USANA's 2 Star Diamond Director Aaron Dinh Quits USANA and Joins Nerium International

USANA Million Dollar Club Member

USANA's 2-star diamond director Aaron Dinh quits and joins Nerium International instead, another multilevel marketing pyramid scheme. Aaron was also a member of USANA's prestigious million dollar club. Why would someone at the top of the distributor hierarchy need to quit and start over with a similar scheme? I've sent Aaron a message asking for his comment and have not received any reply.

Thought this was note worthy since USANA would like people to believe in residual income. Well, when your downline drops out, you have no more income.

October 22, 2012: Aaron Dinh's Lamborghini

USANA Earnings Release for Q1 2014 - Analysts Must Demand USANA Disclose Number of Active Babycare Distributors in China.

USANA Health Sciences releases their first quarter 2014 earnings after the markets close today. I beleive it will be as usual, revenues up and active associate numbers up in select areas (I predict they will recruit 400,000 new associates this year alone). What USANA has refused to do for several years now is disclose the number of Babycare distributors. Babycare is a company USANA purchased that already had a direct selling license in mainland China. Multilevel Marketing (MLM) is banned in China so Babycare uses a single-level structure and no recruiting into downlines.

For several years USANA had allowed Chinese Nationals to be recruited into USANA distributor downlines in markets outside mainland China, such as Hong Kong. These illegally recruited distributors were given a phoney address and even phoney phone number. In fact, they were using the same address and USANA distributor genealogy reports show it by the thousands. This caused the Hong Kong active associate numbers to grow to levels that were suspicious: 1 in 100 in Hong Kong were USANA distributors?! Over the past several quarters now, Hong Kong active associates and revenues have declined greatly. USANA claims people from mainland China are no longer joining in Hong Kong. Yeah right...

I suspect USANA is simply fudging their numbers and the auditors have no way to check it. Since USANA allowed phoney addresses to be used thousands of times by Chinese Nationals, I would not put it passed them to simply report the number of Hong Kong USANA distributors minus those that had resided in mainland China. In other words, those from mainland China are still signed up as USANA distributors and in a downline structure, but are simply not being counted in Hong Kong anymore. Nobody can audit the genealogy structure, except the feds.I believe the revenues from Hong Kong are also simply being reported as Babycare revenue.

The main reason for my suspicion has been the fact USANA stopped reporting the number of Babycare associates. Analysts have repeatedly asked USANA to disclose the numbers of Babycare associates during several quarterly conference calls and every time USANA refused to disclose the figures.

My list of USANA disclosures are quite simple this time: DISCLOSE THE NUMBER OF BABYCARE ACTIVE ASSOCIATES.

While you're at it, disclose the number of United States associates, the number of Professional Startup Packages sold, the percent of net revenues that came from USANA associate's initial product purchase used to "activate" their first business center(s), the number of newly recruited associates, and the number of active associates that have been with USANA for more than 2 years.

(I have no stock position with USANA, never have and never will. I have no financial position whatsoever. I gain nothing from my blog. I have never been a USANA associate or an associate from any MLM company.)

About 85 Percent of USANA's Philippine Associates Quit and The Hidden Information in USANA's Regional Data.

USANA Health Sciences made a couple blunders in the last couple days which I believe reveals an 85% dropout figure for the Philippines market which is not being disclosed to shareholders. USANA wrote a press release on November 12, 2013 regarding typhoon Haiyan. The following is a quote from that press release, which is referenced directly from USANA's website (and still there as I write this):

"We have an incredible USANA family of more than 175,000 strong in the Philippines," said Dan Macuga, USANA chief communications officer. "Their courage and goodness inspires our global team. That's why we feel it so important to help them and all those suffering in the aftermath of Super Typhoon Haiyan." - USANA Investor Relations

I wrote about this 175,000 number on my blog a couple days ago and low an behold USANA tried to change the press release some news organizations got by changing one of their own quotes! Some news agencies now have the same press release but with the following change:

"We have an incredible USANA family, 25,000 Distributors strong in the Philippines," said Dan Macuga, USANA chief communications officer. "Their courage and goodness inspires our global team. That's why we feel it so important to help them and all those suffering in the aftermath of Super Typhoon Haiyan." - Prnewswire

How is it that USANA can change a QUOTE that one of their executives made? It's a quote for goodness sake. I want to thank USANA for making two fantastic mistakes.

1. USANA revealed that the total number of distributors they have recruited in the Philippines over the last 5 years is around 175,000.
2. USANA reveals that there are only 25,000 active associates currently in the Philippines.

So 85% of the Philippine USANA distributors no longer purchase USANA product or participate in the business opportunity. My previous estimate two days ago was 17,000 active associates or a 90% dropout figure.

Here is the key information shareholders should understand here:

If the Philippines has 25,000 active associates, and the East Asia Pacific region has 60,000 active associates, then that means only 35,000 active associates can account for Australia, New-Zealand, Singapore, Malaysia, and Thailand.

Let me show the last time USANA disclosed active associate numbers by the territory: - USANAWatchDog Blog

Active distributors in East Asia Pacific for Second Quarter 2010 (3 years ago)

Australia and New-Zealand =18,000

Singapore = 5,000

Malaysia = 14,000

Philippines = 7,000

Thailand = Non-existent

This totals to 44,000 active associates.

Fast forward to today: Active distributors in East Asia Pacific for Second Quarter 2013 (today)

USANA states in their SEC filing that East Asia Pacific has 60,000 active associates.

Australia and New-Zealand =14,000 *

Singapore = 3,000 *

Malaysia = 12,000 *

Philippines = 25,000 (recently revealed in press release)

Thailand = 4,000 *

* My guestimate in order to make the numbers add up to the reported 60,000 for the region.

Since USANA no longer discloses active associate numbers for each market they are in, investors are left in the dark about the true operations of USANA. The markets were grouped into “regions” and began only reporting regional numbers.

Based on my guestimate, the following represents the percent change over the last 3 years for those markets:

Australia and New-Zealand = 22% DECLINE

Singapore = 40% DECLINE

Malaysia = 14% DECLINE

Philippines = 257% INCREASE

Thailand = new market

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 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 Should Answer The Following Questions During Their July 24, 2012 Second Quarter Earnings Release and Conference Call.

(Updated July 26, 2012 at bottom of posting)

USANA's second quarter earnings will be released Tuesday July 24, 2012 and a follow up conference call will take place on Wednesday at 11:00 AM. I have a few very simple and important questions analysts or shareholders should ask USANA during the conference call for the second quarter earnings release. It is in the best interest of the shareholders that USANA answer the following questions.

1) How much (or percentage) of the distributor incentives was the result of active associates purchasing the minimum requirement every 28 days in order to be commission eligible? (VERY IMPORTANT QUESTION)

2) Of the distributors that USANA considers "Full Time" (Gold Directors and up), ON AVERAGE how much (or percentage) of the commission paid to them comes from preferred customers and how much (or percentage) comes from downline distributors? (VERY IMPORTANT QUESTION)

3) How many active associates and preferred customers are in each of USANA's territories? (Australia, New Zealand, South Korea, Japan, Malaysia, Philippines, Hong Kong, Mainland China, United States, Canada, Mexico, etc...) Please break it down by territory and not region.

4) How many distributors either renewed their distributor membership or purchased a Business Development System (BDS) in the last 12 months? (Will tell shareholders how many TOTAL distributors USANA has)

5) What percentage of USANA's net revenue was the result of product being retailed to customers outside distributor membership program? (If there are no retail sales, then why are associates being lured into the distributorship?)


Questions 1 & 2 are extremely important and shareholders and analysts should demand an answer to them. Its about time USANA explain where the commission comes from that pays tens of millions of dollars to their Full-Time (Gold Directors and up) distributors while leaving the remaining 99% of distributors profitless.

I challenge at least one of these USANA analysts to ask the above questions.

Scott Van Winkle - Canaccord Genuity, Research Division
Rommel T. Dionisio - Wedbush Securities Inc., Research Division
John P. San Marco - Janney Montgomery Scott LLC, Research Division
Frank A. Camma - Sidoti & Company, LLC
Timothy Ramey - D.A. Davidson & Co.
Per Osland (ph) – Jefferies & Company
Mimi Noel - Sidoti & Company
Doug Lane - Jefferies & Company
Diederik Basch – Canaccord Adams
Madeline Miller -- D.A. Davidson & Company

(Updated July 26, 2012)

Of course important questions like the ones I proposed above do not get answered and USANA continues to hide falling distributor numbers in many of their territories. Beginning last quarter, USANA decided to stop disclosing United States, Canada, and Mexico distributor numbers and instead just grouped them all together. Okay, not a big deal. However, USANA now includes their newest territories from EUROPE in the North American distributor numbers. For those that don't know, the United States and Europe are separated by about 3000 miles of ocean. So it is completely irrational for USANA to combine the European segments along with the North American segments because they are so incredibly geographically different. The only reason for USANA to have done this is to mask the continuing dismal distributor numbers in the US and Canada by including a new territory that is expected to have somewhat rapid growth. I call this sleazy and USANA's stock analysts are too blind to have noticed.

If you wanted to take the United States revenue and divide it by the number of active associates for the United States territory, then you can forget it.

Evidence of USANA Inventory Loading Their Distributors

Inventory Loading is a key sign of a modern day product-based pyramid scheme.

USANA requires their associates to purchase a MINIMUM of 100 points worth of product every 4 weeks. This comes out to about $120 in product purchases. Each "active" associate made such purchase. But why? Every active associate who I have conversed with on the internet has claimed that they "wanted" the product, so the purchase was okay. But are those claims true, or just something USANA has conditioned these active associates to say to make excuses for these ongoing purchases?

If active USANA associates were just consumers of their own product and is why they purchase about $120 worth of product every 4 weeks, then why is it that Preferred Customers (those who are actually consumers who "want" the product) only purchase on average $70 worth of product every 4-weeks? Perhaps you are wondering where this $70 figure comes from.

According to USANA's latest financial SEC filings 67,000 Preferred Customers were responsible for $15.4 million in net sales, which is 10% of USANA's total net sales (associates accounted for the remaining 90%!). This works out to an average of $70 per preferred customer every 4 weeks. I use a 4-week calculation because USANA requires purchases from their associates on a 4-week cycle (13 times a year).

To me, this is proof that associates are primarily making these ongoing $120+ purchases every 4-weeks so they abide by USANA's rules and remain "commission eligible" for the 4-week period. If the associate fails to make this mandatory purchase, that associate is no longer considered "active", is stripped of all accumulated groups sales volume generated from their preferred customers and downline associates, and unable to collect any commission. That's a pretty severe penalty, especially when upline associates (typically the leaders) are continually pressuring their downline to remain on "autoship" and make those $120+ payments every 4-weeks.

Since most product purchases from USANA are from the active associates (219,000 of them), and each of them has to purchase about $120 worth of product every 4-weeks in order to participate in USANA's compensation plan, and the fact that preferred customers only account for about $70 on average, it is no wonder the primary focus in USANA is to market a business opportunity rather than product. The product is only a disguise as well as "tokens" used in a grand elaborate modern day product-based pyramid scheme.

This mandatory requirement for associates to purchase USANA products is known as "Inventory Loading". That is, the associates are being forced to purchase more product than they can actually resell. Assuming the associate only really consumes at most $70 worth of their $120 purchase, they are left with $50 sitting in their cupboards. USANA claims they can "retail" this product to make a profit. However, preferred customers obtain the product "at the same discounted price as the associates do". This means, there is no chance that any associate can resell their personally purchased product for more than they paid themselves. Unfortunately, the associate is also stuck with a nice shipping charge as well. To top it all off, many USANA associates resort to EBAY to "dump their inventory loaded purchases". These typically auction for 50% less than the associates own cost. Inventory Loading is one of the key indicators of a product-based pyramid scheme.

So if active associates were telling the truth, and that they really wanted $120 worth of product every 4-weeks ($1560 a year), then why does USANA have this "Mandatory" purchase in the first place? What would happen if USANA could no longer be allowed to "force" their associates to make these $120 purchases in order to participate in the compensation plan and be eligible for commissions? I think the answer is obvious. USANA would go out of business in a matter of months because associates would only purchase the amount of product they actually wanted. I would go as far to claim that most associates would not purchase any product at all.

So here's a challenge to USANA. Why not be one of the first MLMs that does not require their distributors to personally purchase the product they are trying to sell? What would USANA be afraid of, reality???

If you are an ex-USANA associate or know someone who is, I suggest filing a complaint to the FTC if you feel you have been cheated out of your money. I have an blog posting that explains how to go about filing a complaint and why it is extremely important to do so. See my Filing FTC Complaint Against USANA posting.

Ex-USANA Associates Need To File A FTC Complaint If They Feel USANA Operates A Pyramid Scheme.

If you believe you have been victimized by USANA and believe they are operating a pyramid scheme, then you need to file a complaint with the FTC. This is very important.

Most people who have joined USANA's business opportunity have lost time and money. I strongly believe USANA is operating an illegal pyramid scheme. According to the a FTC letter: "...a multi-level compensation system funded primarily by payments made for the right to participate in the venture is an illegal pyramid scheme." It should be noted that 90% of USANA's net revenue comes from their distributor's own purchases. It should also be noted that USANA requires their distributors to purchase about $1560 each year for a 1-business center account and about $3120 each year for a multi-business center account. These required purchases give the distributor the right to participate in the business venture and be eligible for commissions. If the payment is not made, the associate will lose all group sales volume accumulated (converted to commission when enough points accumulate). Seems like a pyramid scheme to me!

The federal agency responsible for investigating Multi-Level Marketing (MLM) companies is the Federal Trade Commission (FTC). The only way the FTC will investigate whether USANA is a pyramid scheme is for "enough" victims to file a complaint. So the most important thing anyone can do who believes they were swindled is to file a complaint with the FTC. It is very simple to file a complaint, although the task may seem daunting. I will provide a step by step walk-through to help guide you through the process.

Click on the following: FTC Complaint Form. This will open into a new window. You may receive an annoying popup from the FTC regarding a survey, just close that window. (That's just one of their attempts to annoy you and prevent you from actually filing out a complaint)

Fill out your contact information and whether you are submitting this complaint on behalf of someone else. Lawyers or attorneys might fill out the form on behalf of their client. However, since there are no actual instructions with this complaint form, I'll assume anyone can fill out this form on behalf of a friend or family member who is being or has been swindled by USANA.

Next, answer whether you are a member of the armed forces or a dependent. Not sure how this is relevant to the complaint, but whatever.

The next step is to choose what type of complaint you are filing. The correct option on this screen is to choose "OTHER" because none of their initial options have anything to do with business opportunities.

Now choose "Business Opportunity and Employment Offers" in the upper menu box. After a few seconds, you'll be able to choose "Multi-Level Marketing/Pyramid Schemes" in the lower box. I find it interesting that the FTC groups those two terms together.

Choose ow you were first contacted regarding USANA's business opportunity. Your choice will will result in a different set of follow up questions. "Email" contact will ask many questions regarding emails. "Phone" with its own set of questions.

Eventually you will come to the question that asks if you know the name of the company or individual in your complaint, or have additional information about them? This option should be chosen as "YES"

This part of the form asks that you tell the FTC about the company (USANA). Company Name "USANA Health Sciences". Address is "3838 West Parkway Boulevard | Salt Lake City, UT 84120". Phone: 801-954-7200.

Additional information is desired but not mandatory. Questions such as how much money you spent on the business opportunity, When you were first contacted, The name of the individual who contacted you, etc...

Now you are asked about "Consumer Information". Here is where you enter who the victim is. It may be the same information as the one entered earlier for the contact info, or may be the person you are filing this complaint in their behalf (Friend, Family Member, Client, etc...)

This next part is the meat of the complaint form. Here is where you get to explain how you were victimized. Perhaps you were told by your upline that you must stay on autoship for the business to work. Maybe you were told only quitters fail. Perhaps you were told you could make millions and were shown pictures of fancy houses and cars in their literature. The FTC needs to know your story.

Finally, you will see a confirmation screen where all the information you entered is displayed. Once you have confirmed the information is correct, click "SUBMIT" at the bottom of the form.

While the FTC complaint form seems long and tedious, it is very important to do. Many people might not file a complaint because they feel embarrassed or ashamed to have been suckered into a scam. Perhaps you were told over and over that USANA is not a scam because they have been in business since 1992 and are a publicly traded company. Perhaps you are told that it was your own fault you couldn't make any money and that you shouldn't blame others for your failure. These are all very serious statements that the FTC really needs to know about. I have received many emails from people who feel this way. Don't blame yourself. 99% of USANA participants lose money. The compensation is actually designed to fail this many people.

If you know someone who lost money in USANA, encourage them to file a complaint.

USANA and the Comparative Guide to Nutritional Supplements - A Symbiotic Relationship

Since 1999, USANA and its distributors have used the Comparative Guide to Nutritional Supplements written by Lyle Macwilliam as proof that their supplements are the best in the industry. Every edition of the book granted USANA supplements #1 in the industry. I also found that many USANA distributors purchased the book to use as a sales tool when trying to persuade someone to join USANA. For several years this had seemed very odd to me so I did some research. Every time I looked into it, I found more and more ties between USANA and the Comparative Guide to Nutritional Supplements. Their relationship is truly symbiotic. The following are my findings.

There are 4 editions to the Comparative Guide to Nutritional Supplements. The First edition came out in 1999, Second edition in 2001, Third edition in 2003 and Fourth edition in 2007. USANA has been chosen #1 in every edition since the first edition. In fact, the first edition of the book chose USANA as the baseline to compare all other brands to.

One of the individuals listed on the book is Gregg Gies who was responsible for research, editing and layout for the Comparative Guides editions 1 through 4, was a USANA distributor #285320. I questioned Nutrisearch (Lyle Macwilliam's corporation for his books) about this and they informed me that before Gregg joined NutriSearch he purchased USANA product and at the time the only way to get the product was to sign up as a distributor (no preferred customer option). I was also told that he let the distributor lapse between ten and twelve years ago. Yet, the first edition came out in 1999, twelve years ago. It should be noted that this distributor ID achieved a leadership level of Sharer, which does not seem consistent with someone who only wanted product.

I think there is a conflict of interest here because Lyle Macwilliam basically hired a USANA distributor to perform the research for a book that ranks USANA #1 while trying to portray itself as an independent source of information regarding the nutrition industry. Gregg was also Co-Owner of NutriSearch at one point in time. Currently, he is only considered as a consultant. Although, when contacting NutriSearch, their replies to me also carbon copied Gregg at a NutriSearch email account. I'm not aware of companies giving their consultants email accounts.

Knowing that Gregg Gies was a USANA distributor around the time Lyle hired him to do research for the Comparative Guide, what do you think about the following statement made by NutriSearch?

"The research, development, and findings are the sole creative effort of the author and NutriSearch Corporation, neither of whom is associated with any manufacturer or product represented in this guide."

Another name listed on the Comparative Guide to Nutritional Supplements is Ian Black. He is responsible for the book's cover design. He is a professional graphics artist. He is also a Silver Director USANA distributor #90155 as is his wife, who is a 1-star diamond director #43050. How is it that Lyle Macwilliam wrote a book claiming to be an independent guide to the nutrition industry that chooses USANA #1 in all four editions ends up hiring a USANA distributor to do the book's cover design?

I asked NutriSearch if anyone there is a USANA distributor. They responded by telling me no one at NutriSearch is a USANA Associate. When bringing to their attention that Gregg Gies and Ian Black are USANA associates, NutriSearch responded stating that Gregg is a consultant and Ian is not and never was "employed" at NutriSearch.

UPDATE January 4, 2014: I have discovered that there has been yet another USANA distributor working at Lyle Macwilliam's NutriSearch. Her name is Joan Baumann USANA distributor #100450. She joined NutriSearch in 2008 as a Database Administrator. It appears that my correspondent at Nutrisearch lied to me when I had asked if any USANA distributors work at Nutrisearch. Obviously there is a serious conflict of interest here.

Then there is Dr. Ray Strand. He is listed as one of the "Independent Nutritional Experts" used for the Comparative Guide's "Blended Standard". Ray Strand has been on USANA's medical advisory board since the 1990s, which isn't that big of a problem since the medical advisory board members are not paid a salary by USANA, but only stipends. However, Ray Strand and his wife were USANA distributors making hundreds of thousands of dollars off their downline. Their distributorship was called "AMARA Enterprises, Inc." This is a huge conflict of interest, especially when USANA mysteriously manages to rank #1 in every edition. During USANA's third quarter of 2011, Ray Strand has since left USANA to join a different MLM company, ARIIX. Their USANA distributorship appears to also have ended.

I questioned NutriSearch about Ray Strand's distributorship with USANA and NutriSearch's "independent nutritional expert" claim. NutriSearch stated that Ray Strand's recommended daily nutritional supplementation along with the eleven other authors used as references for the Blended Standard is published work in the public domain. So what? The problem I have is the usage of the term "Independent". To me, the term implies the twelve individuals used for the Blended Standard do not have a financial ownership with any of the companies listed in the book or financial motives on the outcome of the data represented in the book. Clearly, the fact Ray Strand was a USANA distributor even before the first edition of the book came out and the fact he contributed directly to the results presented in the Comparative Guide (USANA being #1 out of over a thousand choices) means Ray Strand is not an independent authority.

Yet, NutriSearch finished by stating that these independent nutritional experts are associated with different nutritional product lines and does not bias the scoring of any of the products listed in the Comparative Guide. I strongly disagree...


I should also point out that another one of the independent authorities used for Lyle's Blended Standard is Michael Colgan. He was also a USANA distributor in the 1990s. His distributor ID was #89201 and was listed under the account name "Colgan Institute". It is unclear when he left the USANA distributorship and it may be close to the time the first edition of the Comparative Guide was written.


Another interesting piece of evidence is that the 1st edition of the Comparative Guide To Nutritional Supplements (1999) appears to have been written for USANA distributors to use as a sales/recruiting tool. The following was written on Lyle's website macwilliam.net back in 2001:

Why is the USANA graph flat, with everything at 100%?


The reason the USANA graph appears as a series of yellow bars, all set at 100%, is because this represents the comparison standard. In other words, it represents USANA compared to itself. Why did we do this? The purpose was to establish a benchmark where all products would be compared to the USANA standard - this allows your clients to clearly see how the vitamin formulation they use stacks up to the USANA formulation.

I believe Lyle Macwilliam's response to the FAQ on his old website suggests he is answering a USANA distributor's question. The "your clients" refers to the USANA distributor's prospective customer/recruit. Seems quite obvious to me the motive behind the book - to sell it to the hundreds of thousands of USANA distributors.


From an archived copy of USANA's unitogether.com website which sells many books related to USANA including the 2nd edition of the Comparative Guide to Nutritional Supplements (2001), the following is the description for the book:

Fully revised and updated - Lyle MacWilliam's Comparative Guide puts the USANA Essentials against over 250 of the most common nutritional supplements on the market today. Through his incredible research, Mr. MacWilliam shows both how and why the USANA Essentials are second to none. This best seller was updated for the USANA 2001 9th Annual International Convention and it's better than ever.

So the book was updated for USANA's convention which I believe was so it could be sold to all of the participating distributors at the event. So of course the book will rate USANA #1.

On the back cover of the 3rd edition of the Comparative Guide to Nutritional Supplements (2003), there are five individuals praising the book. These five members are listed as doctors and authors of their own books. What is not disclosed to the reader is that these five doctors are also USANA distributors!

Dr. Christiane Northrup, M.D. - USANA Distributor ID# 2040175
Dr. Gerald Lewis, M.D. FRCP, FRACP - USANA Distributor ID# 203463
Dr. Laz Bannock, Ph.D. - USANA Distributor ID# 2290764
Dr. Denis Waitley, Ph.D. - USANA Distributor ID# 70541
Dr. Christine Wood, M.D. - USANA Distributor ID# 348

So out of the thousand plus supplements presented in the book, Lyle and his team were not capable of producing anyone else to praise his book other than USANA distributors? I find this very deceiving and dishonest. USANA associates would only need to tell the person they are trying to recruit to look at the back of the book and claim that five doctors trust the book and so should you, so join my downline today (before you find out the truth).


Then there is the fact that Lyle Macwilliam was on USANA's Medical Advisory Board from 2003 to 2006, the time the fourth edition to the comparative guide was being produced. I was quite vocal about this on the Yahoo USNA stock message board (where I began sharing my research since 2006). Finally after criticizing that fact for several months, Lyle Macwilliam left USANA's medical advisory board and USANA made the following statement on their Ask Andy website (which is no longer made available for some unknown reason):

"Lyle shares his expertise as a consultant with a number of nutritional manufacturers and, for this reason, was asked to join USANA's Medical Advisory Board after the release of the third edition of the Comparative Guide to Nutritional Supplements in 2003. He served on the Medical Advisory Board until 2006. Lyle decided to leave the position, in part, because he felt that that it might have created an impression of bias for his work. Lyle is neither an employee of USANA Health Sciences nor an Independent USANA Associate."

So Lyle finally figured out that after 3 years of being on USANA's medical advisory board, that it created an impression of bias for the Comparative Guide to Nutritional Supplements... Really!?


Do I need to mention that USANA received their NSF stamp only a few weeks before the fourth edition of the comparative guide came out awarding USANA the top rank again, only achievable by having a third party certification, i.e. NSF. Seems that while Lyle was on USANA's medical advisory board, information about what USANA had to do to keep #1 status was also coordinated. It was even admitted by Lyle that after the third edition, other companies adjusted their formulations and leapfrogged USANA. So how was it that USANA was able to then reformulate their product to be #1 again?

Lyle wrote the following after publishing the 4th edition: "In fact, for at least the last three years of the third edition’s run, it had been false to say USANA was ranked #1 in our research. Even though our guide still showed this product as the best in the field, other products had already eclipsed it, simply by adjusting their formulations to improve their score on our rating criteria, possibly with little or no regard for the scientific evidence supporting their changes. They simply wanted to be #1."

Yet, USANA regained that #1 position by reformulating their supplements. Lyle criticized other companies for doing reformulating their products claiming there was little or no regard for the scientific evidence supporting their changes. Gee, if that's really true, and these companies changed their formulation to be closer to this "Blended Standard", and Lyle calls that reformulation a change with no regard for scientific evidence supporting their changes, then shouldn't the same be said about the Blended Standard? Seems very hypocritical to me.


Lyle Macwilliam claimed the following regarding USANA and the Physicians Desk Reference:

"USANA nutritional products are listed in the Physician’s Desk Reference, one of a select few nutritional supplement manuacturers to merit such high recognition of product quality." - FAQ

What Lyle does not understand is that the PDR does not endorse nor offer any type of credibility for the products listed in their book. In fact, all the products listed are paid advertisements. USANA had to pay a fee to have their products listed and USANA got to chose which book to listed it in (PDR for drugs or the PDR for Herbs & Supplements). USANA chose the book for drugs. Then USANA claims their supplements are better than the rest of the vitamins because they are listed in the PDR for Drugs. Because of Lyle Macwilliam's lack of understanding regarding the PDR, he decided to repeat the same nonsense USANA did. So much for any real research. But of course the research for the Comparative Guide was done by a USANA distributor (Gregg Gies).


In Conclusion: I believe Lyle Macwilliam chose USANA to be #1 in his book from the very beginning back in 1999.  Lyle hired a USANA distributor "Gregg Gies" to do research for his book. For the past 12 years, USANA has remained #1 in every edition of the Comparative Guide to Nutritional Supplements. Yet, USANA spends less than 1% of their net revenue on Research & Development (incredible if you ask me). Why research when the author of the Comparative Guide is on your medical advisory board. From the research I have done, I believe there is a symbiotic relationship between USANA and NutriSearch where one is dependent on the other. USANA's main source of praise for their product is the Comparative Guide. I have no doubt the main source of Lyle Macwilliam's sales comes from USANA distributors themselves. If one looks back at the way Lyle sold his Comparative Guide, he did so priced as bulk purchases.

According to Macwilliam.net 9 years ago regarding their 2nd edition:
1-9 books    $15.95 per copy
10+ books    $14.95 per copy
25+ books    $13.95 per copy
50+ books    $12.95 per copy

And where can you get a copy of the book? Lyle suggests buying from him directly or from USANA's website "Unitogether.com" which was a site used to sell sales tools and other books to USANA distributors. This book was intended to be sold to USANA distributors as a sales aid. Any time a USANA distributor recruits somebody into their downline, you can be almost certain that the Comparative Guide to Nutritional Supplements was used to claim USANA was #1 in the industry. Lyle also appears at just about every USANA event as a key speaker. I would like to know what other vitamin manufacturers Lyle is a key speaker for.

If a USANA Distributor Asks You To Join Their MLM, Ask Them This Simple Question

If a USANA distributor asks you to join their Multi-Level Marketing business opportunity, simply ask them the following question.

How much commission do you make each month on average from (1) Downline Distributor's purchases and (2) Preferred Customer's purchases?

If the promoting distributor has actually made anything (66% of them haven't made a penny), then the answer you get will likely break down as the following: 90% of their commission came from Downline Distributors and 10% came from Preferred Customers. What does this mean? It means the distributor's primary job is to sell the business opportunity and recruit more distributors. Only 10% of the business opportunity is committed toward selling the product and signing up preferred customers.

How do I know this? Because 90% of USANA's products are purchased by USANA distributors according to their latest SEC filings. Does this mean distributors want the product because they use it or because they have a customer to resell it to? Absolutely not. In fact, USANA distributors are forced to purchase over $100 worth of product every 28 days in order to participate in the business venture. It is a business obligation. If the distributor fails to make this required purchase, then that distributor loses all volume points accumulated, is not eligible to collect commission and is no longer considered as “Active”.

So in order to be successful in USANA, distributors must recruit enormous downlines. Not only that, but these distributors must pressure downline members to also recruit more distributors. This is an endless chain of recruiting. More than half of new distributors stop participating within the first year. So in order for MLMs to survive, distributors must recruit new distributors at a higher rate than those who are dropping out. This is a pyramid scheme. If the recruitment of new distributors were to stop, then the MLM company like USANA would go out of business in just a couple months. The product itself cannot retain enough customers. Only the dream of becoming rich in their deceptive business opportunity keeps the company alive. Only 1% of those who join make a profit.

Now if that USANA promoter answers your question by telling you they make most of their commission from preferred customers, then ask them what the dollar amount is per month. If it is not more than $100, then they are not even recovering the expense of their $100 required product purchase, not to mention all the other expenses incurred.

Another answer you may hear is that they immediately received a $100 commission check their first week. This is a very deceptive answer because of the following. If you joined USANA and signed up purchasing their $1250 "Professional Pack" starter package, you will automatically receive a $100 commission check without having to sell anything! Now ask yourself, if you purchase something for $1250 and receive $100 back, would you seriously consider that an earning let alone a commission? This is one of USANA's dirty little secrets ad violates even their own policies and procedures by paying a commission to someone without any selling whatsoever. It's also used to manipulate their numbers.

If you are asked to join, consult with your accountant regarding the business opportunity. Take them the compensation plan and ask them to evaluate it.

Does USANA having a product mean they are not a MLM pyramid scheme? No.

Remove the USANA product from the equation and what do we have? The same thing.

Most MLM promoters claim that Multilevel Marketing is not a pyramid scheme because they offer products and claim pyramid schemes don't have products. This is far from the truth. Modern pyramid schemes offer products to make their scam appear legitimate. Lets look more closely at this and use USANA as the example.

Scenario 1) Lets pretend that USANA had no product. All the distributors who want to participate in the compensation plan would be required to pay $68 every four weeks (13 times a year) in order to collect commission from their downline. Those who make their payments would be considered as “Active Associates”. If a distributor neglects to make their payment for any given four week cycle, then that distributor loses all rights to collect commission from their downline and are no longer considered as “Active”.

So what does this $68 fee consist of? Well, $23 of it goes toward paying the operators of the pyramid scheme (USANA executives and employees). The remaining $45 is used to pay commissions and bonuses to Active Distributors who joined earlier. The amount of commission paid to a distributor depends on the number of active members they have in their downline. The more you recruit and get others to recruit for you, the more you make.

Distributors with 10 active members in their downline would receive $100 every four weeks.

Distributors with 100 active members in their downline would receive $1000 every four weeks.

Distributors with 1000 active members in their downline would receive $10,000 every four weeks.

Unfortunately, the majority of participants (over 90%) do not make enough to even cover the required $68 fee they must pay every four weeks to participate. Most participants don't even receive a single commission check! This is a pyramid scheme. While distributors aren't paid when new recruits pay the $19.95 startup kit (required to become a member), the distributors are paid commission when downline members pay their $68 mandatory participation fee. Thus, distributors are paid to recruit!

Scenario 2) Now lets go ahead and include USANA's products into the mix. USANA's cost to produce their product is $18. Adding that to the $68 fee and we end up with $86, but that is not what distributors will actually pay. In fact, USANA distributors will pay an additional $14, which brings the total to $100. These are actual figures based on USANA's SEC filings. For ever $100 of net revenue, 45% goes toward commissions and bonuses paid to distributors, 23% goes toward “selling, general & administrative” expenses, and 18% goes toward USANA's “cost of sales”.

The only differences between the two scenarios is that one you get a product and the other you don't. Both are still pyramid schemes. Both have over 90% of participants losing money. These percentages are fixed no matter how hard members try to “work the business”. Success in MLM takes a lot of hard work at deceiving people into throwing their hard earned money away by joining a pyramid scheme.

If you are considering joining USANA or any other MLM company, take the compensation plan to your accountant and ask them if you should join. Ask your accountant if the majority of their clients who are in MLM lose money. This broad of a question would not break any client confidentiality rules. Do not let the USANA promoter pressure you into making a decision without doing your own homework. 99% of MLM participants lose money.

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

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

Well, today USANA was asked during their dismal second quarter earnings results the following question by John San Marco at Janney Montgomery Scott LLC:

"Do you know what the percentage of your Hong Kong associates that are actually Chinese nationals?" - Transcripts

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

Better yet, Dave Wentz could have just simply quoted their own internal document that surfaced over a year ago!

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

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

Dave could have simply stated that he isn't sure of the exact percentage, but that a "LARGE SUM OF PRODUCT ENDS UP IN CHINA". But Dave is only the CEO, so why would he know any of this...

After John San Marco asked for USANA to at least give a ball park estimate on the percentage, Dave Wentz replies back with:

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

 Really!? Chinese Nationals "building in Hong Kong"? Uh oh! Dave Wentz was not suppose to admit that. During the first quarter's conference call 3 months ago, USANA's Fred Cooper said "we have a large group of Asian Associates who are involved with USANA only because of the products and are buying in Hong Kong for consumption only."

So now USANA is in a pickle. Dave Wentz lets the truth come out and admits that the Chinese Nationals are actually building a USANA downline in Hong Kong. So USANA has been "Cheating in China". And of course they are having trouble "transitioning" these distributors over to BabyCare because they all know that without a downline they have no chance of making a dime. The product is over priced and over rated. There is little to no demand for USANA's product except as a required purchase to participate in a pyramid scheme. To transition these Chinese Nationals over to BabyCare would mean breaking apart their already formed downlines. And best of all, these downlines are attached beneath many of USANA's top distributors. That is why USANA's distributor leaders were upset about some changes USANA was trying to implement which forced USANA to quickly retract their plan. To split up the Chinese Nationals out from USANA would mean top distributors of USANA losing tens of thousands of dollars in commissions. Commissions which come from the mandatory product purchases by these Chinese Nationals in order to participate in the scheme.


Lastly, John San Marco asks USANA if there are any Chinese Laws that prevent Chinese Nationals from doing any sort of multilevel marketing outside their borders. Dave defers the question to Jim Bramble, USANA's legal officer. Jim dances around the question and John had to then be more specific. Finally, Jim makes the following statement:

"Well if an individual does not have residency in Hong Kong and the ability to build in Hong Kong, then they can only build in China." - Jim Bramble

Jim follows that up with a lot of rambling and back peddling. So in otherwords, Chinese Nationals are not legally allowed to participate in USANA's multilevel marketing business opportunity whatsoever. I have been making this claim for a while now USANA finally admits it. But wait a minute, in regards to Chinese Nationals, Dave Wentz had just stated that "We definitely have a number of people who are building in Hong Kong." I think we have a winner folks. USANA caught in a lie regarding Chinese Nationals as USANA distributors.


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

USANA's distributor Hall of Fame reveals their elaborate recruiting pyramid scheme

USANA's October 2010 Distributor Hall of Fame
Compiled and Analyzed

By: USANAWatchDog

October 2010

Click For FULL SIZE

USANA Health Sciences, Inc. does not publicly publish their distributor figures. So I must take it upon myself to compile and publish the information. It becomes very apparent why USANA refuses to disclose the distributor numbers; almost everyone is unable to make a profit!

Of course if this information were made available to prospects before they join USANA's business opportunity, the outcome may be very different. Who would join a failed business where 99% of USANA's sales representatives lose money? It is easy to see how bad the failure rate is when comparing the leadership levels in this diagram to USANA's last average distributor earnings figures: USANA's 2006 North American Distributor Earnings Statement. USANA has not published a relevant report since then.

In the diagram, I represent USANA's distributors in a pyramid chart. The pyramid on the lower left represents all of USANA's distributors that have at one time or another received a commission check. Since the higher ranks represent such a small percentage of the total, the middle pyramid is a zoomed-in representation of the lower left pyramid's tip. The same goes for the upper right pyramid, which is a zoomed-in representation of the middle pyramid. The diagram does not even include the other 600,000+ distributors that have never received a commission check! USANA also only considers what is represented in the upper right pyramid as "Full Time" distributors (Gold Directors and up). Everyone else are just part timers according to USANA.

So what is USANA's response to this? I would love to know. USANA cannot claim that most distributors join only to receive discounts on the product because USANA's Preferred Customers pay the same price as distributors. All of USANA's distributors joined with the intent to "Make Money" (otherwise they would only be preferred customers). Distributors are forced to purchase over $100 worth of product every 4 weeks in order to receive their commission check. Just imagine each level of distributors making these required product purchases. Those purchases pay commission to the higher levels. What we have here is a very elaborate pyramid scheme.

The Security Exchange Commission, Federal Trade Commission, Stock Analysts, Shareholders, Distributors and Prospects should all be aware of the information presented in the diagram.