Fraud Discovery Institute's Analysis of USANA

[MWave]

Mr. Serra, I have tried to ignore your last "response" and move on, but you are just making this too darn easy. I can't resist...

Clements: SEC, NASDAQ took no action against USANA. Serra: No legal significance, citing law. Clements' reply:

You're not the first to use this defense, and I've always got a kick out of it. So the SEC and NASDAQ investigated all of the alleged illegal activities that Minkow asserted, did find evidence of this illegal activity, and just decided to forget it and drop the whole thing? There is no other logical scenario that supports your position. Mine, however, suggests that they spent months (10 in the case of the SEC) investigating these claims, and took no action because they found no evidence of any illegal activity.

Unless you have a report, you can only guess at what they did. In any event, the SEC does not have primary responsibility for pyramid scheme enforcement - the FTC does. For all you know, SEC staffers shrugged (yes, it can take ten months for the government to shrug) and said that it's an FTC matter.

Where do I even begin? First, if Minkow's allegations were an "FTC matter", then why did the SEC and NASDAQ even get involved in the first place? Wouldn't they have known it was an FTC matter when they first looked at the claims they were going to be investigating? And didn't the SEC and NASDAQ also investigate allegations of securities violations? And so, are we to assume that the SEC and NASDAQ did find evidence of such violations and simply "shrugged", and said, screw it, let's forget all the time, effort and expense of this 10 month long investigation and let's just let them keep doing it? Are you actually suggesting they did find evidence that Usana was an illegal pyramid, decided this was the FTC's jurisdiction - and then didn't tell them!? Or, are you suggesting they did inform the FTC (as Minkow already had), and the FTC simply chose to ignore both Minkow and the SEC? Please, Mr. Serra, describe for us any scenario besides those I've just described where your "just because they took no action doesn't mean they didn't find evidence of Usana's guilt" makes rational, logical sense.

Furthermore, you claim that "the SEC does not have primary responsibility for pyramid scheme enforcement - the FTC does" is just more of your semantic game playing. While you are correct that the "primary" responsibility for enforcing anti-pyramid law falls on the FTC - that federal regulatory body that completely ignored Minkow's (and based on your statement, possibly the SEC's as well) anti-Usana claims - but that absolutely does not mean the SEC does not investigate allegations of such schemes and, if warranted, take legal action against them. The basis for such SEC actions is not breaking anti-pyramid law (yes, the FTC and state AGs do that), but rather for not disclosing the true nature of the scheme (a violation of disclosure law), and for selling an unregistered security. To loosely quote Tom Cruise in "The Firm", It's not as sexy, but has teeth that are just as sharp. So the SEC would have absolutely investigated, and if warranted taken action on, Minkow's pyramid scheme allegation.

More importantly, though, I cited Supreme Court law that agency inaction (absent an affirmative statutory duty to act) is not proof of anything, let alone "legal vindication".

While you would love to keep my "legal vindication" claim to only actual legal decisions handed down by a court, I am talking about "legal vindication" based on the laws of common sense, logic, and reason.

Clearly, the SEC and NASDAQ closed their investigations, and the FTC didn't even commence one, BECAUSE THERE WAS NO EVIDENCE THAT USANA WAS GUILTY OF EVEN A SINGLE CHARGE MADE AGAINST THEM! To argue otherwise is simply foolish.

I looked carefully though your reply and found no law at all. I did find, however:

"All other things being equal, the simplest solution is the best."
– Occam's razor

I have a hint for you, Mr. Clements: If you ever find yourself in court and your opponent cites the Supreme Court, don't cite Occam's Razor in response. You won't like the result.

I agree. You are correct in that logic, common sense and reason do not always prevail in a court of law (I again direct your attention to O.J. Simpson). However, I am speaking to the good readers of this board. They are our jury.

Clements I: "China took no action against USANA." Serra: "China? China? You're kidding, right?"

Once again we are left with two possible scenarios:

Mr. Serra's: China, who has far stronger anti-pyramid laws that the U.S., who (according to Barry Minkow) far more aggressively pursues such schemes, where the most agregious violations are punishable by death, did investigate Minkow's claims and simply, in this one case, chose to just ignore it, and not even let Usana know.

Mine: China took no action of any kind because Usana broke no laws.

Again, I'll leave it to the reader to decide which makes more sense.

Oh, and BTW, according to Minkow's anti-Usana documents (the subject of this thread, as you'll recall), Usana's "Cheating-in-China" was also a direct violation of U.S. securities law, and he sent this report to the SEC as well. Which also ignored it!

Clements: Minkow's "withdrawal" of his allegations against Herbalife means USANA was "legally vindicated". Serra: Minkow's allegations against Herbalife are now gone, and I never looked into them... how does Minkow saying "never mind" to Herbalife "legally vindicate" USANA?

I'll catch you up. Minkow said Herbalife was an illegal pyramid due to its MLM compensation model, and the fact that most of the sales were made to reps, not retailed to non-reps – the identical assertion on which he based his claim that Usana was an illegal pyramid. The SEC investigated Herbalife on this claim (we know this - well, at least I know this - because the SEC specifically requested data on percentage of sales to reps vs. non-reps), and the SEC also took no action against Herbalife. But more to the point, Minkow eventually ceased his entire campaign against Herbalife (who had not sued him - at least not yet) and stated publicly that Herbalife's MLM model was valid - the same MLM model used by Usana, except that Usana requires a fraction of the upfront product purchase that is typically bought by new Herbalife reps.

And that "one and only" legal decision that went against USANA was that they couldn't prove a case (other than the 10b-5). Kind of an important one, don't you think, to any discussion about whether they have been "legally vindicated"? Why is this not obvious?

Um, maybe because you keep changing your answer. I thought you said Minkow had sufficiently proven that Usana was guilty? I countered that Minkow didn't even make such a case, and the burden was on Usana to DIS-prove his claims. Now you're saying they lost because Usana couldn't "prove" their case - which I think is the same thing I said, is it not? Once again you have validated my original point.

And to throw in the "other than the 10b-5" (the stock manipulation charge) as a parenthetic aside is kind of like saying, "The prosecution couldn't prove their case (except for the murder charge)".

I then listed all the ways they were "legally vindicated". I'm sure you would love to just have everyone ignore all of the other "legal vindications" Usana achieved, and focus on only their single loss (that actually provides utterly no evidence of any actual illegality). How convenient I'm sure that would be for you at this point.

In point of fact, I showed that none of what you cite constitutes "legal vindication". I did that by citing law. You cite ... you.

Mr. Serra, not being a mind reader I would never presume you are outright lying, so I will assume your memory is faulty on the matter (or you are hoping the reader's is).

Even if I were to concede every point not involving an actual legal decision by a court of law (which I'm not), I would still have the federal court decision in Ashok Kapur vs. Usana et al, where the identical set of charges that would have still been in play had the Minkow case gone forward was found to not even be "plausible", and was DISMISSED WITH PREJUDICE!

This single, and very legal vindication by a federal court of ALL counts against Usana certainly trumps your partial, state level decision which also in no way found Usana actually guilty of those same counts.

You're wrong. Usana was, by every definition, "legally vindicated" in this case, and unless you can prove the Court Order I just linked to above is a fake, you can not possibly defend this point.

Clements: The dismissal of the shareholder derivative / class action suits vindicates USANA. Serra: Whatever the merits (or lack thereof) of those suits, they have nothing to do with USANA's suit against Minkow.

The only thing I undertook to debate in the first place - I agree, the only thing I know enough to debate about - was USANA's claimed "legal vindication" in its suit against Minkow. There are lots of ways that class action and derivative suits can founder which are unrelated to the merits. Maybe those suits were decided on the merits, maybe not. If they were, maybe those merits were the merits of Minkow's arguments, maybe not. The one thing I know was that Minkow was not a party to them.

Minkow was most certainly a direct party to the distributor suit (see "Christopher Crane" section, Page 30, of this Rebuttal Report), and his report was directly responsible for the two shareholder suits. And you are simply ignoring facts already in evidence. We know why these two suits were dropped. The plaintiff's attorney agreed to drop the derivitave suit, and asked to drop the distributor suit! Do attorney's typically do that in class action cases if their case has any legal merit, Mr. Serra?

And I most certainly was not debating only the Campbell decision, nor did I even insinuate any such thing. I specifically and clearly declared Usana to be "legally vindicated". Nothing more. You then provided a snotty response challenging this claim, which I then defended by pointing out all the ways that Usana has been legally vindicated - which you now are apparently admitting you didn't know about. "Don't count all the evidence I didn't know about" may work after discovery, Mr. Serra, but it probably doesn't play well in this forum.

Clements: USANA really won against Minkow, since they got what they wanted. Serra: That is shameless post-defeat spin, since USANA made it clear (and Judge Campbell found as fact) that USANA cared most about disputing Minkow's observations about its business and products, which it ignominiously failed to do.

I keep saying that Usana would have still had to defend against these points had the stock manipulation case been heard, but you keep ignoring this point (in fact, after comparing your last response to my previous one, I've notices there are quite a few points I made that you made no effort what-so-ever to refute). Besides that, Usana obviously didn't need this libel decision for vindication against Minkow's claims because they had already gotten it from the SEC, NASDAQ, and three law suits they defeated!

Let's see if you can spin your way out of this point by asking the question this way: Had Usana's libel count gone forward, what could they have achieved that they did not already achieve by the actual outcome?

Delete ad hominem. How did you put it? Oh, yeah, "If you can't discredit your opposition's point, try to discredit your opposition."

Do you really not appreciate the hypocracy and irony in this repeated accusation towards me? Do you not recall that your very first reference to me on this board was as an "ignorant scammer"? While I do tend to lower myself to the level of my opponent - a fault in my conduct, I confess - the mud was first slung by you, sir.

And how could a court rule that something is or is not a plaintiff's "goal" (desired outcome)?

Well, I think you should ask Judge Campbell, who (as I quoted in my post above) rejected USANA's position that stopping Minkow's market manipulation was its real goal, and instead found that goal to be shutting Minkow up about its business practices and products - what she refers to as Minkow's "report". She went on to rule that USANA was unable to show even a "reasonable probability" of attaining that goal. Squirm, repeat and obfuscate as you will, that's completely clear.

Now I'm totally confused. My exact point was that Usana's "goal", their "desired outcome", was, and could only have possibly been, a Permanent Injunction against Minkow forcing him to remove his anti-Usana materials, cease and desist in producing more of it, and to never invest in their stock again. Now you rebut my point by claiming that the judge "found that goal to be shutting Minkow up". How in the world do you think your complete agreement with my point in some way refutes it?

I ask you again, Mr. Serra – and keeping in mind Minkow still owes millions in restitution to one of his past victims (Union Bank), so monetary damages are obviously not on the table – what more could Usana have gotten that they didn't get?

Yes, Minkow shorted Usana's stock. AND... he made $61,000 from those put options, AND... he was paid $250,000 by fellow felon Sam Antar (did I mention he, like Minkow, was convicted of stock fraud?) specifically for the anti-Usana report, who was also short Usana's stock, AND... Minkow was given a $100,000 "gift" by Antar, AND... this was all right before Minkow began his Usana investigation, AND... he was paid $50,000 specifically for the report by two hedge fund managers! And since you chose to defend this point, allow me to also include... Minkow wrote a negative report on Herbalife and shorted their stock right before the report was published, AND... shorted PrePaid Legal's stock right before his negative report on them was published! That's why the judge allowed the stock manipulation suit to go forward!

There. I left it all in this time. Happy?

No. Because you still haven't answered the question as to why, if you knew all of this as you now claim, you suggested Usana's stock manipulation suit was tenuous (based on "hints" from the judge), and only mentioned, within the context of this count's validity, that Minkow had "shorted their stock". You weren't trying to manipulate the reader into believing that's all Usana had on this count, were you? I have a better theory: You had absolutely no clue about all of this other evidence! Am I right?

And you are a senior USANA distributor over whose position controversy swirls concerning whether you bought your position from a previous distributor or whether USANA placed you in a vacant position ahead of hundreds of thousands of others in compensation for your tireless defense of them. I knew of this before my colleague webhick posted it, but didn't see the relevance in a discussion of facts and law.

You forgot to explain what changed your mind. Doesn't it still have no relevance? I mean, other than to "discredit the source" of facts you can't discredit?

For the record, I am not a "senior" distributor. I started at the same rank as everyone else. And there is no "controversy". This entire issue is a blatant fabrication manufactured by Steve Rotolante, a delusional, obsessed, anti-Usana nut case who has been lying about me and attacking me in hundreds of posts over several message boards for almost two years now. He's a classic internet troll who has zero credibility. Well, at least with people who actually think for themselves.

Since you insist on reposting what you posted about Minkow, I'll certainly agree (as I have in numerous other posts) that Minkow's motives are suspect due to his financial interest. However, there is no difference between Minkow's interest and yours. He has a financial interest due to his shorting USANA, and even if you got the position in accordance with established USANA procedures, you have a financial interest in the company's health. I, on the other hand, have none.

Interesting wording. So this now begs the question, Do you have a financial interest in their ill-health?

And, again, you are wrong. As you will see from this extensive list of rebuttal reports HERE, I defended Usana, and indirectly the MLM industry, many months before I became a Usana rep. The points I am making now are the very same. Furthermore, the proposition that my points should be less credible because I am defending a company, or an industry, that I am personally involved in is only, once again, an attempt to deflect from the point and diminish the credibility of its source.

We all know there was a sealed, private settlement. I was clearly and specifically referring to the Final Court Order granting Usana an injunction against Minkow issued by the judge! If this was all part of the private settlement, then why would the judge have ordered an injunction? Why didn't the judge just say, the parties have agreed to a settlement involving Minkow ceasing his attacks, and just allow the suit to drop? Again, Mr. Serra, this is not a rhetorical question.

OK, a non-rhetorical answer. A settlement isn't a court order. I have settled hundreds of cases over the years. If part of the settlement consists of injunctive relief - as it frequently does - then it must be "So Ordered" to have the power of the Court (and contempt relief if violated) behind it. It has nothing to do with any Court determination, since it was agreed by the parties.

You're right, a settlement isn't a court order. A COURT ORDER is a COURT ORDER! And again I ask, why didn't the parties just agree as part of their private settlement that Minkow stop his attacks? Wouldn't that have been legally binding? Why would Usana also ask for this COURT ORDER over and above what was already agreed to in the private settlement? Fine, I'll play along. Let's call it "injunctive relief". Call it what ever you want, but Usana got exactly what they would have gotten had the case went forward and they had won!

Enough. I don't have the time or the inclination to cover the ground necessary to explain the relationship between federalism, Erie, state-law claims in diversity cases and federal procedure to someone who thinks they have anything to do with a change of venue.

Whoa! Hold on. You were the one who insisted we debate this here, in this forum, Mr. Serra. We could have easily covered all of this in less than an hour on a live podcast, where I challenged you to take this. You were the one that suggested I was running from the debate. And now you decide you've had "enough"?

And what the hell did my comment about venue, which was specifically and directly in response to your claim that Usana chose to pursue their case in CA, have to do with all those other points? Getting desperate, are we?

But I agree. I think I've made my point, and I am confident that any reasonable, objective reader (should one actually exist on this board), will conclude that you have not made yours.

The last word, Mr. Serra, is yours. Knock yourself out.

Len Clements

[wserra]

I only address two things. As to everything else, since there is nothing new in your latest post, there would be nothing new in mine either. Folks can read and judge as is.

First:

While you would love to keep my "legal vindication" claim to only actual legal decisions handed down by a court, I am talking about "legal vindication" based on the laws of common sense, logic, and reason.

Thereby, of course, redefining the word "legal". Perhaps next you'll claim that USANA was "legally vindicated" based on the law of gravity, the law of averages, or the law of the jungle.

Second:

Even if I were to concede every point not involving an actual legal decision by a court of law (which I'm not), I would still have the federal court decision in Ashok Kapur vs. Usana et al, where the identical set of charges that would have still been in play had the Minkow case gone forward was found to not even be "plausible", and was DISMISSED WITH PREJUDICE!

Not, of course, the case involving Minkow. Nonetheless, I guess I gotta read it.

Having read it, I'm glad I did. (BTW, I also checked the docket to make sure that it's the final word. It is.) A comparison shows how the Minkow decision was in fact on the merits, while the Kapur decision was not. For those really interested, I suggest using the links to have both decisions open while reading this. I'll refer to the former case as "Minkow", and the latter as "Kapur".

(1) The respective issues as the Courts framed them.

Minkow:

USANA maintains that the case centers on illegal market manipulation, not the Defendants’ statements made in the report and after.

But the allegations in the amended complaint do not support USANA’s argument. In fact, most of the allegations arise from Defendants’ “public relations campaign,” in which Defendants made disparaging remarks about USANA’s products and business strategy. (See Am. Compl. ¶¶ 1, 25-48.) Because the manipulation, as described in the amended complaint, is clearly based on the report and Defendants’ statements about USANA, the basis of the lawsuit is the report and Defendants’ statements about USANA. (See id. ¶¶ 5, 32, 38.)

What’s more, USANA’s own pleadings in response to Defendants’ motions leave no
doubt that the essence of USANA’s claims centers on Defendants’ statements.
...
USANA must show “there is a reasonable probability [it] will prevail on the merits at trial” by “show[ing] both that the claim is legally sufficient and there is admissible evidence that, if credited, would be sufficient to sustain a favorable judgment.” ... The court “should grant the motion if, as a matter of law, the defendant’s evidence supporting the motion defeats the plaintiff’s attempt to establish evidentiary support for the claim.” (Citations omitted.)

Kapur:

To adequately plead that the defendant made a material representation or omission, the PSLRA [Private Securities Litigation Reform Act, a 1995 statute which makes it more difficult for a private plaintiff to pursue certain securities litigation - wserra] requires a plaintiff to “‘specify [in the complaint] each statement alleged to have been misleading, the reason or reasons why the statement is misleading, and, if an allegation regarding the statement or omission is made on information and belief, the complaint shall state with particularity all facts on which that belief is formed.’”
...
Specifically, the PSLRA increases a plaintiff’s burden when pleading two elements of a rule 10b-5 action: (1) a material misrepresentation or omission by the defendant and (2) scienter.
...
To sufficiently plead scienter under the PSLRA, a plaintiff must, “‘with respect to each act or omission[,] . . . state with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind.

The Court in Minkow thus inquired whether USANA could show a "reasonable probability" of prevailing on the merits, while the Court in Kapur looked at whether the plaintiffs had sufficiently pleaded their case.

2. The respective rulings.

Minkow:

USANA emphasizes that “Defendants knowingly released false and misleading reports . . . in an effort to manipulate USANA’s stock price.” (Pl.’s Resp. Opp’n Defs.’ Mot. Dismiss 7.) ... Without specific evidence to explain why this misstatement was material
and could have deceived the public—particularly when Defendants attached the lab report to
their report—the court has no basis to find that the statement establishes a violation of
California’s unfair competition law.
Similarly, USANA emphasizes that the report compares the antioxidants of a serving of
grape juice to a serving of USANA’s TenX bar. USANA declares—without any evidentiary
support—that this is misleading because “the only meaningful way to compare [differing foods] is gram-for-gram . . . .” (Pl.’s Suppl. Resp. Opp’n Defs.’ Mot. Strike 7.) But this assertion does not establish that the report is false. On the contrary, as USANA states in its brief, Defendants’ report explains that it is not comparing the products gram-for-gram, stating that the “‘test results showed TENX is just over 2 times stronger than 8 ounces of grape juice . . . .’” (Id. at 6) (quoting Compl. Ex. 1 at 12 n.32) (emphasis added). USANA’s remaining assertions of Defendants’ inaccuracies suffer from similar problems; they are hyper-technical statements representing differing interpretations of data, with no evidence tending to show how the statement was material.
...
Because USANA provides no evidence to illustrate why the purported misstatements
should create liability under the unfair competition law, USANA does not satisfy its burden of
showing a probability of success for its claim of unfair competition and the court grants
Defendants’ motion to strike this cause of action.
...
Consequently, the evidence now indicates only that Defendants engaged in the lawful
trading of securities. Because USANA did not meet its burden, the court strikes the second claim for relief under California’s anti-SLAPP statute.
...
USANA submitted no evidence of Defendants’ wrongful conduct or any evidence that
Defendants’ wrongful conduct harmed USANA’s business relationships.9 Because USANA
failed to meet its burden, the court strikes the third claim for relief.
...
USANA has offered no evidence tending to show that Defendants engaged in tortious conduct or that this conduct required USANA to incur litigation costs. Without any evidence to support the claim, USANA has failed to meet its burden, and the court strikes the fifth claim for relief.

Kapur:

In sum, there are simply no alleged facts in the Second Amended Complaint strongly suggestive of “intent to deceive, manipulate, or defraud.” Id. at 1259. Nor has Lead Plaintiff alleged facts that strongly insinuate conduct constituting “an extreme departure from the standards of ordinary care.” The court concludes that while “the inference of scienter [in this case could perhaps be] . . . reasonable or permissible . . . [it is not] cogent and compelling.... The court concludes that in failing to assert actionable federal securities law claims and to satisfy the PSLRA’s heightened pleading requirements, Lead Plaintiff has failed in her Second Amended Complaint to “‘nudge [her] claims across the line from conceivable to plausible.’” (Citations omitted) Accordingly, the court GRANTS Defendants’ Motion to Dismiss with prejudice.5

5 Lead Plaintiff indicated at oral argument that she was not interested in further amendments to the Second Amended Complaint.

In short, it is absolutely clear that the Court in Minkow ruled that USANA could not show a "reasonable probability" of prevailing on the merits. It is just as clear that the Court in Kapur ruled that plaintiffs had insufficiently pleaded their case. The Kapur dismissal is (as you put it) "WITH PREJUDICE" because plaintiffs declined the opportunity to further amend their complaint. Both Courts said as much in so many words.

Was USANA "legally vindicated" in Kapur? In the sense that the case is over - what counts most - sure. In the sense that the Court ruled that they were correct on the merits - no, because it didn't; if you read through the opinion, the Court repeatedly noted it did not decide the merits in view of the pleading deficiencies. Was USANA "legally vindicated" in Minkow? Clearly not.

BTW, how do you know that USANA didn't pay Minkow an additional $1M on top of the court-ordered costs and fees to settle the case? I'm clearly not defending Minkow - this is uncomfortably close to greenmail (or Ed Magedson of Rip-Off Report). But how do you know it wasn't the case?

One final interesting observation on the Kapur opinion. Early on (at p 3 of the 34-page opinion), the Court noted that the SEC had begun and terminated an investigation into USANA without bringing any charges. For the remainder of the lengthy opinion, the Court never mentions that fact again, and certainly never says anything like the Clements claim that this constitutes a "vindication" of USANA. Why? Because, as I've been saying, it doesn't.

[Nikki]

USANA logic (Boolean logic on KoolAid)

Kapur = not lost

not lost = won

won = vindication

QEDumb

[wserra]

Nearly three weeks. It seems that Dracula and Renfield have left the building.

[ohein56]

Nearly three weeks. It seems that Dracula and Renfield have left the building.

WFG, Matthew Hopkins, I presume?

I believe it's due to the hallways around here being quite too narrow to walk through comfortably.

Happy hunting...

[wserra]

I believe it's due to the hallways around here being quite too narrow to walk through comfortably.

Electrons are pretty small.

[WhiteKnight]

Len Clements comments on the USANA Ebay selling is a total perversion of what the EBAY analysis uncovered. Visit the actual website that explains the whole issue. http://www.geocities.com/terminatedramp/ebaydata.html
SEE THE CHART

Len Clement's Wrote

Rotolante surveyed eBay resellers of Usana products in June of 2007 and found that during that single month $31,795.46 of products were sold to non-distributor customers!

- No "SURVEY" ever took place.
- While the USANA product on EBAY sold for $31,795.46 for that month, it cost the those distributors dumping their inventory on EBAY $50,893.59 (DISTRIBUTOR'S COST). The analysis revealed that distributors LOSE MONEY.


Len Clement's Wrote

What's more, the HealthPak 100 resold for an average price of $60.01. That's the product that Minkow toted to several stores in his YouTube video and claimed was "comparable" to vitamin products selling for $29.95 to as low as $9.95.

- USANA Distributors pay $107.00 for the HealthPak100. For it to sell on EBAY for $60.01 on average is proof the distributors are "Losing Money".

Len Clement's Wrote

And keep in mind that Usana reps can return their product for a 90-100% refund, so the only reason they would sell to an eBay reseller (almost all of which clearly defined themselves as being such, and as not being a Usana distributor) is if their product is more than one year old, or is one of the two products Usana has reformulated in the last ten years (which they still could have returned at 90% for three months after the old product was discontinued).

- USANA Distributors are all told it is a violation of USANA's Policies and Procedures to sell the product on EBAY, so of course they would all state they are NOT distributors.
- Only on ONE occasion was the product being sold an "Expired" or "Old Formulation". The rest of the $50,000 worth of USANA product were "BRAND NEW" and did not expire for AT LEAST ONE Year.
- USANA has reformulated many of their products, and continue to do so each and every year.
- USANA Distributors cannot return the product for a refund unless they accept the fact that it cancels their distributor account and pisses of every single person in their upline because USANA has to take away the upline's sales points they accumulated from your mandatory 4 week purchases. THAT is why dumping it on EBAY is a better choice. It isn't worth risking the friendship you have with your sponsor since the sponsor is either a Friend, Co-Worker, or Family Member.


Len Clement's Wrote

So the fact all of this was aged, unrefundable, third-party product easily accounts for the difference between the price paid and actual wholesale. Yet, in spite of it being aged, unrefundable, third-party product sold by an anonymous eBay reseller rather than a personal acquaintance, $31,795.46 worth of it was STILL sold at a premium price to non-distributor customers who just wanted the product!

- Again, it is not "AGED". The product sold on EBAY is "NEW".
- Again, They are not being sold form a "THIRD-PARTY" because nobody else can accumulate $10,000 worth of USANA product unless they are a USANA Distributor who collects their downline's product from their PERSONAL SALES VOLUME requirements, and gets rid of it all on EBAY so they can atleast recover some of their cost while still maintaining a Commission Qualified Account with USANA.
- Yes, they are Anonymous Ebay Sellers because USANA would terminate their distributorships and other Distributors would SUE them.

USANA has been notified about the EBAY Sellers and have refused to take ANY action. USANA does not care what distributors are doing as long as they keep on purchasing USANA's products every 4-weeks to meet their Personal Sales Volume requirements. You see, These required purchases are the primary source of USANA's net revenues. If USANA enforced their own rules, USANA would collapse and all the distributors would leave. If you would like some insight about USANA's 5 customer rule which they do not enforce, then I suggest reading the following document:
Analysis of USANA's Five Customer Rule

[Arthur Rubin]

If you would like some insight about USANA's 5 customer rule which they do not enforce, then I suggest reading the following document:
Analysis of USANA's Five Customer Rule

Well, actually, there's a slight flaw in that analysis, in that it's not required that the five customers be different for each distributor. The company could have assigned 5 people as non-distributors, who would accept excess product below distributors' cost, and then resell it to the company outside the distributor-customer relationship. It's fraudulent in a sense, but it would allow the 5-customer rule not to be violated.

It's called "creative financing", the sort of thing Enron and Financial News Network were doing....

[MWave]

Len Clements comments on the USANA Ebay selling is a total perversion of what the EBAY analysis uncovered.

Face it, Steve. You have yet again tried to manufacture an "exposé" of Usana that has completely backfired on you. Your eBay report inadvertently did exactly the opposite of what you had intended. It not only provides strong evidence of a sizable market for Usana products beyond the reps themselves, you have also completely debunked Minkow's claim that Usana's products are so overpriced to "comparable" products that they have no resale value. Your eBay report is a disastrous blunder.

Rotolante surveyed eBay resellers of Usana products in June of 2007 and found that during that single month $31,795.46 of products were sold to non-distributor customers!

- No "SURVEY" ever took place.
- While the USANA product on EBAY sold for $31,795.46 for that month, it cost the those distributors dumping their inventory on EBAY $50,893.59 (DISTRIBUTOR'S COST). The analysis revealed that distributors LOSE MONEY.

You have completely evaded the point of my comment, which is what you always do when you have no rebuttal to it.

First, if you didn't go to eBay and search for Usana products, and then take a survey of the amount sold by these resellers, please explain how you came by this data.

You claim third-party, non-distributor customers to not exist. The POINT I made is that your report reveals that $31,795.46 of Usana product was sold to third party, non-distributor CUSTOMERS! That is, people who did not need to quality in the Usana pay plan, and only wanted the products!

Can you offer anything that actually refutes my point?

What's more, the HealthPak 100 resold for an average price of $60.01. That's the product that Minkow toted to several stores in his YouTube video and claimed was "comparable" to vitamin products selling for $29.95 to as low as $9.95.

- USANA Distributors pay $107.00 for the HealthPak100. For it to sell on EBAY for $60.01 on average is proof the distributors are "Losing Money".

Again, as always, you have fled from the actual POINT I made, because you can't offer anything to counter it.

Your pal Barry Minkow claims products that were "comparable" to Usana's sell for as little as $9.95. You both have repeatedly made the case that Usana products are so high priced that there can not possibly be any actual resale market for them. Yet, your report proves that the resale market (non-distributor customers) will pay a premium price of over $60.00 for the HealthPak100. How does your report not disprove your claim that end-user customers are perfectly willing to pay a premium price for Usana products?

And keep in mind that Usana reps can return their product for a 90-100% refund, so the only reason they would sell to an eBay reseller (almost all of which clearly defined themselves as being such, and as not being a Usana distributor) is if their product is more than one year old, or is one of the two products Usana has reformulated in the last ten years (which they still could have returned at 90% for three months after the old product was discontinued).

1. USANA Distributors are all told it is a violation of USANA's Policies and Procedures to sell the product on EBAY, so of course they would all state they are NOT distributors.

2. Only on ONE occasion was the product being sold an "Expired" or "Old Formulation". The rest of the $50,000 worth of USANA product were "BRAND NEW" and did not expire for AT LEAST ONE Year.

3. USANA has reformulated many of their products, and continue to do so each and every year.

4. USANA Distributors cannot return the product for a refund unless they accept the fact that it cancels their distributor account and pisses of every single person in their upline because USANA has to take away the upline's sales points they accumulated from your mandatory 4 week purchases. THAT is why dumping it on EBAY is a better choice. It isn't worth risking the friendship you have with your sponsor since the sponsor is either a Friend, Co-Worker, or Family Member.

1. This, of course, would offer no protection to a Usana rep at all since Usana need only purchase a single product from the reseller to expose their identity. Secondly, actual Usana reps would simply return the product to Usana for a 90%-100% refund rather than resell it on eBay for less. Thirdly, resellers and brokers of MLM products are common throughout eBay. Finally, you have not a single shred of evidence to support your ultra-biased, baseless accusation.

2. "Brand new" simply means it was still unopened. Please explain, Steve, exactly how many days or weeks beyond the purchase date of an unopened product would it no longer be "new"? Also, how do you reconcile your assertion that these resellers are lying about not being a Usana rep, and your complete trust in their claim that these products are not "expired"? It's funny to watch you flip-flop in what ever way serves your obsessive anti-Usana agenda.

3. You have made this claim on the Yahoo board, and I challenged you to simply name them. And you utterly failed there, so why did you think you'd get away with this blatant lie here? If Usana has reformulated "many" products, and continues to do so "each and every year", surely you can name five examples throughout the 16 year history of Usana, yes?

4. Not only is it hard to believe you are still espousing this patently absurd argument, but that you are not completely embarrassed by it. First, why else would a rep return their inventory except to discontinue their distributorship? Why would they care that it's cancelled by this return? This makes no rational, logical sense. And you are completely wrong about the returns being deducted from their upline's "mandatory 4 week purchases". Besides it not being a "mandatory purchase" (as you surely know), this returned volume is only deducted from the total points that accumulate in the upline's entire leg - which is simply displayed as a total number on the upline's commission report with no identifying data to show who contributed to it. Only the sponsor would know who returned their inventory, and obviously they would already know the person is quitting the business. Furthermore, thanks to various cold-market lead generation methods (such as the internet) the vast majority of people sponsored today are NOT "Friends, Co-Workers, or Family Members". And even if they were, and even if they would be upset enough by your quitting to damage your relationship with them (which is rarely the case, but which you wouldn't know since you've never actually been an MLM distributor and just make crap like this up, or parrot it from Jon Taylor), wouldn't just the act of quitting already cause this to happen, regardless of whether or not you got 90-100% of your money back from Usana?

None of these are rhetorical questions, but of course you won't even come within a light-year of actually answering any of them. You never do.

So the fact all of this was aged, unrefundable, third-party product easily accounts for the difference between the price paid and actual wholesale. Yet, in spite of it being aged, unrefundable, third-party product sold by an anonymous eBay reseller rather than a personal acquaintance, $31,795.46 worth of it was STILL sold at a premium price to non-distributor customers who just wanted the product!

1. Again, it is not "AGED". The product sold on EBAY is "NEW".
2. Again, They are not being sold form a "THIRD-PARTY" because nobody else can accumulate $10,000 worth of USANA product unless they are a USANA Distributor who collects their downline's product from their PERSONAL SALES VOLUME requirements, and gets rid of it all on EBAY so they can atleast recover some of their cost while still maintaining a Commission Qualified Account with USANA.
3. Yes, they are Anonymous Ebay Sellers because USANA would terminate their distributorships and other Distributors would SUE them.

1. So if it's just over a year old, but still before the expire date, and still in an unopened box, it still can't be considered "aged"? Please tell us, then, how old does a product have to be to be considered "aged"?

2. Of course someone else can accumulate this much product to resell on eBay - an eBay reseller! Besides them being resellers makes perfect, reasonable sense, they all claim right in their listings they are resellers and not distributors. Again, Steve, what evidence do you have that they are not?

3. Again, if they were incognito distributors Usana could so easily discover their identity, so this statement makes no sense on it's face. But your claim that distributor eBay sellers would be "sued" by other distributors is so pathetically desperate and ridiculous that it needs no further response.

USANA has been notified about the EBAY Sellers and have refused to take ANY action. USANA does not care what distributors are doing as long as they keep on purchasing USANA's products every 4-weeks to meet their Personal Sales Volume requirements.

Or, they can't take any action because they are not Usana distributors! Just as they claim.

Ah, but I keep forgetting. Perfectly reasonable explanations like this make no sense in your clinically delusional, upside down fantasy world.

BTW, Steve, everyone on this board has cowardly refused (or ignored) my offer to debate any of these issues in a live forum as well. You should fit right in.

Len

[wserra]

I find myself partially agreeing with Clements on this one. I didn't think I would be writing that anytime soon.

WhiteKnight's survey is interesting, but I don't think it proves much by itself - other than the obvious, which is that people are willing to purchase something from a semi-anonymous reseller like Ebay only if they pay less for it. That makes perfect sense, but applies across the board. I am sure that you would find the same if you looked at Ebay prices for non-MLM items - they will be significantly less than if purchased new through the usual sources.

I further assume (without having done any research, just because it makes sense) that perishables will fare worse in terms of the discount required than non-perishables, for obvious reasons. To prove your thesis - that Ebay prices reflect the degree to which USANA products are overpriced - you would have to compare the discount at which they sell with the discount at which other, non-MLM vitamins sell on Ebay. Then you might have something interesting. Your research similarly fails to support Clements' claim of "a sizable market for Usana products beyond the reps themselves", since that conclusion would also require a comparison with other similar products.

everyone on this board has cowardly refused (or ignored) my offer to debate any of these issues in a live forum as well.

Horsepucky. I refused to engage in a debate hosted in your living room, where you control the inputs, the recording and just about everything else. I similarly would not agree to an open-ended debate with you in any live forum concerning the MLM industry. You make your living as an MLM distributor and writer. I am a lawyer whose practice has nothing to do with any commercial matters, let alone specifically with MLMs. I have no doubt that you could pull all sorts of supposed statistics out of your hat, which I would need time to investigate before commenting. I'm perfectly comfortable discussing the law of pyramid schemes, or specific ones such as USANA - but, as to the specific ones, only after I have the time to investigate. That actually is why a forum such as this one is less histrionic and more analytical than anything live - because both sides have the time to investigate the respective claims.

[WhiteKnight]

Len Clements Wrote

First, if you didn't go to eBay and search for Usana products, and then take a survey of the amount sold by these resellers, please explain how you came by this data.

You claim third-party, non-distributor customers to not exist. The POINT I made is that your report reveals that $31,795.46 of Usana product was sold to third party, non-distributor CUSTOMERS! That is, people who did not need to quality in the Usana pay plan, and only wanted the products!

- You're right, "Survey" fits the syntax of the issue.

- Your point that there is a market to Non-Distributors doesn't matter because it has nothing to do with the entire premise of the argument, which is the fact that the Distributors are losing money because all the product sold far below the distributor's cost. Of course there is a demand for multivitamins and skincare products, but definitely not at a price at or above what the distributors are paying. The distributors are paying too much for the product.

Len Clements Wrote

Your pal Barry Minkow claims products that were "comparable" to Usana's sell for as little as $9.95. You both have repeatedly made the case that Usana products are so high priced that there can not possibly be any actual resale market for them. Yet, your report proves that the resale market (non-distributor customers) will pay a premium price of over $60.00 for the HealthPak100. How does your report not disprove your claim that end-user customers are perfectly willing to pay a premium price for Usana products?

Distributor Cost of HealthPak100: $107.00
Wholesale Cost of Healthpak100: $118.89
Suggested Retail Cost of Healthpak100: $128.40
Average Selling Price of Healthpak100 on EBAY: $60.01

And you think bragging about the Healthpak100 selling for $60.00 on Ebay proves that people are willing to pay a "Premium Price" for USANA Products and somehow proves Barry Minkow wrong??? You've got to be kidding me! It shows that distributors are paying too much for a product and are taking a huge loss.


Len Clements Wrote

1. This, of course, would offer no protection to a Usana rep at all since Usana need only purchase a single product from the reseller to expose their identity. Secondly, actual Usana reps would simply return the product to Usana for a 90%-100% refund rather than resell it on eBay for less. Thirdly, resellers and brokers of MLM products are common throughout eBay. Finally, you have not a single shred of evidence to support your ultra-biased, baseless accusation.

I'm glad you agree that USANA has the means to actual stop its distributors from dumping their inventory on EBAY. Since you are very close with Jim Bramble at USANA, why don't you ask him why he has not taken action against those top USANA Ebay Sellers? USANA Only need to spend a couple dollars to uncover who the sellers are, right?

Those USANA Ebay sellers don't need to return the product for a 90% refund because if they did, USANA would terminate their account. Why would a distributor who has a large downline and is making commission off of all those downline distributors return their own personal inventory if it terminates their account? Remember, USANA REQUIRES each distributor to purchase 100/200 sales points of product every 4 weeks. If the person never intended to use the product personally, then EBAY would be the place to at least recover the cost of that USANA Participation Fee.

If Resellers and Brokers of MLM products are common throughout EBAY, then I beg you, explain to me how these resellers accumulate over $10,000 worth of USANA product every month to sell it on EBAY? I've emailed many of these EBAY Sellers long before I "surveyed" the data. Many of those that responded stated they had too much inventory (but they were only doing a couple hundred dollars worth on Ebay). Those that were doing the extremely large quantities would not respond. So you want evidence? Buy something, charge it to USANA, and turn the USANA Distributor in for violating the USANA Agreement.

Len Clements Wrote

2. "Brand new" simply means it was still unopened. Please explain, Steve, exactly how many days or weeks beyond the purchase date of an unopened product would it no longer be "new"? Also, how do you reconcile your assertion that these resellers are lying about not being a Usana rep, and your complete trust in their claim that these products are not "expired"? It's funny to watch you flip-flop in what ever way serves your obsessive anti-Usana agenda.

Brand New means that there is still over a year until the product expires and since most all USANA products are made to be consumed in 28 days, then something expiring in a year is still new. If an Ebay seller lies about their product, they can be kicked off Ebay. Why would an Ebay seller risk that by lieing about the product Expiration Date? Also, how can the same person who sells thousands of dollars worth of USANA product on EBAY end up with "OLD" product? They are obviously moving the product, and doing it far below the distributor's cost.

Len Clements Wrote

3. You have made this claim on the Yahoo board, and I challenged you to simply name them. And you utterly failed there, so why did you think you'd get away with this blatant lie here? If Usana has reformulated "many" products, and continues to do so "each and every year", surely you can name five examples throughout the 16 year history of Usana, yes?

USANA's Lemon Bar was discontinued. USANA has discontinued its Dutch Chocolate and French Vanilla 14 Pouch Pack Nutrimeal™ Meal Replacement in the US and Canada. USANA Discontinued Advantra Z. USANA is Discontinueing their E-PRIME. USANA Reformulated their Essentials Product. USANA Reformulated their HealthPak100. Do you want me to continue Len???

I'm going to stop here for now and will write more either later today or after ThanksGiving. Len, have a great Thanksgiving and eat lots of turkey. gobble gobble...

[wserra]

An update based on certain current events: one of Clements' primary bases for his claim that USANA was "legally vindicated" in its fight with Minkow went like this:

The 10 month SEC investigation which Minkow's report initiated, which resulted in not only no action on the part of the SEC of any kind, they didn't even find enough merit in even one of Minkow's claims to upgrade their "informal inquiry" to a "formal investigation"!

He wrote the same thing in several different ways, such as "So the SEC would have absolutely investigated, and if warranted taken action on, Minkow's pyramid scheme allegation." I wrote about how the law does not permit such inferences from agency inaction, citing cases. Clements responded that it was a matter of "common sense", citing nothing.

Well, by now perhaps even Mr. Clements has heard of Bernard Madoff. Despite having "credible, specific" information against Madoff, the SEC completed its investigation with no recommendation of enforcement action.

I guess it's just "common sense" that he didn't do anything.

[Doc Bunkum]

I noticed soapboxmom the other day over on scam.com reminded Len Clements about this thread.

Someone started a thread there entitled Should all MLM programs be illegal? and apparently the Guru of Greatness took exception to some points raised.

As soapboxmom put it:

The great defender of USANA got kicked all over Quatloos.com. Now, he is here on Scam pushing Yoli and defending the MLM business model with such vim and vigor. Why the jump to the new snakoil when he was so hot on USANA and was given a repship at the top of the food chain?

Soapboxmom

Lenny apparently didn't think he "got kicked all over Quatloos.com". His version of the discussion on this thread is:

To readers of this thread that are actually here to investigate MLM and learn more about it, please be aware that Scam.com has a small but prolific (in some cases clinically obsessed) contingent of anti-MLM internet Trolls. They attack the MLM profession by making comments and accusations that are completely baseless which, when challenged, they won't even attempt to defend.

Also, when ever one of them links to something that supposedly supports their point, actually check the link! This is another little game they like to play. They know most of you won't actually click on the link and check it out. Rather, you're suppose to just assume that it surely must support their point, otherwise why would they link to it. For example, you're not suppose to actually go to the Quatloos thread that soapboxmom referred to above, you're support to just assume it supports her point. Go there and actually read the debate between myself and "WSerra" and see who actually got their ass kicked. It's a long read, but is educational and somewhat entertaining.

Yes, Lenny is entertaining in his own right.

Like this gem from the same thread.

And you apparently aren't even smart enough to understand that openly declaring that you think I'm using "big words" and "big paragraphs" to try to seem smart is an admission that we are not communicating on the same level intellectually! I know a lot of big words that no one here would understand, and I've always felt it was pretentious and pompous to use them in normal conversation. That's why I deliberately don't use such words, and actually thought I was communicating at a level commensurate with yours.

Rather than dumb down my responses, I'll include definition links to any "big words" just for you.

Good lord!

Lenny actually knows a lot of big words that none of us would understand!

When was the last time you actually saw somebody link to a dictionary to prove they actually know how to use one?

[wserra]

I know a lot of big words that no one here would understand
...
For example, you're not suppose[d] to actually go to the Quatloos thread that soapboxmom referred to above, you're support [supposed?] to just assume it supports her point. Go there and actually read the debate between myself and "WSerra" [between wserra and me] and see who actually got their [his] ass kicked. It's a long read, but is educational and somewhat entertaining.

Anyone can make the occasional typo - or even the occasional grammatical error - but it's bad form to brag about one's erudition and make several such errors in the same post.

And this is indeed a good thread. Exercise: see how many times Clements cites any law at all in his quest to show that USANA was "legally vindicated".