A new lawsuit claims Salt Lake City-based USANA Health Sciences executives operated an illegal pyramid scheme, misled investors into believing it was a viable business model and made off with millions of dollars by selling company stock at artificially inflated prices.
The proposed class-action suit filed in Utah’s federal court on behalf of investors, seeks to recover stock-market losses connected to claims outlined by private investigator Barry Minkow and detailed in a recent story in The Wall Street Journal. Minkow, who has served time in prison for stock fraud, directs the Fraud Discovery Institute. His report is quoted liberally in the lawsuit.
Lawsuit Says USANA Ripped Off Investors
March 28, 2007 by Ty | 2 Comments
In Network Marketing News
Klaus on September 25th, 2007 at 4:40 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
Justin Weschenfelder on June 15th, 2008 at 10:40 pm
I thought it should be noted here that SEC cleared USANA Health Sciences of all allegations of illegal business practices made by Mr. Minkow.
I’m unaware of any other articles or letters written by investigator Barry Minkow, or his supporters apologizing for the damage they caused collectively.
Since then, Mr. Minkow has gone on to investigate Lead content in the products of USANA Health Sciences’ Network Marketing Competitor, Herbalife.