USANA Spends Less Than 1% of Net Sales on Research and Development While Claiming They Develop Science-Based Products That Reduce The Risk of Chronic Degenerative Disease.

USANA prides itself on science and research. However, that is one of USANA's most erroneous claims.

THE SCIENCE BEHIND USANA

"At USANA, scientific research is at the heart of every product we offer. Whether in studies conducted by top scientists in our on-site laboratories, or findings from the many research partnerships we have across the globe, USANA is fully committed to the research and development of cutting-edge nutritional technology.



And, of course, our state-of-the-art manufacturing facilities ensure that each product we create is made with the same high quality that set us apart from others in the past and will allow us to lead the field in the future."

 - Dr. Myron Wentz
, Founder and Chairman, USANA Health Sciences

Since 1996, USANA has sold $6.5 billion in product. From that money, USANA has spent $50.3 million in research and development, which represents only 0.8% of net sales. This is not representative of a company that is committed to research and development. In contrast, drug manufacturer Merck in 2014 alone spent $7.1 billion on research and development, which represents 17% of their net sales. In 2014, Pfizer spent $8.4 billion on research and development, which represents 16.9% of their net sales.

USANA 2014 10-K SEC Filing 

"Our research and development efforts are focused on developing and providing high-quality, science-based products that promote long-term health and reduce the risk of chronic degenerative disease."

USANA claims their products can reduce the risk of chronic degenerative disease? I thought dietary supplement manufacturers were not allowed to make such claims unless they can back it up with substantial evidence.

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.

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.

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. 

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.

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

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

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

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

we have a large group of Asian Associates who are involved with USANA only because of the products and are buying in Hong Kong for consumption only. We expect many of these consumers will begin purchasing USANA products through BabyCare and either remain consumers or become entrepreneurs and build a BabyCare business.

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

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

My Emphasis in Bold Red:

LETTER ONE – Sent May 8, 2011

USANA and BabyCare: 3 Steps to Long-term Success

Dear USANA Family,

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

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

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

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

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

Beginning May 21, 2011

New enrollment

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

Common address

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

Credit card usage

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

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

Beginning June 4, 2011

Limit on ordering and collection

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

Personal pick-up

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

Restriction on new Autoships

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

 

Photo identification

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

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

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

Sincerely,

Dr Myron Wentz

Founder & Chairman, USANA Health Sciences

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

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

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

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

A Message From Deborah Woo & Dave Wentz

Dear Distributors,

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

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

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

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

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

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

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

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

We look forward to working with you.

Deborah Woo

President of Asia Pacific

Dave Wentz

Chief Executive Officer

____________

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

Beginning May 21, 2011

New enrollment

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

Common address

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

Credit card usage

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

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

Beginning June 4, 2011

Limit on ordering

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

Restriction on new Autoships

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

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

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

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

LETTER THREE – Sent May 13, 2011

Dear USANA Family,

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

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

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

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

Deborah Woo

President of Asia Pacific

Dave Wentz

Chief Executive Officer

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

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

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

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

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

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

USANA's Use of "The Healthy Home" Book as Entry Into Company Run Nation Wide Lottery May Violate State & Federal Laws

"The Healthy Home" hits 5 best seller lists during first couple weeks of book release. However, ...

Screenshot of USANA's website showing The Healthy Home

It appears USANA is currently violating both Utah State and Federal gambling laws. USANA's requirement for distributors to purchase Myron Wentz's book "The Healthy Home" in order to participate in a lottery to win an iPad may land USANA in a heap of trouble. State and Federal Regulators need to be made aware of this potential crime currently taking place. The lottery runs from March 27, 2011 to April 15, 2011.

According to PRNewsWire, USANA has made the Best Sellers list for The New York Times, USA Today, L.A. Times, Publisher's Weekly, and Amazon.com for the book's extraordinary sales.

According to Utah State Laws for gambling

     76-10-1102.   Gambling.
     (1) A person is guilty of gambling if he:
     (a) participates in gambling;
     (b) knowingly permits any gambling to be played, conducted, or dealt upon or in any real or personal property owned, rented, or under the control of the actor, whether in whole or in part; or
     (c) knowingly allows the use of any video gaming device that is:
     (i) in any business establishment or public place; and
     (ii) accessible for use by any person within the establishment or public place.
     (2) Gambling is a class B misdemeanor, provided, however, that any person who is twice convicted under this section shall be guilty of a class A misdemeanor.

According to Federal Laws regarding lotteries:

    * The federal lottery statutes made it illegal to transport lottery materials across state lines, or ship them to other countries
    * The Interstate Wagering Amendment of 1994 made it illegal to procure a ticket for someone in a different state than that in which the lottery was held

Let this also be a reminder to the general public that Myron and Dave Wentz's book "The Healthy Home" made it to several Best Sellers lists solely because they used their book as $13.19 raffle tickets for USANA distributors and USANA preferred customers to purchase and have the right to participate in a company run lottery to give away 3 iPads. The "general public" as Dave Wentz calls it, has virtually nothing to do with the sales of his book.

Myron Wentz's “The Healthy Home” makes NY Times best seller list by being sold as raffle tickets in lottery drawing held by USANA.

Myron Wentz (founder of USANA) and his son Dave Wentz (CEO of USANA) authored a book called “The Healthy Home” which was released on March 22, 2011. Their book made it to number 7 on the NY Times best selling book list for “Hard Cover Advise and Misc”. What is not mentioned on any press releases is the fact the book is being sold as raffle tickets to win an iPad in a lottery operated by the authors.

USANA is currently running a lottery drawing exclusively for their distributors and preferred customers to win iPads. In order to participate in this lottery drawing, the USANA distributor or preferred customer must purchase Myron Wentz's new book “The Healthy Home” from Amazon.com for $13.19. Distributors can enter as many times as they wish, but are advised to do so during different weeks of the contest to help bolster the book's best seller rankings.

USANA explains this contest in a document on their Ask Andy website which is used by their distributors to access important information regarding USANA: http://obs.usana.com/UPLOADS/usana/2011/87/87-1_CAA.html. (A copy of this document is provided in full at the bottom of this blog entry)
 

"Here’s how it works—Purchase a copy of The Healthy Home on Amazon.com between March 27 and April 15 and e-mail a copy of your electronic receipt to contest@myhealthyhome.com. Not only will you receive a special Healthy Home pin at USANA’s 2011 International Convention, but your name will also be put into one of three special drawings for a chance to win one of three iPads!

…

* Week 1: March 27–April 2 (we need to sell 1,000 copies of the book this week)

* Week 2: April 2–9 (we need to sell 1,500 copies this week)

* Week 3: April 10–15 (we need to sell 2,500 copies this week)

...

Q. Who can participate in the drawing?

A. This drawing is only for USANA Associates or Preferred Customers living in the United States."

Distributors interested in participating in the lottery to win a $500 iPad only need to purchase a $13.19 raffle ticket from Amazon.com called “The Healthy Home”.

Amazingly, USANA's CEO Dave Wentz made the following statement regarding their position on the NY Times Best Seller list in the following article:

"The response to our book has been incredible," says Dave Wentz. "Although the book was released less than three weeks ago, we have gotten calls from reporters and TV and radio stations from all over North America. We have received over 3,000 'likes' on Facebook in a short time and gotten a lot of great feedback from our readers. Clearly, the topics we address in The Healthy Home are a huge interest to the general public." (my emphasis in bold)

What GENERAL PUBLIC is Dave Wentz referring to? Dave knows that the book is primarily being sold to USANA distributors who purchase the book in hopes of winning a $500 iPad in a lottery drawing. The general public has nothing to do with the purchases of The Healthy Home. Clearly, the statement made by Dave regarding "interest to the general public" was an attempt to mislead the general public.

I believe the authors are conducting a highly unethical method to appear on Best Seller lists. It would be very interesting to find out what Amazon thinks about this lottery system. Also, what about the other outlets that sell the book? What do they think about the fact the authors are holding this lottery exclusively with Amazon.com?

Below is USANA's Lottery Information found on their Ask Andy website: http://obs.usana.com/UPLOADS/usana/2011/87/87-1_CAA.html

---

Amazon.com Contest

The Healthy Home launched with a bang, but we're not done. Our sights are set at the top of the best-seller lists, and we need your help. Purchas at Amazon.com, and you could win an iPad!

 
Buy Copies of The Healthy Home at Amazon.com by April 15

---

Participate in USANA’s efforts to help make The Healthy Home a best seller and you could win an iPad!

The Healthy Home launched on March 22 with incredible success, but the journey is just beginning. To make this book a truly powerful vehicle for spreading Dr. Wentz’ vision and for building your business, we need to make it a best seller. To do so, we need you! And in case you need a little extra incentive, we’ll be awarding incredible prizes to those who help.

To become a best seller, we’ll need to sell a certain number of copies of The Healthy Home on Amazon.com within the next three weeks.

Here’s how it works—Purchase a copy of The Healthy Home on Amazon.com between March 27 and April 15 and e-mail a copy of your electronic receipt to contest@myhealthyhome.com. Not only will you receive a special Healthy Home pin at USANA’s 2011 International Convention, but your name will also be put into one of three special drawings for a chance to win one of three iPads!

There will be an iPad drawing at the end of each of the three weeks during which Amazon.com will be reporting sales of The Healthy Home for possible inclusion on the top best-seller lists. 

• Week 1: March 27–April 2 (we need to sell 1,000 copies of the book this week) 
• Week 2: April 2–9 (we need to sell 1,500 copies this week)  
• Week 3: April 10–15 (we need to sell 2,500 copies this week)

The number of books we need to sell is not impossible. We can do it, and any help from you will make a big difference. So talk to your Preferred Customers (because they can participate, too), talk to your downlines, and talk to your uplines—spread the word and create a strategy to determine the best week for each of you to make your purchases. And if you plan on purchasing more than one copy of the book from Amazon.com, buy them one at a time and during different weeks to help bolster our chances of making the best-seller list and your chances of winning an iPad.

Together, we can make a difference. Many of you have already bought copies of The Healthy Home, and your efforts are reflected in the early success of the book. But with a little more help—even the purchase of just one more copy through Amazon.com by April 15—you can help make The Healthy Home an even greater sales tool than it already is. Let’s spread the vision of Dr. Wentz to the world together.

FREQUENTLY ASKED QUESTIONS

Q. Who can participate in the drawing?
A. This drawing is only for USANA Associates or Preferred Customers living in the United States.

Q. What do I win?
A. Anyone who purchases a copy of The Healthy Home from Amazon.com between March 27 and April 15 will receive a special Healthy Home pin at USANA’s 2011 International Convention. The name of each entrant will also be placed in a drawing for one of three iPads.

Q. Can I enter the drawing multiple times?
A. Yes, as long as you have more than one receipt. Multiple copies of the book shown on a single receipt will only be entered into the drawing once. Therefore, it is important that you purchase each copy of The Healthy Home separately during this period.

Q. Where do I send my receipt?
A. E-mail an electronic copy of your receipt from Amazon.com to contest@myhealthyhome.com.

RULES

1. This is an individual-based promotion.
2. Participants must reside in the United States.
3. Only one Healthy Home pin and/or iPad will be awarded per distributorship.
4. No purchase necessary. Participants can be entered into the drawing by mailing a postcard with their name and Associate or Preferred Customer identification number to the following address:
   
   Healthy Home Contest
   c/o USANA Health Sciences
   3838 W. Parkway Blvd.
   Salt Lake City, UT 84120
5. Employees of USANA and their family members may not participate in this promotion.
6. Any manipulation of this promotion, i.e., sponsorship manipulation, downline purchasing (placing a sales order in a Business Center other than where the sale was generated), forgery of receipts, etc., will result in disqualification from this promotion, in addition to any sanctions under the Associate Agreement.
7. By entering, each entrant accepts and agrees to be bound by these rules and by the decisions of USANA, which shall be final and binding in all respects.
8. Taxes, if applicable, are the sole responsibility of the prize winner. The fair market value of all prizes will be reported to the IRS pursuant to IRS regulations.
9. Prizes are non-negotiable and cannot be redeemed for cash.
10. No substitutions or transfer of prizes is permitted. USANA reserves the right to substitute a prize for one of equal or greater value in the event that an advertised prize is unavailable.
11. USANA is not responsible for lost, late, or misdirected online entries or transactions for incorrect, inaccurate, or incomplete entry information whether caused by a contestant, equipment, or technical malfunction or for any human error, technical error, or malfunctions. USANA reserves the right to halt or modify the promotion at any time during the promotion period if events beyond their control compromise the promotion's fairness or integrity.
12. USANA, in its sole discretion, may disqualify any entrant from participating in the promotion, refuse to award prizes, and require the return of any prizes if entrant engages in any conduct USANA deems to be improper, unfair, or otherwise adverse to the operation of the promotion or detrimental to other entrants. Such improper conduct includes, but is not limited to, falsifying personal information required during the promotion.
13. USANA reserves the right to modify these rules for clarification purposes without materially affecting the terms and conditions of the promotion.
14. This promotion may not be used for any form of gambling.
15. If for any reason the Internet portion of the program is not capable of running as planned, including infection by computer virus, bugs, tampering, unauthorized intervention, fraud, technical failures, or any other causes beyond the control of USANA which corrupt or affect the administration, security, fairness, integrity, or proper conduct of this promotion, USANA reserves the right, at its sole discretion, to disqualify any individual who tampers with the entry process, and to cancel, terminate, modify, or suspend the promotion.
16. USANA assumes no responsibility for any error, omission, interruption, deletion, defect, delay in operation or transmission, communications line failure, theft or destruction, or unauthorized access to, or alteration of, entries or transactions.
17. USANA is not responsible for any problems or technical malfunction of any telephone network or lines, computer on-line systems, servers, or providers, computer equipment, software, failure of any e-mail entry or transaction to be received on account of technical problems or traffic congestion on the Internet or at any website, or any combination thereof, including any injury or damage to participant's or any other person's computer related to, or resulting from, participation or downloading any materials in this promotion.
18. USANA reserves the right to use names, images, and likenesses of promotion winners for printed and online media to market USANA products and promotions.