Fraud Discovery Institute's Analysis of USANA

[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".