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StumbleMan accuses Usana of operating as pyramid scheme
Friday, April 24, 2009 | 1:30 a.m.
Beyond the Sun
A Clark County man has sued Usana Health Sciences Inc., alleging the big direct marketer of nutritional and cosmetic products operates as a pyramid scheme in which independent distributors must focus on signing up more distributors as opposed to selling products.
Joseph Chirco, in his lawsuit filed last week in Clark County District Court, seeks to have the suit certified as a class-action representing all Nevada Usana distributors. His Las Vegas attorney is John Nowakowski.
Chirco claims to have lost money by purchasing a Usana distributorship.
He alleges violations of Nevada's deceptive trade practices act and accuses Usana of consumer fraud, of failing to disclose all required facts about its marketing program, of unjustly enriching itself at the expense of distributors and of civil conspiracy.
"Those already in the pyramid are greedily incentivized to recruit more and more distributors to grow the base for the benefit of those higher up on the pyramid,'' Chirco's suit charges. "It isn't until one is locked into a distributorship that it becomes clear that merely selling products to consumers without a pyramid position is not a realistically sustainable option. The only way for an associate to economically stay afloat is to recruit lower ranks for the Usana pyramid."
A Usana spokesman could not immediately be reached for comment on the allegations, which the Salt Lake City company has faced before in various lawsuits.
In its annual report filed with the Securities and Exchange Commission, the company said it's careful to comply with marketing laws.
"Associates are encouraged to build and manage their own business group by recruiting, managing, and training others to sell our products. Associates are compensated on sales generated by their business group, and they can also receive compensation by purchasing products at wholesale prices and selling them at retail prices," Usana said. "We believe that network marketing is an effective way to distribute our products because it allows person-to-person product education, which is not readily available through traditional distribution channels. This personal touch may enhance consumers' awareness of the health benefits of our products, as well as motivate them to live and support a healthier lifestyle. Additionally, we feel that network marketing appeals to a broad cross-section of people, particularly those seeking to supplement their income, start a home-based business, or pursue entrepreneurial opportunities other than conventional full-time employment."
As of Jan. 3, the company said it had 198,000 active associates who bought products; and 71,000 active "preferred customers" worldwide who bought products for personal use but did not re-sell products. Active was defined as someone buying products within the past three months. Of $429 million in net sales in fiscal year 2008, 88 percent was generated by associates and 12 percent by preferred customers, the company said.
"Although we have, from time to time, modified our network marketing system to comply with interpretations of various regulatory authorities, we believe that our network marketing program is in compliance with the laws and regulations relating to network marketing activities in our current markets," Usana said.
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I've been researching and investigating USANA for the last 3 years and have a very good understanding of the situation regarding USANA's Business Model and its effects on distributors. If information is needed for this court case, please email me and I can provide all the documents and references.
A little bit of what I have investigated and researched can be found on my website at http://www.geocities.com/terminatedramp
(note to moderator: This is not spam and neither is the link. It will prove useful to Chirco's case)
As a court certified expert in the field of multilevel marketing (unlike the previous poster) I have done extensive research on Mr. Chirco specifically and others who, under the encouragement and guidance of ex-con Barry Minkow (ZZZZ Best scam) have attacked Usana Health Sciences. In short, since Chirco suffered no significant damages from his 6-8 week participation in Usana (two years ago), his lawsuit may very likely be part of Minkow's ongoing stock manipulation scheme.
Please see the Chirco section (page 3) of this report:
http://www.marketwaveinc.com/articles/Yo...
The previous poster "TerminatedRamp", who also assisted Minkow in his Usana smear campaign, is exposed beginning on page 37.
The distributor class action law suit referenced in the above article (written in late 2007) was eventually dismissed when the plaintiff's attorney dropped it (after a Minkow induced SEC investigation of Usana was closed with no action taken, a derivative suit was also dropped, and a federal shareholder suit also claiming Usana was an illegal pyramid was dismissed on summary).
More reports related to this matter can be found here:
http://www.marketwaveinc.com/articles.as...
If you would like to discuss details related to Mr. Chirco or Usana, please contact me at 800-688-4766.
Thank you for your attention.
Len Clements
Founder & CEO
MarketWave, Inc.
Las Vegas, NV
What Mr. Len Clements fails to mention is that he is also a Usana distributor. Apparently he was awarded an existing distributorship and paid a nominal sum, alledgedly as he refuses to answer any questions concerning this, but what is clear is that this existing distributorship included a complete leg. Some people say that he was compensated by Usana for his defense of them on the Yahoo msg. board, which is now almost useless because of the SPAM generated by Usana supporters.
What (the always conveniently anonymous) Rhino271 fails to mention is that, as an industry researcher, advocate, and product consumer, I am a distributor for several MLM companies, and the only person who has made any accusations of my being financially compensated for my Minkow rebuttal reports is the first poster, terminatedramp, based on no evidence what-so-ever (I was not paid anything by Usana for these reports). Furthermore, as Rhino271 surely knows, my investigation of Minkow, Chirco, et al, and my subsequent reports were conducted and published well over a year before I enrolled as a Usana rep.
He also failed to mention what, specifically, was inaccurate about what I said in my first post, or in any of the reports.
As my college debate teacher once instructed, "If you can't diminish the quality of your opponent's argument, try to diminish the quality of your opponent."
Sometimes I wonder if terminatedramp and Rhino271 took the same class.
Len Clements
MarketWave, Inc.
Mr. Clements fails to mention that he was an officer and distributor for a company called Zenza, an MLM, and is currently in litigation with them regarding his representation of Usana when he should have been attending to their business - or so I understand this. Perhaps Mr. Clements will clarify and correct any inaccuracies? Also, explain the other MLMs, two or three which failed per what we gather - and explain if this isn't so. Mr. Clements says he wasn't paid, but the question was whether he was compensated? Compensated by receiving at a nominal charge and existing distributorship with a full leg? Also, during the time in question when Mr. Clements wrote his highly questionable reports, he employed the ad hominem attack against Minkow, and as you see, against this poster Terminatedramp. Mr. Clement failed to mention that Usana was found to have indulged in a slapp suit - meritless litigation against Mr. Minkow and was fined. This is in the court records and Mr. Clements can testify to this I expect. He also didn't mention that Mr. Minkow assisted the FBI in recovering considerable amounts of money by exposing various fradulent operations, some would say as a form of penance. Yet Mr. Clements and Usana constantly referred to his previous conduct of which he paid for, never mentioning his subsequent good deeds. Indeed, Usana settled with Mr. Minkow, which many believe they would not unless there was merit. Such things dismayed people who expected more of Mr. Minkow, but the various faults in Usana SEC filings, company officer resumes, diminishing book value, an auditor who quit are all a matter of record. All of which Mr. Clements tries to deflect, distort, and when that fails, to attack those who point out the truth like Terminatedramp. Mr Clements attacks people's character. Isn't it ironic, some might say even hypocritical, that he tries to attribute this tactic to others? And he does it with a statement that makes us wonder what college, indeed he went to. We would like to know such a prestigious institution of higher learning. Perhaps he would care to share with us this? Otherwise, quite often we see people who try to present themselves as something that they are not. Some say this is the mark of the shoddy and shabby side, the con side, of MLM. Or perhaps it is a coincident?
The accusations stated above are false, and again derived from a single source - terminatedramp. This is all simply an attempt to deflect attention from the point of this commentary - Chirco's suit against Usana. I will not comment further here on any issue other than that, other than to declare once again that I will openly debate any and all issues and directly answer any and all questions related to any and all aspect of MLM, and Usana specifically, on a live, recorded podcast where the anonymity and protections afforded by a message board are no longer available to either party. I have made this offer to terminatedramp numerous times, and he has always declined. This is an open offer, Rhino271.
Joe Chirco joined Usana on July 27th 2007 and quit about 6-7 weeks later. He voluntarily purchased $1,300 in product which was $780 more than was needed to meet the highest possible quota in the Usana pay plan. The following month he chose to purchase another $300 in product, $200 over the standard commission quota at this stage. Of his $1,600 in total product purchases, he returned half of it for a 90% refund, which he received - $782.41. The remainder was presumably sold, sampled, or consumed (otherwise, why not return it as well?). Chirco never enrolled a single person, refused to participate in his upline's training, and chose not to even attend a Usana training event in Las Vegas, his home town. Shortly after, Chirco was featured in one of Minkow's Usana attack videos as one of their "victims".
Chirco has no legitimate reason to now file this law suit, 19 months after he received a refund for well more than the amount of product that was required to meet any quota in the Usana pay plan (at most that would have been around $675). Furthermore, a distributor law suit based on almost identical charges has already been dropped, and a shareholder suit dismissed by a federal judge on summary, declaring the pyramid charges to not even be "plausible". That only leaves one other reason to file this lawsuit...
An illegitimate one.
Len Clements
MarketWave, Inc.
This is a classic Len Clements ploy. Whenever he finds himself having to face questions he doesn't want to answer he falls back to the live debate gag which allows him the opportunity to say whatever he wants but answer nothing. That is, of course, unless he's talking to Howard Sirota who actually offered to engage him in a live debate. When that happened Len switched to a new game of having a 'list' of people he wanted to debate first.
Congratulations Rhino you managed to beat the queue!
Mr. Clements boldly puts in print two brazen untruths: that the accusations are not true, and that these come from a single source. He obviously hopes people won't do their own due diligence. Mr. Clements was feted at Usana Hq. He has acted on Usana's behalf and he even made a 100,000 dollar bet on the Yahoo message board saying he would pay this amount if anyone could prove he was compensated. His quid pro quo appears to have been 'buying' an existing distributorship, some claim for a very nominal sum, with an existing leg. This puts him far over any new associate coming in, and gives him a huge jump-start any reasoning person would conclude. Mr. Clements refuses to disclose how much he paid, and the circumstances, and it is obvious only a court order would compell him. One draws the conclusion that he believes by releasing the details is to his detriment. Here he is presenting himself as an objective watchdog, which is far from the case. He presents himself one way, when he is really another. This sleight of hand, deflection, is his pattern, as was observed on the Yahoo board. He has something to gain for him defense of what is, to an objective person, the indefensible. He has been discredited by objective facts time and again, caught in inaccuracies (to be polite) time and again. It is also true that when a lawyer with the handle Hirsota offered to debate him live, he ignored this and retreated into another ruse. In many people's opinion, he is more harmful to Usana's case and reputation than almost any action that the Company took themselves. That they appear to embrace him, reward him, speaks to their lack of judgement. This should come as no surprise to anyone who witnessed how they dealt with inaccuracies in their SEC filings, board and officer resumes, etc.
What is interesting is that Mr. Clements feels that Mr. Chirco has a case without merit yet he never chastised Usana for a case without merit. The Courts will decide as they may.
USANA ordered to pay for SLAPP violation
May 7th, 2008 @ 11:35am
SALT LAKE CITY (AP) -- Vitamin maker USANA Health Sciences Inc. must pay a critic of the multilevel marketing industry who was forced to defend himself against a company lawsuit.
Federal Magistrate Samuel Alba decided Wednesday that USANA owes $142,510 in attorney fees to a San Diego investigator, Barry Minkow, and his Fraud Discovery Institute.
Alba's order came after U.S. District Judge Tena Campbell ruled on March 3 that USANA violated California's anti-SLAPP (Strategic Lawsuit Against Public Participation) law for suing Minkow for fair criticism.
Minkow has assailed USANA for its network marketing business model, once-soaring share price, and series of flaps involving the credentials of top executives and sales associates.
Minkow served eight years in prison for stock fraud before starting the Fraud Discovery Institute. He came out with his first critical report on USANA in February 2007 when he bought "put" options on USANA's stock in a bet the price would fall.
USANA sued him for defamation and stock manipulation, but dropped the defamation claim last summer. It still has one claim pending, for securities manipulation.
USANA and its Chicago-based public relations firm did not immediately return calls for comment.
(Copyright 2008 by The Associated Press. All Rights Reserved.)
My primary objective in debating Mr. Sirota, a prolific Usana attacker, would have been to expose him as a short selling stock basher, and his profit motive for attacking them. Then, he posted this on the Yahoo message board...
"I'm also a bear and have a long put position so I have an economic interest in screwing up USANA's recruitment... and retention of... Associates, which would ultimately make my bear position profitable." (ad hominem attacks omitted)
Since Mr. Sirota so clearly exposed the agenda behind his smear campaign all on his own, it would seem redundant for me to now try to out him as a biased propagandist.
But I most wholeheartedly and anxiously extend the same offer to you, Rhono271. It's easy to make personal attacks on someone based on outright lies when you're cowardly hiding behind an anonymous screen name. But when you are called out into the light, where you have to be fully accountable for what you say, your kind always runs for cover. Let me know when you're ready.
Now, does anyone care to refute anything I've said regarding Mr. Chirco's law suit? If not, then you may have the last word. I have no intentions of continuing to feed a couple of internet trolls.
Len Clements
MarketWave, Inc.
Mr. Clements, you are again being disingenuous. Your offer to debate Mr. Sirota, or anyone, had no limitations. You were obviously chagrined at being so roundly defeated during extensive written debates and also exposed trying to collect personal information. Regarding the latter, we see Usana indulged in a Slapp suite and got roundly defeated, and you have made allusions to 'holding people accountable' - which some presume you used as a threat, to institute meritless litigation. Some have confronted you and said go for it, rightly assuming that with the preponderance of evidence of your own providing, they would win a huge award against you and Usana, who would be drawn into this. Yet, you never took any of those people up when confronted; and you could never prevail during written debate, discourse, which is held to a higher standard - there is no room for deflection (which you unsuccessfully indulged in), and only VERIFIABLE FACTS - which were not, and still are not, your friend. In fact, many deem you the coward - for presenting yourself as something you are not - a watchdog, an objective and unaffiliated commentator. Some consider you bought and paid. And all can see by your previous post, what low character and tawdry, infantile taunting tactics you espouse. Yes, I'll gladly take the last word. As it becomes obvious you haven't any real arguments or defense, and just continue to diminish yourself with such ignorant rebuttals. Regarding Mr. Chirco - the courts will decide where the merit resides. If you recall, you said Mr. Minkow did not have merit regarding the Usana SLAPP suit. And if you refer to the last sentence of that article, you know also that USANA settled with Mr. Minkow as they could not prove stock manipulation as you claimed. Mr. Clement, you have been completely discredited in each and all of your biased and false arguments.
Selling your soul to Usana Health Sciences for $27,000 a year
SALT LAKE CITY -- January 22, 2009 -- Colette Evans was approached by her husband, Allen, 14 years ago about starting a home-based business with USANA Health Sciences. Though skeptical at first, Colette started taking USANA's nutritional products and saw an improvement in her health. Once she saw firsthand the effectiveness of the products, Colette decided to work side-by-side with her husband introducing USANA to others and building a successful business
Through hard work and determination, the Fort Lauderdale, Florida residents recently reached a major milestone with the company, becoming the newest members of USANA's Million Dollar Club.
USANA's Million Dollar Club is made up of distributors who have earned at least $1 million in commissions through their USANA business. To be officially inducted into USANA's exclusive club, Colette was treated on Jan. 22 to a "million dollar day" as part of an unforgettable trip to USANA corporate headquarters in Salt Lake City.