SAN DIEGO, March 19 /PRNewswire/ — In a rebuttal to the Usana Health Sciences, Inc. lawsuit in federal court, filed on March 15, 2007, the Fraud Discovery Institute, Inc. (FDI) has posted a ten-point response on its website (http://www.frauddiscovery.net) to further bolster and corroborate the allegations made in FDI’s original report to authorities, dated February 20, 2007.
In a letter addressed to three law enforcement agencies today, FDI puts Usana Health Sciences, Inc. on notice that a distributor, offended by the use of the term “terrorist” to describe Barry Minkow in a blast email sent by a high-level Usana distributor to his down-line, has forwarded Usana’s unabridged, current distributors list. The list was immediately turned over to law enforcement.
“We have summarized the contents of the distributors list in our response and the implications for the company appear to be significant,” said Mr. Minkow. “Knowing that the government now possesses this list, Usana might now reconsider what public statements they make in defending the reality of previously undisclosed collapse and attrition rates as well as the fact that 70% of the compensation is paid to just 3% of those at the top of the Usana distributor pyramid.”
The FDI response, prompted by the Usana lawsuit, also addresses the embarrassing, previously undisclosed fact of Dr. Myron Wentz’s renounced American citizenship as well as his 46% stake in Usana stock being parked in the tax haven of Liechtenstein, a fact that went undisclosed until the release of the FDI report, and now acknowledged by the company to be true.
But instead of explaining why these facts were not disclosed, the company has relentlessly attacked Barry Minkow by citing his past conviction in 1988 by erroneously stating, among other things in their press release, that he was convicted not in 1988 but in 1998.
FDI questions how Usana CFO Gil Fuller could possibly claim to have no knowledge of 46% of the Usana stock being parked in Liechtenstein. Says Minkow, “To borrow a phrase from a movie, it is clear to me that ‘Wentz flew and Fuller knew.’”
The response also addresses other accusations contained in the Usana lawsuit, including the Dave Wentz “It was my daddy and not me” defense, the “Grape Seed Extract” defense, the failure to address the alleged deception regarding average annual distributor income on the Usana website, and the accusation of stock manipulation by establishing beyond any doubt the fact that between 2003 and 2006 (and according to Usana’s most recent 10-K) the company bought back, with cash from operations, 3,881,000 shares for a total of $133,377,000 while insiders sold equity-based compensation totaling 95 million dollars.
According to Minkow, “When the company generates the cash to buy back the stock on the open market from a pool of failed distributors, it is wrong. Those failed distributors looked at the ‘True Health and True Wealth’ meetings as an opportunity to achieve financial freedom and independence, only to have those dreams shattered by the reality of staggering distributor failure rates that range upwards of 87% (a previously undisclosed statistic). Those failed distributors end up in further debt and appear to be the ones who can least afford to lose money, yet they are directly funding these cash buybacks, exploited by company insiders, as they account for the vast majority of Usana’s income. Aside from being wrong, and in my opinion, evil, it is also a motive that is undeniable and unable to be further spun by Usana Health Sciences, Inc.”
Finally, Mr. Minkow offers, as he has already to law enforcement, to return any profits for ‘put options’ to Usana Health Sciences, Inc. failed distributors on the one condition that the company insiders agree to do the same with their 95 million in equity-based compensation. “When people find out that the ‘put options’ I own will probably never cover the cost of the original investigation, and more importantly, pale in significance to even just one of the Usana insider’s profiteering, they will realize that the company’s preoccupation with this issue is nothing more than a red herring.”
SOURCE Fraud Discovery Institute, Inc.
Jenn on March 29th, 2007 at 3:12 pm
I read your blog about Usana and Minko and if you look carefully at the statement made by Usana they go over all the things that Minkow blurted about. I think that the proof is in the pudding. Usana has 18 monhts of record growth they are in 15 different countries and have a customer base that some would only dream of. Minkow is driving the stock prices down to put a buy down on them. A comment that he made was about don’t look what is in the product just look at how much they cost. I don’t know about you but there is a big price difference from a steak at a fast food joint and a steak from a fine restraunt. Minkow is still a crook!!!!
Klaus on September 25th, 2007 at 4:50 pm
I personally think that Minkow’s unknown client(s) targeted USANA for reasons that we are not sure about. My feeling is that it may be profit oriented.
My main concern is that overall; USANA is a caring company with many great people and alliances. It’s by far not perfect, but overall it’s a good company. They have a 250,000 square foot manufacturing facility that voluntarily manufactures its products to pharmaceutical standards. They do use a legitimate network marketing go to market strategy of direct sales.
If they just wanted to build a fake/farce product pyramid scheme, why spend so many resources on land, manufacturing equipment, labs, warehousing, IT systems, employees (1000 people work for USANA) and the list goes on.
If you look at companies that were brought down that “posed as legitimate NWM businesses”, you’ll see that most of their so-called products were manufactured by a third party, services were contracted out and the product was inferior. No high-end third party endorsement would be there even if you paid them.
I’m not sure if USANA paid an endorsement fee or signing bonuses to the US and Canadian Olympic Speed Skating Teams, Women’s Professional Tennis, Tennis BC, Bernice King, Christine Northrup, MD, SportMedBC or any other of the multitudes of high end third party organisations and professionals. What I can say is that if the product that USANA produces would have been inferior (because they do use three well respected independent labs to check their products), they would not have agreed to the terms of an endorsement. There is no price tag for integrity and honesty. If these organizations and people did not think USANA made the cut, chances are they would have said, “keep your money!”.
My issue here is that I think Minkow used the press as his method of prosecution, judge and jury, which is a blatant misuse of free speech. The FBI or any other law enforcement authority would never shoot first and ask questions later. Before the FBI issue any formal statement to the press, they along with the respected prosecutors office, would say that there was enough evidence to lay charges and pursue legal action. Barry and his FDI went to the press in a hateful and malicious way. With total disregard for the majority of honest and hardworking people that work with and for USANA. He used information that may have had some relevance, but twisted it in a way that went beyond the real truth. I call them half-truths, because he twisted the tidbits of information in a way that made the whole company look bad. This also hurt many shareholders of USANA. If you need examples I can easily put that list together.
Let the courts and jury decide who will win this battle and be done with it. USANA has a very strong legal team and I’m sure Minkow and his unknown client(s) are doing OK for legal representation. It will be interesting to follow this story, as it will have ramifications for the NWM industry as a whole. I’m sure there will be issues of external USANA stock manipulation as well.
You know, USANA isn’t even interested in getting money out of Minkow (he already owes 25 million dollars from previous criminal activity), you can see that in their suit against him. They simply want a public apology for jumping the gun and for listening to the small horde of anti MLM/NWM zealots who jumped on, or created this bandwagon. USANA want their good name back. They want their shareholders to be assured that they made the right choice investing in them. USANA want their preferred customers and associates to know that the last 15 years was a time to be a part of something greater then themselves. USANA want their stakeholders to regain confidence in them. By the law of the universe, this will happen and everyone on both sides of the equation will be better for it and hopefully will have learned something.
We live in free countries (Canada and the US) and have the ability to express our views openly. I just hope that these freedoms are not abused in a way that hurt others in the process.
All the best and thanks for the dialogue.
Sincerely,
Klaus
Greg on February 7th, 2008 at 9:01 am
I not a distributor of Usana but have looked into the company and individuals involved in the company including very high level distributor as well a starting distributors. The company has the fairest compensation plan I have ever seen and the people are the most upfront and honest people I have ever encountered in any organization. I’m sure there are some bad apples just like in any organization. But the truth is that this company has all the ingredients required for a solid business to “hang your hat on”. For anyone willing to work it like a true business this is a great opportunity to generate a very substantial income stream in a matter a two to three years. Something you can not say about most businesses that require several tens of thousands of dollars to get into plus the same or even more effort. I truly believe that even Mr. Minkow is aware of this fact and is the reason he chose to attack Usana for the purpose of personal gain in the market. Most people with a good sense of business knowledge can see this. All this actually is tempting me to join even though I am so busy with all my other business commitments.