Usana Health Sciences (NASDAQ: USNA) announced yesterday (subscription required) that the Special Committee of its Board of Directors had unanimously determined that founder, chairman, and CEO Myron Wentz's offer to take the company private at $26 per share undervalued the company, and recommended that shareholders reject it. Mr. Wentz declined to sweeten the offer, and so the deal appears to be dead in the water.

Here's where it gets kind of interesting: back in 2002, Wentz made an offer to take Usana private but then rescinded it, saying that "To allow our shareholders to benefit from any increased value, I have decided to terminate my current effort to acquire Usana's operating assets on the terms previously announced."

A cynic could suggest that Wentz made this latest buyout offer anticipating that it would be rejected as inadequate, given that it was for just over half the stock's 52-week high. Some analysts predicted when the offer was made that it was likely to be rejected. So what did Usana get out of the offer? Since ex-con turned short-selling gumshoe Barry Minkow began accusing the company of fraud last year, the company's stock has fallen precipitously and short interest has soared to more than 50% of the float. The announcement of Wentz's offer ran the stock up by about 20%, probably shaking out a good number of short sellers -- the offer may have helped precipitate a short squeeze, even if that wasn't the intent.

Earlier this week, Usana raised earnings guidance, giving the stock another jolt.

Usana Health Sciences (NASDAQ: USNA) announced its quarterly results last night, and then, exactly one minute later, announced the resignation of Bradford Richardson, Executive Vice President of Asia Pacific.

Why did he resign? Usana says that it was to "pursue another career opportunity" and sent him off with a "Brownie you're doing a heck of a job" pat on the back: "We thank Bradford for his many contributions to USANA and wish him well with his new career opportunity. His leadership and direction over the past 10 years has solidified the Asia Pacific region as a strong and vibrant business."

And maybe that's all there is to it. But maybe not. Back in October of 2007, ex-con turned short-selling gumshoe Barry Minkow accused the company of illegal business practices in China. He said that an investigation had turned up evidence that the company uses its Hong Kong business to recruit Chinese citizens into the company's network marketing business. For more detail, read this New York Post story.

Usana denied the allegations, and maybe it's all unrelated. But the fact is that there have been accusations of bad conduct in China and Hong Kong and now the vice president in charge of that region has resigned. It makes you wonder.

This post is part of a series on some of the most memorable companies that have disappeared.

In the mid-1980s, Barry Minkow was the toast of Wall Street. His Zzzz Best Carpet Cleaning company, which he started in his garage at age 16, was an overnight success and, by 19, he was a millionaire. Investors flocked to buy stock in the fast-growing company that was earning millions from lucrative restoration projects.

There was just one problem: the restoration projects weren't real, the company was little more than an elaborate Ponzi scheme, and Minkow wasn't making his money cleaning carpets. He was laundering money for the mob. After a Los Angeles Times reporter broke the story on Minkow's fraud, the scheme unraveled and Zzzz Best filed for bankruptcy. Minkow was charged with pretty much every white-collar crime known to man, and he spent seven and a half years in federal prison.

But that's only the beginning of the Barry Minkow story: Minkow attended college from his cell, was paroled early at the urging of the judge who sentenced him, and became a pastor in San Diego -- not far from the scene of his crimes. Using the skills he learned committing fraud, Minkow set about uncovering it and, to date, has helped the FBI and other government agencies bust up more than $1 billion in fraudulent investment schemes: an amount far larger than the crime Minkow perpetrated.

Most recently, Minkow has gained notoriety for his accusations of fraud at leading multilevel marketing companies Herbalife (NYSE: HLF) and Usana Health Sciences (NASDAQ: USNA).

Let us know in the comments what you remember about Zzzz Best. And be sure to check out other Companies That Have Vanished.

I and many others have been critical of Usana Health Sciences (NASDAQ: USNA) for a while now. Fraud fighter Barry Minkow has argued quite compellingly that the company's business model amounts to little more than a cleverly disguised pyramid scheme. How did he figure that out? He read the company's filings with the SEC.

Since Minkow's report, the stock has taken a beating: an auditor resigned, numerous credentials flaps were uncovered, the SEC opened (and closed, sadly) an investigation, and the company has repeatedly failed to meet the growth expectations of the Street.

Now founder Myron Wentz -- who owns half the stock through Gull Holdings -- is offering to take the company private at $26 per share. His reasoning? In the press release announcing the offer, Wentz explained, "Going private will provide significant cost savings and will allow USANA's talented management team, employees, and Associates to focus solely on providing industry-leading products and building USANA's strong Associate network without the pressures and distractions brought on by the public market."

Exactly! Going private will allow the company to operate its shady business model free from scrutiny. The selling of overpriced vitamins based on the promise of the potential to earn a six-figure income working from home has earned a lot of money for Usana. But having to disclose the business model in black and white has attracted the scorn of critics.

Now Usana can go back to what it does best: luring people in to a multi-level marketing business without having to disclose as much information about what a rip-off it is.

But before shareholders get too excited, they might want to take a look at Wentz's history of offering to buy the company. Back in 2002, Wentz made a similar offer (for a lot less money), but then Wentz later announced, "To allow our shareholders to benefit from any increased value, I have decided to terminate my current effort to acquire USANA's operating assets on the terms previously announced."

What a swell guy! This is starting to remind me of the whole Parlux (NASDAQ: PARL) buyout that never was fiasco.

Ex-con turned fraud fighter Barry Minkow has released a press release raising questions about Herbalife (NYSE: HLF). Calling the company a "financial crime in progress," he wrote about the "Top Ten Red Flags of Fraud at Herbalife."

Herbalife describes itself as "a global network marketing company that sells weight-management, nutrition, and personal care products intended to support a healthy lifestyle," but Minkow believes the company is a fraud.

Minkow writes about a large amount of insider selling combined with aggressive debt-financed share repurchases and indications that the company's business model is not sustainable. Minkow argues that the company has saturated many of its existing markets and that the stringent multi-level marketing laws in China will make expansion there difficult. In the report, he writes that "Herbalife's expansion has reached more than 80 percent of the world's population as the entire continent of Africa, for the most part, is not in the market for weight loss products," but the reality is that Africa is actually facing an extremely serious obesity epidemic. Whether Herbalife's premium-priced products are a viable solution there is a separate question.

Here are some highlights from this past week's earnings coverage from BloggingStocks:

• AAR Corp. (NYSE: AIR) posted record third-quarter earnings and revenue.
• Adobe Systems Inc. (NASDAQ: ADBE) posted better-than-estimated first-quarter results and raised its outlook.
• CKE Restaurants Inc. (NYSE: CKR) posted third-quarter results that missed estimates.
• ConAgra Foods Inc. (NYSE: CAG) third-quarter profit surged as strong sales offset commodity prices.
• Darden Restaurants Inc. (NYSE: DRI) beat third-quarter expectations and offered guidance.
• FactSet Research Systems Inc. (NYSE: FDS) second-quarter results beat estimates and it raised its outlook.
• Fortress Investment Group (NYSE: FIG) remained upbeat despite a fourth-quarter loss.
• Guess Inc. (NYSE: GES) record fourth-quarter results beat Wall Street expectations.
• Inter Parfums Inc. (NASDAQ: IPAR) posted better-than-estimated fourth-quarter results and raised its outlook.
• Jabil Circuit Inc. (NYSE: JBL) beat second-quarter expectations but lowered its guidance.
• JC Penney Co. Inc. (NYSE: JCP) lowered its first-quarter outlook on weaker-than-expected sales.
• KB Home (NYSE: KBH) swung to a larger-than-expected first-quarter loss on write-downs.
• Lennar Corp. (NYSE: LEN) posted a smaller-than-expected first-quarter loss.
• Monsanto Co. (NYSE: MON) raised its second-quarter and full-year guidance.
• Oracle Corp. (NASDAQ: ORCL) merely met earnings expectations, sending shares lower.
• Tiffany & Co. (NYSE: TIF) posted better-than-estimated fourth-quarter results and raised its outlook.
• Usana Health Sciences Inc. (NASDAQ: USNA) posted lower-than-expected first-quarter results.
• Walgreen Co. (NYSE: WAG) posted solid second-quarter results, including same-store sales growth.

Also, auction-rate securities issues may hurt some tech company results. Analysts keep cutting earings estimates for the big banks, but some are eyeing Yum! Brands (NYSE: YUM) earnings prospects as it expands in China, as well as Archer Daniels Midland (NYSE: ADM) on soaring demand for commodities.

Upcoming results to watch for include Best Buy (NYSE: BBY), Monsanto (NYSE: MON), and Research in Motion (NASDAQ: RIMM).

Visit AOL Money & Finance for more earnings coverage.

Shares of Usana Health Sciences (NASDAQ: USNA) are down 25% after the company reported lower than expected first quarter sales, and forecast a drop of 20% in full-year earnings.

In the press release announcing the results, Usana blamed "disappointing results from new promotional and incentive activities, economic uncertainties in the U.S., as well as the lingering effects relating to negative misinformation about the company that appeared in the mass media during 2007."

The "negative misinformation" referred to consisted of a series of reports produced by ex-con turned fraud investigator Barry Minkow, who alleged that the company was operating an illegal pyramid scheme. While the SEC ended its investigation of the company without taking any action, the company's lawsuit against Minkow has not gone so well.

A court tossed out 4 of the company's 5 claims against Minkow, with Judge Tena Campbell saying that the company failed to demonstrate that Minkow's claims were false, writing that their arguments of defamation revolved around "hypertechnical statements representing differing interpretation of data."

Minkow told the Salt Lake Tribune that "The message from this case is if you have accurate information and you don't break the law and you can corroborate your findings, you don't have to fear retribution from the company."

So here's my question for Usana: If Minkow's claims were "negative misinformation," why can't you rebut the substance of his report?

In an email, Minkow told me that he believes that "the credit crisis prevented people from dumping overpriced vitamins or failing business opportunities on their credit card and the same will occur with Herbalife (NYSE: HLF)."

Usana (NASDAQ: USNA) closed at $26.94 Thursday.

USNA, a developer and manufacturer of nutritional and personal care products, warned on Q1 results and lowered 2008 guidance.

Jefferies says: "Management attributes the sales shortfall to 1) ineffective promotions, 2) weakening consumer macros and 3) continued fallout from recent negative third party publicity."

USNA overall option implied volatility of 63 is above its 26-week average of 58 according to Track Data, indicating larger price movement.

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

The Securities and Exchange Commission has reportedly ended its probe of Usana Health Sciences (NASDAQ: USNA), and will not recommend any enforcement action, according (subscription required) to the Wall Street Journal.

Without question, this is a big victory for Usana, which has been the target of criticism from fraudster turned fraud fighter Barry Minkow. Minkow has accused the company of operating an illegal pyramid scheme, lying about the credentials of certain executives and directors, and illegally operating a multi-level marketing business in China while saying that the company had no distributors there on an investor conference call.

It's puzzling that the SEC has ended its investigation -- evidence presented on Minkow's Cheating in China website seems to indicate that Usana does have distributors in china, a lot of distributors in China. The pyramid scheme allegations aside, CFO Gil Fuller's denial of distributors in China seems to have been false.

In an email, Barry Minkow told BloggingStocks that "I respect the Securities and Exchange Commission and how hard they work at prosecuting and uncovering fraud for the public. I have not seen the letter in its entirety so I really cannot comment."

The SEC has decided not to act, but questions still remain. Class-action lawsuits on behalf of distributors are still pending and the allegations of a pyramid recruiting scheme may be more the jurisdiction of FTC regulators. And you also have to wonder why the company's auditor resigned last year.

This is quite a victory for Usana Health Sciences, but given that this is the same SEC that approved Enron's perversion of mark to market accounting, investors should remain skeptical.

Usana Health Sciences, Inc. (NASDAQ: USNA) critic Barry Minkow established the Cheating in China website a few months ago, positing that the company's growth and profitability relied on a complex scheme involving the elicit recruitment of Chinese citizens -- a country where multi-level marketing is generally illegal, and in which Usana does not have a license to operate.

According to a press release issued by Minkow's Fraud Discovery Institute this morning, the Nanning Business Administration Department, "Shuan Sheng" Branch Economic Inspection is taking a look.

According to Minkow, "It would appear that the interrogation notice is interested in both the individual and the company as a whole". On the Cheating in China website, Minkow has posted evidence of Usana distributors seeking to recruit Chinese nationals, in sharp contrast with Usana CFO Gil Fuller's proclamation on a 2006 conference call that "We don't have any associates in China".

Reading through TheStreet.com's ratings this weekend, I came across something interesting:

Nutritional and personal care products developer USANA Health Sciences (NASDAQ: USNA) has been upgraded to a buy from a hold. Its revenue increased by 16.9% in the third quarter compared with the same period last year. Earnings improved to 70 cents a share from 55 cents per share over the same timeframe.

The company's return on equity improved to 184.53% in the third quarter compared with 78.97%, a signal of significant strength within the corporation. This return on equity greatly exceeds that of both the industry average and the S&P 500. USANA Health had been rated a hold since August 2007.

All of that is true and, as investors, we all know that a company that can earn high returns on equity is a wonderful thing indeed. If you don't believe me, take a look at the writings of Peter Lynch, Warren Buffett, Bill Miller, and just about any other great investor.

But at some point, a high return on equity becomes a red flag for fraud and/or an unsustainable business model. Can a company's management/business model be so amazing that the company can earn returns many times greater than industry peers or that market as a whole -- without any particularly important patents or competitive advantages to speak of? Does TheStreet.com really think that a ROE of 184.53% is sustainable? Are Dave Wentz and Gil Fuller (Usana's President and CFO, respectively) really more than eight times as good at deploying capital as Warren Buffett?

I somehow doubt it.

Visit AOL Money & Finance for more earnings coverage

Usana Health Sciences (NASDAQ: USNA), a multi-level marketing company that has come under the scrutiny of ex-con turned gumshoe Barry Minkow, The Wall Street Journal, Forbes, and a host of other critics, released its earnings on Tuesday afternoon, and hosted a conference call to discuss them yesterday. We got the usual mix of softball questions from cocker spaniel analysts, but CFO Gil Fuller actually did provide some revealing information in response to a question from D.A. Davidson analyst Tim Ramey. From the transcript, made available on SeekingAlpha:

Tim Ramey - D.A. Davidson

Great. And one more quick one on the Autoship number going up. I was -- I guess I had in my head that it would probably never go up, that as you became more international, those numbers would -- the mix would change and you probably wouldn't, why would it go up, what happened to make it go up?

Gilbert Fuller

Tim, one of the things that we try to do sometimes more successful than others is create incentives for people to be on Autoship. And just looking at it by country here, it looked like we had the U.S. go up a couple hundred basis points in the quarter versus on a consecutive basis for the second quarter. And that was what drove, since it's the biggest market that we have -- that was the thing that seemed to drive our overall number up nicely. So we are always looking for ways to give folks a reason to have their products on Autoship. It helps compliance. It's a great -- that is, they will likely to keep taking their products and also of course, it's a great cash flow thing for us and also gives us some visibility as to what's coming.

In 2003, ex-con turned fraud buster Barry Minkow delivered a report to regulators suggesting that MX Factors LLC was engaging in a $39 million fraud. Later that year, MX Factors collapsed when the California Department of Corporations shut it down on the ground that it was operating an illegal Ponzi scheme -- paying off earlier investors with money acquired from later investors.

According (subscription required) to The Wall Street Journal, Mr. Minkow more recently helped law enforcement find mastermind Richard Harkliss, who had fled to Mexico. He was arrested in Arizona while visiting relatives.

The report Minkow prepared on MX Factors is not unlike the one he put together on Usana Health Sciences (NASDAQ: USNA), the multi-level marketing company he has accused of operating an illicit pyramid scheme.

Here's an interesting quote from a recent Forbes piece on Usana:

"Why would anybody take this guy seriously?" Usana spokesman Joseph Poulos said Tuesday. "What is he an expert on? He isn't a forensic accountant. He just committed one very large crime once."

MX Factors is the latest in a string of more than $1 billion in fraud uncovered by Minkow, and that doesn't even include Usana Health Sciences (although you could make a strong case it should).

Rather than rebuking claims made in Minkow's report, Usana has chosen to go the ad hominem route -- focusing on Minkow's criminal past. One can only hope that they will have the fairness to also remind investors of Minkow's stellar track record as a fraud investigator. I somehow doubt they will.

More USANA Health Sciences news

Kevin Kelly: "Heard on the Street" knocks USANA
Zac Bissonnette: Oh snap! Barry Minkow fires back at Usana Health Sciences
Zac Bissonnette: Forbes slams Usana Health Sciences (USNA)
Zac Bissonnette: NZ National Business Review slams USANA Health Sciences (USNA)
Zac Bissonnette: USANA has a product, so it's not a pyramid scheme?
Zac Bissonnette: Is Baghdad Bob working for USANA Health Sciences?
Zac Bissonnette: Is Usana selling vitamins, a pyramid scheme, or an illegal tax shelter?

Usana Health Sciences (NASDAQ: USNA) claims to be a vitamin company that distributes its products through a multi-level marketing business model. But a report released by Barry Minkow and his Fraud Discovery Institute in March suggested that the vitamins were merely incidental to the illicit pyramid scheme that Usana was operating, and the stock plunged.

But here's something new to consider: Based on my investigation, it appears that some Usana distributors are marketing the Usana "business opportunity" as something else entirely: a tax shelter. For example, a New Zealand Usana distributor with the URL uniquehealth.usana.com writes, "... the fact is a USANA business can save you up to $6,000 plus in a tax return every year. This is not just $6,000 in extra deductions, but an extra $6,000 in YOUR pocket each year - regardless if part-time or full-time." The distributor also gives a list of the potential deductions including automobile expenses, a portion of your mortgage, phone accounts, child care, "pay your kids to work for you, and write it off," and 100% of initial start-up costs.

Uniquehealth is not alone. My investigation of the websites of dozens of Usana distributors found claims of too-good-to-be-true tax savings were widespread. Usana doesn't make these claims on its own website, but the fact that numerous distributors do raises questions about the real reason that people become Usana distributors.

In addition to numerous misrepresentations about its own company, the management at Usana Health Sciences (NASDAQ: USNA) has also taken to slandering its chief critic, con-man turned gumshoe Barry Minkow. Now Minkow is fighting back.

In a letter to Usana President David Wentz and CFO Gil Fuller also posted on his Fraud Discovery Institute's website, Minkow writes:

I have struggled over the last several weeks to remain silent in response to the multiple slanderous accusations made by your company in both your SEC filings and public statements. You and your paid supporters have made one false accusation after another, including your
company's statement in the recent Forbes article:
"We believe everything he [Barry Minkow] says to be false," Usana spokesman Joseph
Poulos told Forbes.com. "He's a liar; he's a criminal -- he can't be trusted."
Now Mr. Poulos said this on the record to a national magazine knowing it not to be true because even he believes that everything I have said is not a lie or he would have prevented (just to give one example but be assured these examples could be readily multiplied) Mr. Waitley from resigning from the board of directors as our reporting of the non existence of his Masters degree from the Naval Academy was dead on (again just to provide one example).

Of course, anyone following the Usana story knows that Mr. Poulos is, at best, completely out of touch with reality. I recently did a post comparing him to Baghdad Bob. Minkow also shows the first real evidence of accounting fraud at the Salt Lake City multilevel marketing company. Read the letter to see that.

More USANA Health and Sciences news

Kevin Kelly: "Heard on the Street" knocks USANA
Zac Bissonnette: Oh snap! Barry Minkow fires back at Usana Health Sciences
Zac Bissonnette: Forbes slams Usana Health Sciences (USNA)
Zac Bissonnette: NZ National Business Review slams USANA Health Sciences (USNA)
Zac Bissonnette: USANA has a product, so it's not a pyramid scheme?
Zac Bissonnette: Is Baghdad Bob working for USANA Health Sciences?