doing in China.

USANA Q4-2012 Earnings - Questions USANA Should Answer for Shareholders and Federal Regulators

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

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

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

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

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


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

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

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

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


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

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

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

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

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


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

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


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

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

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

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

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


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

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


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

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

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


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

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

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


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

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


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

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


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

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

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


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

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

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


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

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

USANA Allows Distributors To Sign Up Under The Same Home Address and Credit Card - Recipe For Circumventing Foreign Laws

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

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

Internal USANA document regarding address and creditcard enhancements states the following:
QUOTE

         Address and Credit Card System Enhancements

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

UNQUOTE

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

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

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

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

This policy outlined in the internal memo about allowing over 15 associates sharing the same address contradicts USANA's published policies and procedures which states the following:
QUOTE

3.13 One Distributorship
 

An Associate may operate, receive compensation from, or have an ownership interest, legal or equitable, as a sole proprietorship, shareholder, trustee, or beneficiary in only one USANA Distributorship. However, notwithstanding this rule, your spouse may become an Associate and operate a second distributorship as long your spouse’s distributorship is placed below one of your business centers and not in a cross line sales organization. The second business must be a bona fide independent business that is operated by the person listed on the agreement and not by the owner of the first business.

UNQUOTE

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

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

QUOTE (my emphasis in red)

VII. Questions from DSR
II. When can we get the computer to list accounts with same address, phone, ssn, etc.
 

i. We already have access to most of that information, it just doesn’t automatically show us it. We have spoken with IT and the more actions we place on the system, the more burdensome it becomes and the slower it  operates. So for now, we have to run our own little reports to try and find multiples.

UNQUOTE

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

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

QUOTE (my emphasis in red)

III. Fraud
iii. Credit card usage

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

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

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

UNQUOTE

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


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

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

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

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

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

I'll finish with one of my favorite non-disclosures by USANA revealed in the older internal USANA document:
QUOTE

IV. What is the biggest market that buys our products that we are not eligible to operate in?

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

UNQUOTE

A Large Sum sounds like a lot to me.

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

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

The Number One Product USANA Distributors Sell is the Business Opportunity Membership. Is This Worse Than Herbalife and Amway?

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

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

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

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

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

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

The FTC wrote a letter tothe Direct Selling Association back in 2004 the states the following: (my emphasis in bold)

QUOTE

...a multi-level compensation system funded primarily by payments made for the right to participate in the venture is an illegal pyramid scheme.

…

Modern pyramid schemes generally do not blatantly base commissions on the outright payment of fees, but instead try to disguise these payments to appear as if they are based on the sale of goods or services. The most common means employed to achieve this goal is to require a certain level of monthly purchases to qualify for commissions.

UNQUOTE

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

USANA Sticks It To Their Distributors With Product Price Increases - Merry Christmas!

As if the U.S. economy hasn't suffered enough, now USANA Health Sciences, Inc (USNA) claims they are forced to raise the price of their products because Vitamin E Succinate is becoming very expensive. This will be in effect on January 5, 2013. Even though USANA has never experienced any problems maintaining a "large profit" every quarter for the last 20 years, USANA feels they deserve more by raising the price of their products. They must do whatever they can to get their overall revenues and profits up without regard for their distributors. Consider this the equivalence of a tax increase on distributors since they are the only ones who will suffer from this.
  

PRODUCT	2008 Prices	Current Price	New Price	New Price Increase	% Increase	Total Vitamin E (IU)
HealthPak100	$107.00	$110.00	$114.00	$4.00	3.6%	11200
Essentials	$39.95	$42.50	$45.45	$2.95	6.9%	11200
Body Rox	$17.95	$19.95	$22.50	$2.55	12.8%	5600
Usanimals	$12.50	$12.50	$13.95	$1.45	11.6%	2800
Mega Antioxidant	$30.95	$32.50	$35.50	$3.00	9.2%	11200
Mega Antioxidant without Vitamin K	NA	$30.95	$35.45	$4.50	14.5%	11200

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

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

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

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

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


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

USANA - Myron Wentz Sells $30 Million in Stock In Last 30 Days

USANA Health Sciences, Inc (USNA) took a dive today dropping $4.43 (10.58%) to $37.44. In the last 30 days, Myron Wentz (Founder of USANA) sold $30.3 million in stock. No mention of this has been made in the news, but I think someone has been selling on insider information. Also don't forget about the Citron report on the illegal recruiting of Chinese Nationals into USANA's MLM business opportunity. That could very well play a role in this drop today as well.

Citron Research Reveals Evidence of USANA's Illegal Activities In Mainland China

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

For additional information regarding the allegations of USANA's fraudulent China activities, read through my blog and you will find several years of information revealing it all!

Dr. Mehmet Cengiz Oz, The USANA True Health Foundation, and The Sanoviv Medical Institute

Updated October 9, 2012:
The "USANA True Health Foundation" charity may be violating IRS laws regarding "Self Dealing" by having tax deducted donations pay for Sanoviv medical treatments in which Myron Wentz, Dave Wentz, and Elaine Pace all have a direct financial interest in.

 USANA's True Health Foundation charged 200 of their distributors $150 each to have their picture taken with Dr. Mehmet Cengiz Oz during the 2012 USANA distributor Annual Convention in Salt Lake City, Utah. That's a wonderful thing, $30,000 right there going toward USANA's new charity. Also on April 28, 2012 guests paid $150 to the USANA True Health Foundation to have their picture with Dr. Oz at the USANA Healthy Living Summit.

Dr Mehmet Cengiz Oz does not endorse USANA or its products. I am repeatedly told that Dr. Oz endorses USANA, but that is not true. USANA issued the following statement to their distributors and those who had their pictures taken with Dr. Oz. My Emphasis in bold red.

How to use your photo

Do:

• Show your friends and family and let them know you got to meet Dr. Mehmet Oz in person!
• If they missed the event, let them know Dr. Mehmet Oz will be attending and speaking at USANA’s International Convention in Salt Lake City, Utah, August 15–18, 2012
• Share your support of and information about the USANA True Health Foundation and its exciting sponsorship of HealthCorps

Don’t:

• Use your photo for commercial or advertising purposes, including using the photo on Facebook, Twitter, or any other social media sites
• State or imply that Dr. Mehmet Oz endorses, certifies, partners with, sponsors, supports, is affiliated with, etc., any product or company, including USANA Health Sciences and its product line
• Copy, modify, reproduce, upload, post, transmit, display, distribute, disseminate, broadcast, or circulate the photo in any way. It is for your personal use only.

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

The USANA True Health Foundation is a charity run by Myron Wentz (Founder of USANA and Sanoviv Medical Institute), Dave Wentz (CEO of USANA), and Elaine Pace (President of USANA True Health Foundation and President of Sanoviv Medical Institute).

The following is stated on the USANA True Health Foundation website regarding the donations. My Emphasis in bold red.

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

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

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

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

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

When someone goes to the Sanoviv Medical Institute, they are put on a dietary regimen. Of course it's USANA's own dietary supplements. Need proof? Check out the Sanoviv website regarding USANA's products: My emphasis in red.

Dr. Wentz recommends all of the great products offered by USANA. He personally uses them every day, and they are used as the base of treatment in every Sanoviv program. 

Dr. Wentz even explains it further on his blog regarding USANA's products used at Sanoviv back in a 2009 posting. So now that I have established the fact Sanoviv uses USANA products for all their treatments, I will like to show how much it costs to be treated at Sanoviv.

How much does it cost to come to Sanoviv?

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

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

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

Companions
Companions: permitted to accompany individuals on the CHA, Comprehensive Medical Program, and Intensive Medical Program.
Companion rate includes meals, classes and use of pools. (per night) $100.

Many of the holistic treatments at the Sanoviv Medical Institute cost the patient several thousand dollars. Many of these treatments are banned in the United States (which is why Sanoviv is in Mexico).

So to sum everything up:

1. Myron Wentz founded USANA.
2. Myron Wentz and Dave Wentz founded Sanoviv
3. Elaine Pace becomes president of Sanoviv
4. Myron Wentz and Dave Wentz founded USANA True Health Foundation
5. Elaine Pace becomes president of USANA True Health Foundation
6. USANA True Health Foundation uses charitable funds to help pay for Sanoviv medical treatments
7. Dr. Mehmet Oz partners with the USANA True Health Foundation

Don't get me wrong, I'm all for charitable givings to help others. However, something here is not right. You can draw your own conclusions here. I'm just surprised Dr. Oz supports a charity that is used in this questionable fashion.

If Nu Skin Loses Their China License, USANA Might Lose Their China License As Well

There might be a very good reason Citron Research made the following Twitter comment today:

Rumors of NUS losing its license in China (cannot confirm), If so REAL BAD for USNA who has as many if not more "China issues" than NUS
— Citron Research (@CitronResearch) September 25, 2012

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

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

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

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

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

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

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

USANA Executives Sell Millions of Dollars Worth of Stock

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

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

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

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

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

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

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

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

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


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

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

It would be very interesting to find out how many USANA distributors are illegal recruits from foreign territories that restrict MLM from operating in their own borders. 

USANA Rebrands Themselves and Makes Impossible Promise To Their Distributors

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

USANA's New Logo

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

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

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

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

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

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

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

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

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

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

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

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

Time For a Name Change? USANA's Failure in the United States May Leave No Other Option.

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

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

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

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