Saturday, March 23, 2013

An Untrue Statement in USANA's 2012 10-K Financial Statement - "Target of False and Misleading Statements Regarding China"

USANA makes untrue statement in their 2012 Form 10-K SEC filing. USANA stated the following:
"More recently, in November 2012, we were again the target of false and misleading statements concerning our business practices, particularly in China and Hong Kong. This adverse publicity also adversely impacted the market price of our stock and caused insecurity among our Associates. There can be no assurance that we will not be subject to adverse publicity or negative public perception in the future or that such adverse publicity will not have a material adverse effect on our business, financial condition, or results of operations."
USANA's claim about being the target of “false and misleading statements concerning our business practices, particularly in China and Hong Kong” is a lie. USANA does in fact illegally recruit Chinese Nationals from mainland China into USANA's multilevel marketing compensation plan through Hong Kong (and possibly other USANA territories), which is a direct violation of China's law. Dave Wentz even admitted Chinese Nationals are signing up in the MLM compensation plan during the July 27, 2011 financial conference call:

John San Marco at Janney Montgomery Scott LLC asks:
“Do you know what the percentage of your Hong Kong associates that are actually Chinese nationals?”

Dave Wentz, CEO of USANA Health Sciences responds after trying to avoid answering the question:
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.
This violation of the law is not just the problem from a couple associates, but an organized circumvention of Chinese foreign laws conducted by USANA. This violation could (and should) cause USANA to lose their direct selling license in mainland China and possibly face serious fines by regulatory agencies both domestic and foreign. Again, USANA's CEO Dave Wentz already admitted the fraud exists.

6 comments:

  1. If the above is true, USANA definitely has a credibility problem. Why should any associate including myself would want to continue with my USANA membership? When I first joined, I was told by my sponsor about USANA's high credibility and ethical standards. To continue to associate with such a company is a disgrace and all we associates might as well consider our position and terminate our membership altogether.

    Signed
    Very disillusioned associate

    ReplyDelete
  2. Not sure if youve heard Watchdog, but Usana has been granted approval to expand their business into three major Chinese territories. I dont recall which ones, only Tianjin.

    Its either the Chinese officials are turning a blind eye (perhaps because it putting money into their economy) or they are still completely oblivious to whats happening.

    Have you heard of the above?

    ReplyDelete
    Replies
    1. USANA was granted approval at the end of last year from the Chinese government to expand their "Babycare Ltd." business to Jiangsu, Shanxi and Tianjin. It is very important for the readers here to distinguish the difference between USANA and Babycare. Babycare is a Single Level Marketing. So there is no pyramid scheme to worry about with Babycare.

      The fraud is with USANA. Tens of thousands of citizens from mainland China have circumvented China law and joined USANA in Hong Kong and other USANA markets. They sign up in USANA using the same address and their sponsor in Hong Kong. This tactic hides where they are really operating from. So auditors back in the US are unable to tell where USANA's associates actually live.

      If China cracks down on this, it could spell the end of USANA permanently. The only real growth in USANA right now are the Chinese Nationals signing up as USANA associates.

      Delete
  3. Thats a good point. I still don't understand why China cannot see whats happening. Technically, if China's laws are against MLMs, then there should only be retail sales happening in China. And this would all be via Babycare. Even if Chinese nationals were signing up as an associate (to sell retail only), they would still need to buy all the products via Babycare one way or another.

    And even if the model above is happening and Usana is not breaking any laws and is actually only selling retail in China (and not recruitment), the competition will be FIERCE. Price wars would absolutely destroy the profitability of any associates. It would even affect Babycare's ability to retail. So even when you consider Usana's actions as following China's laws, it is already a flawed business model as every associate would be in direct competition with Usana's own subsidiary, Babycare.

    Just that simple fact should already point a spotlight for investigators to see just how it is possible that the Chinese territory is expanding so rapidly. It just doesnt make any sense.

    Have you heard more from the case between Citron and Usana? I know in your previous post Usana released a statement denying this, however I am interested to see if there have been more arrests in China for violating the MLM law.

    ReplyDelete
  4. On Usana's website, the promote/brag about having 10 years of growth. It is so misleading to the untrained/unaware prospect. It should specify wherethe majority of that growth is coming from, Asia. When they release their 1st quarter financials, Usana in their deceitful practice will lump North AMerica and Europe together in same region even though separated by ocean in attempts to cover up stagnant growth in America. Take away China, and this company is toast. Such a fraud.

    ReplyDelete
    Replies
    1. Usana is building a factory in China as we speak..that much for take away China.

      Delete

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