I haven't written about Usana Health Sciences (NASDAQ: USNA) since the company settled a lawsuit with Barry Minkow, an ex-con turned fraud fighter who had accused the company of operating a pyramid scheme.

The company just reported its preliminary fourth quarter and full-year results and dropped a couple bombshells in the form of "one-time adjustements":

• An unanticipated arbitration award against the Company for approximately $7 million for wrongful termination of a former USANA distributor; and
• Tax adjustments of approximately $1.8 million, resulting from an Internal Revenue Service ("IRS") audit of the years 2003 through 2006. The impact on cash due to these potential tax adjustments is estimated to be $10 million.

Oops! The company did manage to achieve record fourth quarter sales and earnings per share of $1.72 for the year, but "dramatic" currency changes reduced sales by approximately $9 million.

The financial results aside, the tax issues and wrongful termination judgment provide strong evidence for what many of us have been saying for a long time: This is one slimy company.

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 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?

Remember Baghdad Bob the Iraqi Information Minister who insisted the US was nowhere near Baghdad, even as the media blared images of the invasion?

I'm not sure what happened to Muhammad Saeed al-Sahhaf (AKA Baghdad Bob) after the fall of Saddam Hussein's regime, but a recent AP article gives me an idea: Maybe he's signed on with USANA Health Sciences (NASDAQ: USNA) as a company spokesman.

Yesterday, USANA's auditing firm resigned, but the company basically insisted that it did so for no reason. Until recently, USANA has said relatively little regarding private investigator Barry Minkow's allegations of wrongdoing at the company, but that's been changing lately. Spokesman Joseph Poulos (Salt Lake Sam?) has stood up to defend his employer. The results have been, well... He seems about as disconnected from reality as Baghdad Bob was. Take a look at some of his most memorable quotes from the past few days:

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

USANA Health Sciences (NASDAQ: USNA) shareholders take note: As the company is bombarded with allegations that it is a pyramid scheme, your spokesman doesn't seem to understand what a pyramid scheme is. Interviewed for a piece in New Zealand's National Business Review, Joe Poulous, identified as a spokesman for the company, says that "Usana spokesman Joe Poulos brushed off the arguments about pyramid schemes, saying that "The company sells vitamins. In a pyramid scheme there's no product."

In reality, there is no such rule that pyramid schemes don't have a product. The FTC has successfully shut down numerous product-based pyramid schemes including Equinox International and BurnLounge (which sells MP3s and agreed to change its business model and has continued operations).

This is pretty bad news for USANA: How can the company argue that it's not a pyramid scheme when it apparently doesn't have a strong concept of what a pyramid scheme is?

To learn more about product-based pyramid schemes, and to decide for yourself whether USANA looks like one, check out 10 Lessons For Consumers From the Equinox Case.

For more coverage of the situation at USANA Health Sciences, please read:

http://www.bloggingstocks.com/2007/03/15/heard-on-the-street-knocks-usana/

http://www.bloggingstocks.com/2007/06/15/usana-cfo-our-distributors-are-volunteers/

http://www.bloggingstocks.com/2007/06/13/a-grammar-lesson-for-gil-fuller-and-other-musings-on-usana/

http://www.bloggingstocks.com/2007/04/19/usana-health-sciences-invokes-the-chewbacca-defense/

Usana Health Sciences (NASDAQ: USNA) CFO Gil Fuller is one of the great wordsmiths of our time. When asked about whether he is a CPA during the company's analyst presentation on Thursday, Fuller joked that he needed to ask Bill Clinton's attorney about the definition of is. But the highlight of the presentation came earlier when Fuller explained the company's "business opportunity" by saying that "direct selling implies a volunteer army..."

Well, Gil Fuller's absolutely right. Usana's army of associates are volunteers, in the sense that they don't make any money. According to Barry Minkow's initial report on USANA, 85% of distributors lose money, with no less than 74% failing within a 12-month time period.

In addition, the average payment to the bottom 99% of Usana salespeople is about $5.66 a week, before product purchases, taxes and all other business expenses. Given that Usana products appear to be hopelessly overpriced compared to the competition, being a Usana distributor is a losing venture for all but a tiny percentage of those who give it a try. 3% of the company's distributors earn 70% of the commissions.

So congratulations to Gil Fuller. Even if he can't seem to figure out the definition of is, he has made George Orwell proud with his characterization of Usana associates as volunteers. Next time you hear a complaint, just remember: They're not losing money! They're volunteers!

Yesterday on BloggingStocks, I wrote about the latest in a series of credentials flaps at Usana Health Sciences (NASDAQ: USNA), the multi-level marketing company that has attracted the ire of ex-con turned gumshoe Barry Minkow. It turns out that CFO Gil Fuller let his CPA license lapse in 1986, although recent SEC filings say that he has the credential. Utah state law state law doesn't allow people to call themselves CPA's unless they renew their license periodically and get continuing education units. But according to Fuller, it's really not misleading: "I say Gil Fuller is a CPA. That is in my view an accurate statement. I should have gone on to say I let my license to practice public accounting expire." (emphasis added)

But you see Gil, here's the problem: is has a different meaning than was. Consider the following examples:

Enron is one of the most respected companies in the world.

Enron was one of the most respected companies in the world before it was exposed as a fraud and numerous former officers at the company were hauled off to jail, although one died of a heart attack before he got around to serving any time.

The epic battle of ex-con turned fraud investigator Barry Minkow vs. Usana Health Sciences (NASDAQ: USNA) gets more one-sided by the day. In a YouTube video posted on March 27th, Minkow visited numerous vitamin stores to show that Usana products are hopelessly overpriced compared to the competition. Usana contacted the owner of one of the stores, Nutrimart, threatening to sue him if he didn't demand that Minkow remove the video from YouTube. They accused him of unfair competition.

But Brian Mohr didn't back down. In an email, he told BloggingStocks that he had not even heard of Usana before he was approached by Minkow with request for comparable products. However since then, he has "discovered several people I already knew had been 'taken' by this company. I have numerous people that have stories of their involvement. I really feel this is a big story waiting to become even bigger. Layer upon layer peels back only to reveal more craziness."