Mannatech settles Texas lawsuit originally appeared on BloggingStocks on Fri, 27 Feb 2009 11:45:00 EST. Please see our terms for use of feeds.

The Wall Street Journal

Multi-level marketer Shaklee loses endorsement of Harvard professor originally appeared on BloggingStocks on Fri, 26 Dec 2008 01:30:00 EST. Please see our terms for use of feeds.

It sounds like a bad dream. You should up to listen to and perhaps ask questions of Mike Huckabee, a leading Republican candidate for President but first ... You have to sit through a speech about what a great opportunity Amway is. Pass the puke bucket.

But that's exactly what happened in West Des Moines, according to the Baltimore Sun: "For half an hour, two businessmen paced the stage where Huckabee would soon stump. They never said the name of the company during their talks, but afterward some members of the crowd shared with others the good news of a company called Quixtar Inc." Earlier this year, parent company Alticor said it was phasing out the Quixtar name and rebuilding its Amway brand which it had dropped in 2000.

Huckabee denies any formal association with the multi-level marketing hucksters, but said that they were a "great group of people."

It appears true that Alticor employees and executives haven't been giving to Huckabee. For whatever reason, company patriarch Richard DeVos has given money to Rudy Giuliani and Mitt Romney. But historically, Alticor has been a huge donor to the Republican Party.

Maybe Giuliani, Romney, and the GOP as a whole should do some research into the background of the company that has been one of the part's top donors for years. They could start with this excellent Dateline special.

Wanna hear Mike Huckabee speak? First, ya gotta listen to the Amway pitch originally appeared on BloggingStocks on Fri, 11 Jan 2008 12:47:00 EST. Please see our terms for use of feeds.

Continue reading Multi-Level Marketing not so attractive anymore

Multi-Level Marketing not so attractive anymore originally appeared on BloggingStocks on Thu, 13 Dec 2007 13:11:00 EST. Please see our terms for use of feeds.

On December 1, I wrote about Amway's defense of its conduct in the United Kingdom. John Hutton, Britain's Secretary of State for Business, Enterprise, and Regulatory Reform is attempting to shut down the company's operations there, charging that Amway is essentially an endless chain scheme.

The government has demonstrated that only 10% of Amway's multi-level marketing Independent Business Owners turn a profit, while only 6% ever actually sell a product to someone outside of the organization.

This is compelling evidence that Amway is a pyramid scheme. People buy products to qualify for commissions, and the business operates as a closed system: Money is made by recruiting new distributors, not selling products. This is not different from a chain letter in any meaningful way.

According to the Times, David Chivers, an attorney for Amway, said that Amway's own rules say that promotional material should state that income can only be achieved by the sale of products to end clients and that the company does not pay simply for recruiting further agents.

And yet the data would seem to suggest that the company is doing just that. Meanwhile, Amway continues to recruit "distributors" in the United States, unimpeded by government officials who have essentially been bribed.

To learn more about Amway, check out this Dateline special available on YouTube, or read Amway: The Cult of Free Enterprise.

Amway denies operating as a closed system in the UK originally appeared on BloggingStocks on Sat, 08 Dec 2007 17:40:00 EST. Please see our terms for use of feeds.

Back in July, I wrote about network marketing giant Amway/Quixtar's self-imposed 120-day moratorium on recruiting in the United Kingdom, a response to a Department of Trade and Industry complaint against the company. Many critics charge that Amway is operating a thinly-veiled pyramid scheme, based on the same principles as the chain letter.

Well earlier in November, Amway blogged about its plans to return to the region, posting a memo that had been sent to directors and employees, and also forwarded to many of the company's United Kingdom distributors.

Here's where it gets interesting. Many people, myself included, have charged that the FTC is not doing enough to crack down on multi-level marketing companies using false and misleading recruiting tactics. based on the text of the memo, Amway seems to agree:

"The fact is, in the wake of this sobering experience, every one of us -- employees, IBOs, and others -- should renew our commitment to hold ourselves to the highest standards of behavior. The marketplace -- and in the UK, the government -- has made it clear that they expect no less. And when falling short of those standards exposes our company to such grave risk, there can no longer be any such thing as 'business as usual.'" (emphasis added)

In other words, the government of United Kingdom has made it clear that it will hold Amway to the highest standards of behavior -- but the United States has not followed the lead.

Perhaps Amway's massive political contributions have had something to do with that. it's a shame that our elected officials are putting the interests of special interest groups ahead of those of consumers. That's just business as usual in the land of the free, home of the brave.

Amway admits that the FTC is soft on multi-level marketing ethics originally appeared on BloggingStocks on Sat, 01 Dec 2007 15:40:00 EST. Please see our terms for use of feeds.

In 1979, the FTC ruled that multi-level marketing giant Amway is not a pyramid scheme, after years of controversy surrounding the company. While Amway still has a shady reputation in many circles, it's managed to avoid that level of government scrutiny in the United States since the FTC ruling.

But things are not going so well in England. The country's Department of Trade and Industry has filed a sealed complaint against the company, but has declined to specify any details. Amway responded by announcing that it is conducting a review of its business practices, and posted on its corporate blog some of the things its doing to shape up. The company is placing a 120-day moratorium on recruiting in Britain has banned sales of motivational tapes and literature not produced by the company. The sale of motivational materials has been a hot-button issue among Amway's critics, who charge that high-level Amway distributors get rich by selling motivational materials to naive recruits.

It will be interesting to see what happens here. An unfavorable outcome for the company in England could re-open the issue stateside.

Amway was also recently sued in California, with former distributors charging that the company is operating a pyramid scheme.

Amway runs into trouble in England originally appeared on BloggingStocks on Mon, 09 Jul 2007 19:20:00 EST. Please see our terms for use of feeds.

Shares of Mannatech (NASDAQ: MTEX) are down about 23%, making the shares the top decliner on the NASDAQ. The problem? According to the Wall Street Journal, "The Texas attorney general has asked a state court to bar Mannatech Inc. from allegedly illegal sales and marketing practices, saying the dietary supplement seller is falsely claiming its products cure, mitigate, treat or prevent diseases such as cancer, autism and Down's syndrome, in violation of state and federal laws."

You can read Attorney General Greg Abbott's complaint here. Mannatech has been under fire for months, after the Wall Street Journal ran an unfavorable piece on the company, exposing much of the same wrongdoing that the Texas lawsuit accuses the company of.

Like Amway and Usana Health Sciences (NASADAQ: USNA), Mannatech distributes its products through a multilevel marketing business model. Associates seek to recruit others into the fold, earning commissions on their sales, and the sales of those that they recruit.

According to Mannatech Chairman Sam Caster, "We walk the fine line of always stating our case appropriately and always training our people. We're not into the treatment, cure or mitigation of disease. We're into the improvement of quality of life ... everybody benefits from good nutrition."

Here's the problem. According to Mannatech's opportunity website (emphasis added):

Texas Attorney General sues network marketing company Mannatech originally appeared on BloggingStocks on Fri, 06 Jul 2007 14:45:00 EST. Please see our terms for use of feeds.

USANA Health Sciences (NASDAQ: USNA) just can't seem to wake up from its PR nightmare.

After the close of the market yesterday, San Diego class-action lawyer Alexander M. Schack said he filed a lawsuit in California state court on behalf of hundreds of low-level distributors in the state. The suit is also seeking an injunction preventing the multi-level marketing company from recruiting in the state.

Needless to say, California is a huge market for USANA and, at the very least, the publicity could hurt the company's recruiting efforts there.

According to Robert FitzPatrick of Pyramid Scheme Alert, "The essence of the Usana scheme is the chain letter. Participants pay up to $1,000 to participate in the "binary compensation" plan. They buy the bogus "business centers" (pyramid positions). They then must continue to buy over $100 of goods (priced in some cases 20 times more than comparable products sold in retail stores) every month. Of each dollar that the participant pays in, 40% goes to the upline recruiters. Of that amount, 70% goes to the top 3% of the pyramid chain. Virtually no one
retails the products at retail price. The prime consumers of Usana are just the "Associates" (pyramid participants.) Thus $28 of each hundred spent by the new recruits goes directly to schemers at the top of the pyramid. The bottom 97% are a continuously churning group. 2/3rds of them quit within a year. None makes a profit unless they can climb into the 3% by recruiting other victims."

USANA responded by saying that the suit was without merit and "relies on false claims made by a stock fraud felon who stands to profit from a decline in USANA's stock price."

If USANA wants to stop the bleeding, it will need to come up with a better defense. Barry Minkow, who the company's statement refers to, has earned a strong reputation for uncovering fraud and deception and was mentioned in Newsday a few days ago for his work in shutting down a $16 million ponzi scheme in New York.

Authorities have commended Minkow because he has a track record of providing facts that can be used to shut down financial crimes in progress. If USANA wants people to believe it is something other than that, it will need to provide a rebuttal to the allegations, something that is hasn't done so far.

California distributors file lawsuit against USANA originally appeared on BloggingStocks on Fri, 22 Jun 2007 12:30:00 EST. Please see our terms for use of feeds.

Embattled multi-level marketing giant USANA Health Sciences (NASDAQ: USNA) hosted a quarterly earnings conference call on Wednesday that was questionable on a multitude of levels. The analysts continued to play the role of lap dog, failing to ask a single tough question. When I spoke with Certified Fraud Examiner and USANA critic Tracy Coenen about the call, she joked "Do you think the analysts are secretly USANA distributors?"

During the call, USANA management claimed that 88% of its distributors sign up because they want the products, not because they want to build a business. But the company declines to disclose its attrition rates -- the number of distributors who fail and leave the company each year. In fact, USANA's CEO wrote to the FTC to say that a proposed rule requiring network marketing companies to disclose their attrition rates would harm the company's ability to recruit.

According to Barry Minkow and the Fraud Discovery Institute's report, "Clearly, disclosure of failure rates is important when potentially 90% of the distributors (who bring in 86% of the company's direct selling revenue) will collapse within a 12-month period. Moreover, if USANA wants to fight the FTC on disclosing these statistics to distributors, so be it. However, the lawful thing to do (and that which the company should have done) is to disclose these pertinent issues to investors."

I certainly agree with Mr. Minkow on that point, but here's what I don't understand: If only 12% of USANA distributors sign up with the intent of building a business, why is that attrition rate so high, and why won't the company disclose it?

Continue reading USANA Health Sciences invokes the Chewbacca Defense

USANA Health Sciences invokes the Chewbacca Defense originally appeared on BloggingStocks on Thu, 19 Apr 2007 16:45:00 EST. Please see our terms for use of feeds.

A college-age friend of mine keeps a large stuffed elephant in his dorm room. When people ask him why he has it there, he replies "Ssssshhhhhh . . . we're not supposed to talk about that!" I was reminded of this friend when I listened to Usana Health Science's (NASDAQ: USNA) 1st quarter conference call. Here's some of what's happened with Usana in the past month:

• Ex-con turned private investigator Barry Minkow released a report suggesting that the company's business model was an unsustainable pyramid scheme.
• Minkow accused a prominent director and spokesman for the company of inflating his academic credentials. The company admitted the "errors" and the director decided not to stand for re-election. Minkow also suggested another senior executive at the company had inflated his resume.
• A slew of shareholder class-action lawsuits have been filed against the company.
• The company announced that the SEC had begun an informal investigation of the company.

Fast-forward to Wednesday's conference call. Every question asked seemed to have a bullish slant, and assumed that the company was innocent. Questions centered around whether the company has seen an impact on sales from Minkow's report, and whether the company saw this as an opportunity to buy back more shares. I spoke with Barry Minkow about the conference call and he said, "I don't believe one thing they say" and also pointed out that "There was not one tough question allowed to be asked during the conference call."

Continue reading Usana's conference call: Analyst incompetence on display

Usana's conference call: Analyst incompetence on display originally appeared on BloggingStocks on Thu, 05 Apr 2007 11:07:00 EST. Please see our terms for use of feeds.

Last week, I wrote about ex-con Barry Minkow's battle with Usana Health Sciences, a nutritional supplement company which distributes its products using a controversial multi-level marketing model. Minkow and his Fraud Discovery Institute released a huge report accusing the company of being a pyramid scheme, selling overpriced products, and making a profit on the backs of it's distributors, a huge percentage of whom did not make money. He also talked about the CEO's decision to renounce his U.S. citizenship for tax advantages, a fact which the company had not previously disclosed. As the war of words has heated up, Mr. Minkow released a video on YouTube, where he continued to attack the company. In the accompanying press release, Minkow wrote that:

Since their lawsuit specifically accuses me of 'publicizing my findings, I thought, 'what better way to publicize our findings in the clearest, most compelling and concise manner, than in an easy- to-access video forum like that of YouTube.com and our own website, http://www.frauddiscovery.net?'" Fraud Discovery Institute will be producing multiple segments outlining in exquisitely clear detail what our research concluded about the un-tenability of the Usana Health Sciences, Inc. business model and then placing those segments online...

Mr. Minkow's decision to take his fight to YouTube provides another interesting case of YouTube being utilized to influence investors.. Back in February, I wrote about mPhase Technologies, a small company that appeared to be using YouTube to promote its stock (The stock plunged shortly after the hype of the video.).

Minkow also appeared on TheStreet.com's Wall Street Confidential to discuss Usana.

Minkow uses YouTube to turn up pressure at USANA originally appeared on BloggingStocks on Wed, 28 Mar 2007 18:12:00 EST. Please see our terms for use of feeds.