Usana
Encyclopedia
USANA Health Sciences, Inc. , or USANA, is a Utah-based multilevel marketing company that produces various nutritional and skin-care products. USANA products, most of which are manufactured at the company’s West Valley City, Utah
facility, are sold in sixteen international markets via a network of independent distributors (referred to as "associates"). USANA is the 24th largest direct selling company in the world. The company has sponsored and provided products to several athletic organizations. In 2007, several of USANAs executives were discovered to have made false statements in their resumes.
, sells its products through multilevel marketing: distributors recruit and profit from other distributors. The products are not available through retail channels, but instead can only be obtained through one of its independent distributors (referred to as "associates") or by direct order through the company. The company has approximately 222,000 associates and 68,000 "preferred customers" in its worldwide distribution network. In 2010, 90% of product sales was purchased by associates, and 10% by preferred customers. As of 2010, its products are marketed in the United States, Canada
, Australia
, New Zealand
, United Kingdom
, Netherlands
, Japan
, Hong Kong
, Taiwan
, South Korea
, Singapore
, Mexico
, Malaysia, and the Philippines
.
Beginning in 1993, Dallin A. Larsen served as USANA’s vice president of sales (and later as consultant to USANA’s president and special advisor to the board of directors) prior to founding the MLM beverage company Monavie
in 2005.
From 2004 to 2006, USANA was named on Forbes
“200 Best Small Companies” list. In 2007, USANA was not included on Forbes' 200 Best Small Companies” list, and an article in the magazine quoted industry and government experts who had raised questions about USANA’s business practices and products. USANA responded by issuing a press release denying that the company had breached a $40 million loan agreement with Bank of America.
During 2007, USANA faced repeated controversy after several of its executives were discovered to have made false statements regarding their qualifications. The executives included Denis Waitley
, a member of the board of directors
who had falsely claimed to hold a master's degree from the Naval Postgraduate School
; sales associate Ladd McNamara, who quit the company's medical advisory board after it was discovered that his license to practice medicine had been revoked; the Vice President of Research and Development, Timothy Wood, who was found to have doctorate in forestry
, as opposed to biology
as he had claimed; and the Executive Vice President and Chief Financial Officer, Gilbert Fuller, who had continued to use the title of CPA
, though his CPA license had expired 10 years before he joined USANA in 1996.
In August 2007, USANA announced that it had been notified by the Securities and Exchange Commission (SEC) that its shares were subject to delisting from the NASDAQ
because the company had failed to have the financial information in its quarterly Form 10-Q
reviewed by an independent auditor. USANA reported this was due to their public accountant resigning and not yet being replaced. In October 2007, USANA announced that NASDAQ had determined they were in compliance and their stock would continue to be listed.
On January 3, 2011, USANA completed the transfer of its common stock from the NASDAQ
to the New York Stock Exchange
.
On May 10, 2011, it was announced that 4 of USANA's executives (President and COO
Fred W. Cooper, CFO
Jeffrey A. Yates, EVP of Sales Mark H. Wilson, and VP of Finance Riley Timmer) had unexpectedly resigned their positions at the company to pursue an unspecified business opportunity.
.
Several of USANA's products are certified by NSF International
in the Dietary Supplements category (NSF/ANSI
173) as having the identity and quantity of their dietary ingredients accurately described on the product label and containing no undeclared ingredients. In addition, several products are also certified under NSF's Certified for Sport certification program. The tablets that make up the Essentials product are certified by HFL Sport Science's INFORMED-CHOICE Certification Program to be regularly tested for substances considered prohibited in sport and that the products have been manufactured to high quality standards.
In August 2010, USANA announced its ability to manufacture nutritional tablets with two distinct formulas into one bilayered tablet, as well as the release of two new formulas, Proflavanol C100 and Hepasil DTX. According to Jim Brown, vice president of operations at USANA, the new technology (dubbed Nutritional Hybrid Technology) will allow for the creation of new supplements and cut down on consumer pill fatigue, as well as the opportunity for sustain-and-release tablets.
USANA Essentials were tested by ConsumerLab.com
in their Multivitamin and Multimineral Supplements Review of 38 of the leading multivitamin/multimineral products sold in the U.S. and Canada. The Essentials passed ConsumerLab's test, which included testing of selected index elements, their ability to disintegrate in solution per United States Pharmacopeia
guidelines, lead contamination threshold set in California Proposition 65, and meeting U.S. Food and Drug Administration
(FDA) labeling requirements.
USANA states that their products are of high quality, justifying their relatively high cost: but this claim was disputed by Anthony Almada, Chief Scientist of the nutritional supplement industry consulting firm Imaginutrition, who stated in an interview in Forbes that "The economic reality of Usana, and other [multilevel marketing] entities, mandates that their products invariably lack robust distinctiveness and convincing evidence of consumer relevance and superiority—achievable through rigorous clinical trials only—to their retail counterparts." These comments were supported by natural health product specialist Prof. Jean-Louis Brazier of the University of Montreal's Faculty of Pharmacy who examined USANA's products for Radio-Canada's consumer report show La Facture. Brazier found that they cost two to three times the price of equivalent store-bought items, and no evidence that USANA's products were of better quality than their competitors.
USANA's 2010 income disclosure statement defines "associates" as those who are actively building a business, acting as wholesale buyers, or are new distributors. USANAs 2009 SEC 10-K filing draws a distinction between associates and preferred customers. Associates are defined as independent distributors of USANA products who also purchase USANA products for personal use. Preferred customers may purchase products, at wholesale prices, strictly for personal use and are not permitted to resell or to distribute. As of July 2011, USANA had 222,000 active Associates and 68,000 preferred customers.
USANA's associates are bound by distributor agreements, which forbid distributors from making "misleading income claims" to potential associates or from making health claims for the products. However, an investigative report aired by Radio-Canada in February 2009, which included hidden camera filming of recruitment and other sessions, found that one group of associates appeared to violate the company's policies. The program contrasted the information about potential revenues presented at meetings and in written materials with the Canadian legal requirements for multi-level marketing schemes to provide clear, frequent and complete information about the revenue of the typical participant. In addition, the same group of associates were filmed making recommendations for using USANA products to treat illnesses including leukemia
.
In 2008, two Canadian USANA distributors were awarded $7 million in compensation for damages related to their wrongful dismissal from the company. USANA had terminated their positions in 2003 because USANA believed the distributor had violated the companies' policies and procedures.
New Zealand government statistician for the Commerce Commission
, Dr. Murray H. Smith, who served as an expert witness in every pyramid scheme case brought by the Commission preceding 10 years, opined in 2008 that very few USANA distributors are likely to become wealthy, going as far as to state "you can make a very strong argument that this could be a pyramid scheme." When asked by the National Business Review to review Usana's business structure and compensation plan, it was Smith’s opinion, from a statistical not legal standpoint, that USANA demonstrated a number of characteristics commonly occurring in pyramid schemes including that most members recoup less than what they pay to participate; that those at the top of the structure are more likely to make more than those on the bottom of the structure; and that as the company grows it will become harder to recruit others. Dr. Smith also noted the company’s significant turnover in distributors making it necessary to continually recruit.
WTA
tour.
USANA offers an Athlete Guarantee Program to select members of the Canadian Olympic team through a sponsorship agreement, which stipulates that should an athlete enrolled in the program test positive for a banned substance as a result of taking USANA products, USANA will compensate the athlete with up to two times his or her current annual earnings (up to $1 million CAD
).
In 2003, USANA became the title sponsor of the USANA Amphitheater, an outdoor amphitheater based in West Valley City, Utah with a seating capacity of 20,000.
, an executive of the Fraud Discovery Institute, distributed a 500-page report to officials at the U.S. Securities and Exchange Commission (SEC), the Federal Bureau of Investigation
(FBI), and the Internal Revenue Service
(IRS) accusing USANA of operating an illegal pyramid scheme
. USANA countered by lodging suits against Minkow and his company claiming defamation and stock manipulation. The company denounced Minkow as a convicted felon and liar (Minkow had served a 7-year prison term starting in 1987 for stock fraud; he later became a senior pastor for the Community Bible Church in Mira Mesa and a "fraud-buster" who assisted federal and state authorities in various fraud investigations).
According to an article published in the San Diego Reader
, USANA was subsequently the subject of investigations by the SEC and FBI. The SEC conducted a probe of USANA's business practices in March 2007 and found nothing incriminating, concluding its inquiry with no enforcement action recommended. The company's longtime auditing firm, Grant Thornton, resigned in July 2007 because it could not agree with USANA on procedures for an outside, independent investigation of the charges. Because it had no auditor, USANA was late with official government filings and was not in compliance with SEC and NASDAQ
requirements.
On the day Minkow's report was released, USANA's shares had traded at $61.19 but by August the share price had tumbled to less than $35. Minkow, acknowledged that he was shorting
USANA's shares, hoping to profit from a drop in the stock price. However, in reference to USANA's lawsuit, news columnist Herb Greenberg commented that the criticism of Minkow "is a bunch of malarkey; he has a right to publish his research, as long as people know his position [in the stock]." Minkow had revealed in the report that he was betting for the stock to go down. USANA dropped the defamation suit and in March 2008 U.S. District Judge Tena Campbell threw out four of the five claims brought by USANA against Minkow ruling that USANAs claims violated California’s anti-SLAPP law for suing Minkow for fair criticism. and that USANA did not show a reasonable probability of winning on those claims. The judge also cited two examples where USANA failed to refute Minkow's claims that their products were overpriced and of no better quality than other lower-priced brands. The remaining charge of stock manipulation was settled in July 2008 when USANA and Minkow reached an undisclosed settlement, which included the removal of all USANA-related materials from the Fraud Discovery Institute website, a related Chinese website, and from YouTube. Minkow also agreed to never trade in USANA's stock again. Separately from the settlement, the company paid $142,510 in attorney fees to Minkow and his institute under an order from federal Magistrate Samuel Alba. Court documents show that USANA never pursued others whom they suspected of being part of the alleged stock manipulation nor did they ask for an injunction, their only avenue of release in this case.
West Valley City, Utah
West Valley City is a city in Salt Lake County and a suburb of Salt Lake City in the U.S. state of Utah. The population was 129,480 at the 2010 census,...
facility, are sold in sixteen international markets via a network of independent distributors (referred to as "associates"). USANA is the 24th largest direct selling company in the world. The company has sponsored and provided products to several athletic organizations. In 2007, several of USANAs executives were discovered to have made false statements in their resumes.
Background and organization
USANA was founded by an immunologist and microbiologist Myron Wentz. USANA, based in West Valley City, UtahWest Valley City, Utah
West Valley City is a city in Salt Lake County and a suburb of Salt Lake City in the U.S. state of Utah. The population was 129,480 at the 2010 census,...
, sells its products through multilevel marketing: distributors recruit and profit from other distributors. The products are not available through retail channels, but instead can only be obtained through one of its independent distributors (referred to as "associates") or by direct order through the company. The company has approximately 222,000 associates and 68,000 "preferred customers" in its worldwide distribution network. In 2010, 90% of product sales was purchased by associates, and 10% by preferred customers. As of 2010, its products are marketed in the United States, Canada
Canada
Canada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean...
, Australia
Australia
Australia , officially the Commonwealth of Australia, is a country in the Southern Hemisphere comprising the mainland of the Australian continent, the island of Tasmania, and numerous smaller islands in the Indian and Pacific Oceans. It is the world's sixth-largest country by total area...
, New Zealand
New Zealand
New Zealand is an island country in the south-western Pacific Ocean comprising two main landmasses and numerous smaller islands. The country is situated some east of Australia across the Tasman Sea, and roughly south of the Pacific island nations of New Caledonia, Fiji, and Tonga...
, United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
, Netherlands
Netherlands
The Netherlands is a constituent country of the Kingdom of the Netherlands, located mainly in North-West Europe and with several islands in the Caribbean. Mainland Netherlands borders the North Sea to the north and west, Belgium to the south, and Germany to the east, and shares maritime borders...
, Japan
Japan
Japan is an island nation in East Asia. Located in the Pacific Ocean, it lies to the east of the Sea of Japan, China, North Korea, South Korea and Russia, stretching from the Sea of Okhotsk in the north to the East China Sea and Taiwan in the south...
, Hong Kong
Hong Kong
Hong Kong is one of two Special Administrative Regions of the People's Republic of China , the other being Macau. A city-state situated on China's south coast and enclosed by the Pearl River Delta and South China Sea, it is renowned for its expansive skyline and deep natural harbour...
, Taiwan
Taiwan
Taiwan , also known, especially in the past, as Formosa , is the largest island of the same-named island group of East Asia in the western Pacific Ocean and located off the southeastern coast of mainland China. The island forms over 99% of the current territory of the Republic of China following...
, South Korea
South Korea
The Republic of Korea , , is a sovereign state in East Asia, located on the southern portion of the Korean Peninsula. It is neighbored by the People's Republic of China to the west, Japan to the east, North Korea to the north, and the East China Sea and Republic of China to the south...
, Singapore
Singapore
Singapore , officially the Republic of Singapore, is a Southeast Asian city-state off the southern tip of the Malay Peninsula, north of the equator. An island country made up of 63 islands, it is separated from Malaysia by the Straits of Johor to its north and from Indonesia's Riau Islands by the...
, Mexico
Mexico
The United Mexican States , commonly known as Mexico , is a federal constitutional republic in North America. It is bordered on the north by the United States; on the south and west by the Pacific Ocean; on the southeast by Guatemala, Belize, and the Caribbean Sea; and on the east by the Gulf of...
, Malaysia, and the Philippines
Philippines
The Philippines , officially known as the Republic of the Philippines , is a country in Southeast Asia in the western Pacific Ocean. To its north across the Luzon Strait lies Taiwan. West across the South China Sea sits Vietnam...
.
Beginning in 1993, Dallin A. Larsen served as USANA’s vice president of sales (and later as consultant to USANA’s president and special advisor to the board of directors) prior to founding the MLM beverage company Monavie
MonaVie
MonaVie is a beverage company distributing products made from blended fruit juice concentrates with freeze-dried açaí powder and purée through a multi-level marketing business model...
in 2005.
From 2004 to 2006, USANA was named on Forbes
Forbes
Forbes is an American publishing and media company. Its flagship publication, the Forbes magazine, is published biweekly. Its primary competitors in the national business magazine category are Fortune, which is also published biweekly, and Business Week...
“200 Best Small Companies” list. In 2007, USANA was not included on Forbes' 200 Best Small Companies” list, and an article in the magazine quoted industry and government experts who had raised questions about USANA’s business practices and products. USANA responded by issuing a press release denying that the company had breached a $40 million loan agreement with Bank of America.
During 2007, USANA faced repeated controversy after several of its executives were discovered to have made false statements regarding their qualifications. The executives included Denis Waitley
Denis Waitley
Denis E. Waitley , is an Americanmotivational speaker and writer, consultant and best-selling author.Waitley is a graduate of the U.S. Naval Academy at Annapolis, and claims to have counseled leaders in many fields: Apollo astronauts, Fortune 500 top executives, Olympic gold medalists, Super Bowl...
, a member of the board of directors
Board of directors
A board of directors is a body of elected or appointed members who jointly oversee the activities of a company or organization. Other names include board of governors, board of managers, board of regents, board of trustees, and board of visitors...
who had falsely claimed to hold a master's degree from the Naval Postgraduate School
Naval Postgraduate School
The Naval Postgraduate School is an accredited research university operated by the United States Navy. Located in Monterey, California, it grants master's degrees, Engineer's degrees and doctoral degrees...
; sales associate Ladd McNamara, who quit the company's medical advisory board after it was discovered that his license to practice medicine had been revoked; the Vice President of Research and Development, Timothy Wood, who was found to have doctorate in forestry
Forestry
Forestry is the interdisciplinary profession embracing the science, art, and craft of creating, managing, using, and conserving forests and associated resources in a sustainable manner to meet desired goals, needs, and values for human benefit. Forestry is practiced in plantations and natural stands...
, as opposed to biology
Biology
Biology is a natural science concerned with the study of life and living organisms, including their structure, function, growth, origin, evolution, distribution, and taxonomy. Biology is a vast subject containing many subdivisions, topics, and disciplines...
as he had claimed; and the Executive Vice President and Chief Financial Officer, Gilbert Fuller, who had continued to use the title of CPA
Certified Public Accountant
Certified Public Accountant is the statutory title of qualified accountants in the United States who have passed the Uniform Certified Public Accountant Examination and have met additional state education and experience requirements for certification as a CPA...
, though his CPA license had expired 10 years before he joined USANA in 1996.
In August 2007, USANA announced that it had been notified by the Securities and Exchange Commission (SEC) that its shares were subject to delisting from the NASDAQ
NASDAQ
The NASDAQ Stock Market, also known as the NASDAQ, is an American stock exchange. "NASDAQ" originally stood for "National Association of Securities Dealers Automated Quotations". It is the second-largest stock exchange by market capitalization in the world, after the New York Stock Exchange. As of...
because the company had failed to have the financial information in its quarterly Form 10-Q
Form 10-Q
Form 10-Q, also known as a 10-Q or 10Q is a quarterly report designed to give a status of how a business is doing after three months of operation. These reports generally compare last quarter to the current quarter and last years quarter to this years quarter. The SEC put this form in place to...
reviewed by an independent auditor. USANA reported this was due to their public accountant resigning and not yet being replaced. In October 2007, USANA announced that NASDAQ had determined they were in compliance and their stock would continue to be listed.
On January 3, 2011, USANA completed the transfer of its common stock from the NASDAQ
NASDAQ
The NASDAQ Stock Market, also known as the NASDAQ, is an American stock exchange. "NASDAQ" originally stood for "National Association of Securities Dealers Automated Quotations". It is the second-largest stock exchange by market capitalization in the world, after the New York Stock Exchange. As of...
to the New York Stock Exchange
New York Stock Exchange
The New York Stock Exchange is a stock exchange located at 11 Wall Street in Lower Manhattan, New York City, USA. It is by far the world's largest stock exchange by market capitalization of its listed companies at 13.39 trillion as of Dec 2010...
.
On May 10, 2011, it was announced that 4 of USANA's executives (President and COO
Chief operating officer
A Chief Operating Officer or Director of Operations can be one of the highest-ranking executives in an organization and comprises part of the "C-Suite"...
Fred W. Cooper, CFO
Chief financial officer
The chief financial officer or Chief financial and operating officer is a corporate officer primarily responsible for managing the financial risks of the corporation. This officer is also responsible for financial planning and record-keeping, as well as financial reporting to higher management...
Jeffrey A. Yates, EVP of Sales Mark H. Wilson, and VP of Finance Riley Timmer) had unexpectedly resigned their positions at the company to pursue an unspecified business opportunity.
Products
USANA products encompass three product lines: USANA Nutritionals (Essentials, Optimizers, and Digestion/Detox nutritional supplements), USANA Diet & Energy (RESET meal replacement shakes, protein bars, and Rev3 energy drinks), and Sensé personal care (skin care, skin treatment, and hair & body care products). USANA manufactures 90% of its products in-house, including all of its tableted nutritional supplements. The Sensé personal care line was reformulated in 2004 with a patented new preserving technology that uses a combination of botanicals, antioxidants and other ingredients without the use of parabensParabens
Parabens are a class of chemicals widely used as preservatives in the cosmetic and pharmaceutical industries. Parabens are effective preservatives in many types of formulas. These compounds, and their salts, are used primarily for their bactericidal and fungicidal properties...
.
Several of USANA's products are certified by NSF International
NSF International
NSF International is an Ann Arbor, Michigan-based not-for-profit public health and environmental organization that provides standards development, product certification, auditing, education and risk management services.-History:...
in the Dietary Supplements category (NSF/ANSI
American National Standards Institute
The American National Standards Institute is a private non-profit organization that oversees the development of voluntary consensus standards for products, services, processes, systems, and personnel in the United States. The organization also coordinates U.S. standards with international...
173) as having the identity and quantity of their dietary ingredients accurately described on the product label and containing no undeclared ingredients. In addition, several products are also certified under NSF's Certified for Sport certification program. The tablets that make up the Essentials product are certified by HFL Sport Science's INFORMED-CHOICE Certification Program to be regularly tested for substances considered prohibited in sport and that the products have been manufactured to high quality standards.
In August 2010, USANA announced its ability to manufacture nutritional tablets with two distinct formulas into one bilayered tablet, as well as the release of two new formulas, Proflavanol C100 and Hepasil DTX. According to Jim Brown, vice president of operations at USANA, the new technology (dubbed Nutritional Hybrid Technology) will allow for the creation of new supplements and cut down on consumer pill fatigue, as well as the opportunity for sustain-and-release tablets.
USANA Essentials were tested by ConsumerLab.com
ConsumerLab.com
ConsumerLab.com is a provider of independent test results and information to help consumers and healthcare professionals evaluate health, wellness, and nutrition products. ConsumerLab.com was founded in 1999. It is subscription fee based....
in their Multivitamin and Multimineral Supplements Review of 38 of the leading multivitamin/multimineral products sold in the U.S. and Canada. The Essentials passed ConsumerLab's test, which included testing of selected index elements, their ability to disintegrate in solution per United States Pharmacopeia
United States Pharmacopeia
The United States Pharmacopeia is the official pharmacopeia of the United States, published dually with the National Formulary as the USP-NF. The United States Pharmacopeial Convention is the nonprofit organization that owns the trademark and copyright to the USP-NF and publishes it every year...
guidelines, lead contamination threshold set in California Proposition 65, and meeting U.S. Food and Drug Administration
Food and Drug Administration
The Food and Drug Administration is an agency of the United States Department of Health and Human Services, one of the United States federal executive departments...
(FDA) labeling requirements.
USANA states that their products are of high quality, justifying their relatively high cost: but this claim was disputed by Anthony Almada, Chief Scientist of the nutritional supplement industry consulting firm Imaginutrition, who stated in an interview in Forbes that "The economic reality of Usana, and other [multilevel marketing] entities, mandates that their products invariably lack robust distinctiveness and convincing evidence of consumer relevance and superiority—achievable through rigorous clinical trials only—to their retail counterparts." These comments were supported by natural health product specialist Prof. Jean-Louis Brazier of the University of Montreal's Faculty of Pharmacy who examined USANA's products for Radio-Canada's consumer report show La Facture. Brazier found that they cost two to three times the price of equivalent store-bought items, and no evidence that USANA's products were of better quality than their competitors.
Business model
USANA, a multilevel marketing company, sells its products primarily via non-employee distributors known as sales "associates" as well as via the Internet. Associates may be eligible to receive commissions based on their own product sales as well as through sales made by any new distributors they recruit (referred to in multilevel marketing parlance as a "downline"). USANA uses a binary infinite compensation plan which awards commissionable 'points' for sales volume. When the points reach a pre-determined number, the associate is paid. If the points do not reach the payment threshold, they accumulate towards the next week. USANA requires that associates must purchase a minimum of 100 volume of products (equivalent to approximately $110–$130) every four weeks in order to remain eligible to receive compensation. If this minimum requirement is not maintained, the distributor will lose the points that have accumulated but not yet been paid on. According to documentation from USANA corporate 87% of associates fail to make enough off of commissions to recover the cost of their qualifying purchases with 67% of all associates making no commission; 72.2% of the company's commissions are earned by the top 2.31% of associates. According to a 2011 article published by the Salt Lake City Tribune, USANA's FY09 income disclosure statement indicated that the average yearly income of the company's 165,710 associates, which includes those just starting out, was $617, while the "top-of-the-pyramid distributors earn an average of $857,865 annually".USANA's 2010 income disclosure statement defines "associates" as those who are actively building a business, acting as wholesale buyers, or are new distributors. USANAs 2009 SEC 10-K filing draws a distinction between associates and preferred customers. Associates are defined as independent distributors of USANA products who also purchase USANA products for personal use. Preferred customers may purchase products, at wholesale prices, strictly for personal use and are not permitted to resell or to distribute. As of July 2011, USANA had 222,000 active Associates and 68,000 preferred customers.
USANA's associates are bound by distributor agreements, which forbid distributors from making "misleading income claims" to potential associates or from making health claims for the products. However, an investigative report aired by Radio-Canada in February 2009, which included hidden camera filming of recruitment and other sessions, found that one group of associates appeared to violate the company's policies. The program contrasted the information about potential revenues presented at meetings and in written materials with the Canadian legal requirements for multi-level marketing schemes to provide clear, frequent and complete information about the revenue of the typical participant. In addition, the same group of associates were filmed making recommendations for using USANA products to treat illnesses including leukemia
Leukemia
Leukemia or leukaemia is a type of cancer of the blood or bone marrow characterized by an abnormal increase of immature white blood cells called "blasts". Leukemia is a broad term covering a spectrum of diseases...
.
In 2008, two Canadian USANA distributors were awarded $7 million in compensation for damages related to their wrongful dismissal from the company. USANA had terminated their positions in 2003 because USANA believed the distributor had violated the companies' policies and procedures.
New Zealand government statistician for the Commerce Commission
Commerce Commission
The Commerce Commission is a New Zealand government agency charged with enforcing legislation that promotes competition in the country's markets and prohibits misleading and deceptive conduct by traders...
, Dr. Murray H. Smith, who served as an expert witness in every pyramid scheme case brought by the Commission preceding 10 years, opined in 2008 that very few USANA distributors are likely to become wealthy, going as far as to state "you can make a very strong argument that this could be a pyramid scheme." When asked by the National Business Review to review Usana's business structure and compensation plan, it was Smith’s opinion, from a statistical not legal standpoint, that USANA demonstrated a number of characteristics commonly occurring in pyramid schemes including that most members recoup less than what they pay to participate; that those at the top of the structure are more likely to make more than those on the bottom of the structure; and that as the company grows it will become harder to recruit others. Dr. Smith also noted the company’s significant turnover in distributors making it necessary to continually recruit.
Sponsorships
USANA is a paid sponsor of various athletic organizations. In 2006, USANA signed a co-sponsorship agreement with the Sony EricssonSony Ericsson
Sony Ericsson Mobile Communications AB is a joint venture established on October 1, 2001 by the Japanese consumer electronics company Sony Corporation and the Swedish telecommunications company Ericsson to manufacture mobile phones....
WTA
Women's Tennis Association
The Women's Tennis Association , founded in 1973 by Billie Jean King, is the principal organizing body of Women's Professional Tennis. It governs the WTA Tour which is the worldwide professional tennis tour for women. Its counterpart organization in the men's professional game is the Association of...
tour.
USANA offers an Athlete Guarantee Program to select members of the Canadian Olympic team through a sponsorship agreement, which stipulates that should an athlete enrolled in the program test positive for a banned substance as a result of taking USANA products, USANA will compensate the athlete with up to two times his or her current annual earnings (up to $1 million CAD
Canadian dollar
The Canadian dollar is the currency of Canada. As of 2007, the Canadian dollar is the 7th most traded currency in the world. It is abbreviated with the dollar sign $, or C$ to distinguish it from other dollar-denominated currencies...
).
In 2003, USANA became the title sponsor of the USANA Amphitheater, an outdoor amphitheater based in West Valley City, Utah with a seating capacity of 20,000.
Lawsuit
On February 20, 2007, Barry MinkowBarry Minkow
Barry Jay Minkow is a former businessman, pastor and convicted felon. While still in high school, he founded ZZZZ Best , which appeared to be an immensely successful carpet-cleaning and restoration company. However, it was actually a front to attract investment for a massive Ponzi scheme...
, an executive of the Fraud Discovery Institute, distributed a 500-page report to officials at the U.S. Securities and Exchange Commission (SEC), the Federal Bureau of Investigation
Federal Bureau of Investigation
The Federal Bureau of Investigation is an agency of the United States Department of Justice that serves as both a federal criminal investigative body and an internal intelligence agency . The FBI has investigative jurisdiction over violations of more than 200 categories of federal crime...
(FBI), and the Internal Revenue Service
Internal Revenue Service
The Internal Revenue Service is the revenue service of the United States federal government. The agency is a bureau of the Department of the Treasury, and is under the immediate direction of the Commissioner of Internal Revenue...
(IRS) accusing USANA of operating an illegal pyramid scheme
Pyramid scheme
A pyramid scheme is a non-sustainable business model that involves promising participants payment or services, primarily for enrolling other people into the scheme, rather than supplying any real investment or sale of products or services to the public...
. USANA countered by lodging suits against Minkow and his company claiming defamation and stock manipulation. The company denounced Minkow as a convicted felon and liar (Minkow had served a 7-year prison term starting in 1987 for stock fraud; he later became a senior pastor for the Community Bible Church in Mira Mesa and a "fraud-buster" who assisted federal and state authorities in various fraud investigations).
According to an article published in the San Diego Reader
San Diego Reader
The San Diego Reader is the largest alternative press paper in the county of San Diego, distributed free in stands and private businesses throughout the county, funded by advertisements...
, USANA was subsequently the subject of investigations by the SEC and FBI. The SEC conducted a probe of USANA's business practices in March 2007 and found nothing incriminating, concluding its inquiry with no enforcement action recommended. The company's longtime auditing firm, Grant Thornton, resigned in July 2007 because it could not agree with USANA on procedures for an outside, independent investigation of the charges. Because it had no auditor, USANA was late with official government filings and was not in compliance with SEC and NASDAQ
NASDAQ
The NASDAQ Stock Market, also known as the NASDAQ, is an American stock exchange. "NASDAQ" originally stood for "National Association of Securities Dealers Automated Quotations". It is the second-largest stock exchange by market capitalization in the world, after the New York Stock Exchange. As of...
requirements.
On the day Minkow's report was released, USANA's shares had traded at $61.19 but by August the share price had tumbled to less than $35. Minkow, acknowledged that he was shorting
Short selling
In finance, short selling is the practice of selling assets, usually securities, that have been borrowed from a third party with the intention of buying identical assets back at a later date to return to that third party...
USANA's shares, hoping to profit from a drop in the stock price. However, in reference to USANA's lawsuit, news columnist Herb Greenberg commented that the criticism of Minkow "is a bunch of malarkey; he has a right to publish his research, as long as people know his position [in the stock]." Minkow had revealed in the report that he was betting for the stock to go down. USANA dropped the defamation suit and in March 2008 U.S. District Judge Tena Campbell threw out four of the five claims brought by USANA against Minkow ruling that USANAs claims violated California’s anti-SLAPP law for suing Minkow for fair criticism. and that USANA did not show a reasonable probability of winning on those claims. The judge also cited two examples where USANA failed to refute Minkow's claims that their products were overpriced and of no better quality than other lower-priced brands. The remaining charge of stock manipulation was settled in July 2008 when USANA and Minkow reached an undisclosed settlement, which included the removal of all USANA-related materials from the Fraud Discovery Institute website, a related Chinese website, and from YouTube. Minkow also agreed to never trade in USANA's stock again. Separately from the settlement, the company paid $142,510 in attorney fees to Minkow and his institute under an order from federal Magistrate Samuel Alba. Court documents show that USANA never pursued others whom they suspected of being part of the alleged stock manipulation nor did they ask for an injunction, their only avenue of release in this case.