Wednesday, July 24, 2013

Citron Research Uncovers Thousands of Fraudulent USANA Associates Living in Mainland China

July 23, 2013 Citron Research has uncovered evidence that USANA Health Sciences, Inc (USNA) has recruited thousands of people from mainland China into their Multi-Level Marketing (MLM) compensation plan. A four month long investigation by Citron Research has revealed the enormity of the situation. China's direct selling laws prohibit any MLM business from operating in their country. However, USANA has been recruiting thousands of China's citizens by having them use an address from Hong Kong. In fact, thousands of these recruits used the same Hong Kong address with the sole purpose to circumvent China's laws and to try and hide under the radar.


Citron Research obtained genealogy reports of several top USANA associates whose downline consisted of thousands of associates all sharing the same address. This list contained email addresses and phone numbers of these associates. Every associate Citron contacted on that list that showed a Hong Kong address all actually live in mainland China.

When this was revealed last year by Citron Research, they only showed evidence of a couple associates from mainland China signed up under Ada Chai, a 2-star diamond director that USANA terminated shortly after the scheme was revealed. USANA quickly made a statement simply claiming they do business legally in mainland China through Babycare and never even bothered to address the fact that Chinese Nationals are being recruited into USANA through Hong Kong.

So USANA admits it is illegal for Chinese Nationals to sign up as a USANA distributor in Hong Kong because Ada Chai was terminated for the action. However, Ada's terminated was nothing more than lip service to shareholders and federal regulators because she was a scape goat. The fact of the matter is USANA has been fully aware of how massive this illegal activity is for the following reasons.

October 6, 2009 - USANA sends out internal memo contains the following information about mainland China USANA distributors: INTERNAL MEMO (rogue associates in mainland China)
VI. Question #6: Which market experienced the greatest sales growth from 2007-2008, and by how much?
i. Answer: East Asia (Hong Kong mainly and a little Taiwan), increased by almost $13 million.
ii. Things to look out for – rogue associates in Mainland China, trying to order US product.


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...
 
July 28, 2011 - USANA CEO Dave Wentz admits during a financial conference call that a percentage of Hong Kong distributors are actually Chinese Nationals: TRANSCRIPT
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?"

USANA's 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."

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.

USANA's James Bramble responds with
"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."

November 29, 2012 - Citron Releases investigative report that reveals 2-star diamond director USANA associate Ada Chai actively participated in the recruitment of Chinese Nationals into her USANA downline. As a result of this report, USANA terminates Ada Chai. USANA: An Arresting Story by Citron Research


January 25, 2013 - USANA posts an internal memo that reveals the fact USANA allows associates to use the same address over 15 times: INTERNAL MEMO (associates using same address)

- 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.
DSR = Distributor Services Representative


March 10, 2013 - In USANA's 2012 10K SEC Filings the following statement was made regarding the November report by Citron Research: USANA 2012 10K SEC Filing
"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."
The report by Citron in November did not contain "false and misleading statements" because USANA terminated Ada Chai after the report was released.


July 23, 2013 - Citron Research uncovers THOUSANDS of USANA distributors living in mainland China: Creating a Criminal Conspiracy out of Your Own Customers by Citron Research


I personally believe USANA cannot plead ignorance because they play an active role in hiding the location of their distributors. USANA should disclose to shareholders the percentage of net sales that was the result of USANA distributors living in mainland China. Chinese authorities should revoke Babycare's direct selling license as a result USANA's strategic circumvention of their laws.

21 comments:

  1. I have a question...If this is indeed true, then why has China given Usana licenses/permission to expand their operations into three major provinces? Tianjin and two others ( I cant remember)...

    Dont get me wrong, I absolutely believe that Usana should be stopped but I am frustrated that in spite of very clear evidence nothing seems to have been done about it...

    Perfect example of greed...

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    1. I agree. It is odd. Hypothetically speaking however, how much money would you accept in order to look the other way?

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    2. The devil is always busy....he came to kill, steal, and destroy. As you seek to destroy others....I can only imagine that you will reap the benefits of your own efforts.

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  2. Its an interesting report. I think the "false and misleading statements" USANA refers to is related to the opinions at the end of the report (that USANA used the babycare license as a shield to support illegal activity in Hong Kong), not the actual illegal distributor sales themselves. Much of the Citron report was well researched but some of their concluding accusations seem unlikely.

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  3. Good work, my friend!!! Your hard work is much appreciated.

    CItron is like the Dark Knight!!! Justice is served!

    Hopefully, Chinese Government finally took some serious actions.

    I can even see many Chinese in Melbourne and Sydney here selling USANA. So, here is considered South East Asia I guess.

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  4. Are we seriously defending a communist country who wouldn't want anyone to succeed in any business structure without government consent? Just wondering? All business structures are pretty much a multilevel system. You have the top dog then everyone who funnels underneath. Sorry I just don't see any problem with these kind of businesses but hey, I'm just an idiot who works for the man and makes just enough to get by. Perhaps I should go into politics where the REAL crooks are? Sorry had to chime in. I do use their products but don't sell them. Haven't seen any problems with how they operate and have been using them for months. To each his own I guess.

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    1. Agreed. I was thinking the same thing. I don't think that USANA is the "bad guy" in this scenario. The bad guy is the communist Chinese government, who will do anything to make sure their citizens can't and don't make any money that is outside their realm of control and power.

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    2. You guys obviously don't know anything about China. when was the last time you went to China?

      China has open it's doors to capitalism and business back in the late 1970s.

      You can freely travel, holiday, and do business in China, and the Chinese are free to travel abroad to study and do business as well.

      China is definitely not an evil or bad regime. Please...

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    3. Lol...wait..lmaof...btw China just abolished labour camps...but it is not evil. On which planet are you living seriously.
      But hey, people are trying to make some money retailing a product...oh no, this is bad and deserves a post. Usana is bad ok?...really bad...Seriously, what about all the retail chains that are using cheap labour in under developed countries? Well, this is good because the product is cheap, right? Or who really cares about that. /sarcasm end - I have the feeling that some anti-USANA may not be able to read between the lines.

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    4. The people who provide labour in these under developed countries will at least get paid.

      Usana however will take their money, suck them dry, and ruin their relationships based on false promises. Oh, and lie about the health benefits of its products for good measure.

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    5. I'm not going to argue fiction. It is simple economics. If I read between the lines of your post, assuming that you stay on subject, the thousands of chinese nationals went through the trouble to join a business from a country where you are not allowed to have mlm to lose money. Wow. You should give people some credit on their ability to make choices that are beneficial to them, health or money wise. And if you don't and feel self righteous to provide enlightment, please tell me: what exactly makes you right ? - I hope you won't be pointing out a blog on internet.

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    6. Usana operates a product-based pyramid scheme. Money is made PRIMARILY by recruiting more associates, not by retailing product. Right or wrong?

      The health benefits are exaggerated by the company and its associates. As stated on its website, "USANA products are not intended to diagnose, treat, cure, or prevent any disease". Right or wrong?

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    7. Wrong, partialy wrong (honestly, I can't comment on some associates statements) and right about the company position (the one that you quoted from the website)...since you were looking for straightforward answers.

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    8. Mate, you're deluded. USANA's customers are primarily their distributors, not preferred customers.

      Wake up and get out of this scheme before you buy more product than you would ever want to use!

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    9. I thought that you would say "brain washed". "Mate", I'm not even an associate. I buy the product for my own use. I did read though about the business. Your primary focus is that the main share of sales comes from the distributors...Well what do you imagine? They distribute and they use the product - and stop about them being forced to - they can make choices you know-especially when it is not profitable or no longer suits their interest. And don't even start the bullshit of stockpiling. Usana has so many products/consumables that you can pick and choose what you consume. And before you go into losing money, get real! They joined a business, not a get rich scheme! If they can't aford the start up, then don't bother starting. Wow, this posts are really geared to help the ones that can't help themselves. No wonder they fail.
      I think I covered all the rants that I've seen around. Now next time you want to make a point, please, make it more interesting to read. I think this was my most boring reply and I feel, if not for the others reading this, that I had to come down a notch to meet your level of understanding. Ah well..for a better post next time. :)

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    10. Hello... If the products were that great, and benefited their health, and made them feel better, don't you think they would continue to use USANA's products after they stopped being distributors?

      I mean, as you say, USANA does have an extensive line of products. Why not become a preferred customer after you've failed as a distributor if the ANY of the products were that good.

      You are brainwashed.

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    11. May I ask what products you buy and how you have benefited from them?

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    12. Ben, first of all a USANA associate does not make one penny from an enrollment. Income is based on how much sales volume you and your team generate. Secondly, USANA associates very seldomly drop out. If they did at the rate watch dog claims the company wouldn't have had record growth this year. Of the more than 2000 associates I correspond with their "dropout rate" is about 7%. USANA's products have given me my life back and I will forever be grateful for that. I don't care if the business had not given me my financial freedom, I would be forever thankful for the company as I am finally able to do things again that I couldn't do for many years due to failing health. I have personally witnessed hundreds of people significantly improve their health with the help of USANA's products so to say it's a scam is just silly. A pyramid scheme? Completely untrue. I mean seriously the NYSE is going to allow a pyramid scheme on its ledger? Really? Not to mention the A+ rating with the BBB (Can't wait to see watch dog's outlandish comeback on that one!) Ben, USANA is the perfect business as you ONLY get paid if you help others improve their quality of life, period. I like helping others improve their health and I like helping others improve their finances. Now, as far as you go watch dog, this is the United States of America and you do have a right to create a blog like this, although completely off base with tainted facts and misleading claims, and as a Christian, I pray for you and I pray that you are financially independent already, because with the attitude you portray here you have no chance of ever getting there if you are not already there. God Bless!

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  5. Guys, easy...let's keep this discussion on the subject. As I mentioned, I'm not an associate and I never was. Now, before we deviate on to my plans to join or not and before I get replies such as "do not join because of ...you can look at previous posts to fill in)", let's talk products and how they benefited me.
    I am currently taking: Essentials, Biomega, Poly C, Active Calcium Plus, Vitamin D and Ginko-PS. When I first started taking the products, I only took Essentials.
    The benefits which I found on me, are:
    - stress sensation, that feeling of being under pressure, got greatly reduced
    - energy levels went up and I am more energetic throughout the day
    - because of the above, my mood improved
    As you can see nothing is far fetched and no miracle claims.
    On a side note, for years, I took retail multivitamins and not once I got the same effects as I describe above.
    Now please, skip the temptation to say its placebo effect and take what I said at face value with no hidden agenda.

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  6. I really wish there were some truth and facts in this entire discussion. After fact checking it all seems to be half-truths and sketchy semi-facts.

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    1. Would you care to elaborate? What are the "half-truths" and "sketchy semi-facts"???

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