Thursday, January 31, 2013

USANA Allows Distributors To Sign Up Under The Same Home Address and Credit Card - Recipe For Circumventing Foreign Laws

USANA Health Sciences, Inc (USNA) has virtually expanded their Multilevel Marketing (MLM) operation from about 19 markets to every market in the entire world.

A recently written internal USANA document reveals a secret policy that only insiders and several top distributors are aware of. This hidden policy allows over 15 active associates to use the same home address as well as using the same credit card. I cannot find this sort of policy mentioned anywhere on the web or through distributor literature. This policy essentially allows USANA distributors to sign people up into their MLM downlines within any country in this world including unauthorized markets such as mainland China, which has laws preventing their citizens from participating in MLM schemes.

Internal USANA document regarding address and creditcard enhancements states the following:
QUOTE
         Address and Credit Card System Enhancements
    - System enhancements took effect starting as of January 26, 2013.
    - As each of you are aware, in order to enroll as an associate in any market where USANA does business an associate must provide their correct address in country to show residency and to allow us to contact them.
    - In addition, downline purchasing is strictly forbidden, meaning an associate must pay for his or her own orders.
    - These policies are difficult to enforce at times because an associate may “lend” the use of his or her address to downline members allowing enrollments that do not meet residency requirements.  Likewise, an upline may use the same credit card to pay for all orders in an organization, thus causing compensation plan manipulation.
    - The compliance team has been charged with enforcing these rules but has found it difficult.
    - With project upgrade complete IT has been able to help this situation with two new enhancements.
    - First, as of January 26th the online enrollment system will not accept any address as a home address if that address has already been used by more than 15 other active associates.
          - Limited to main addresses only
          - however will not catch spelling or abreaviation differences
                - example: 123 Jon Boulevard vs. 123 Jon Blv.
          - The example would read as two different addressses
          - This will need to be evaluated and reported to compliance when noticed
          - This prohibition can be manually over-ruled by a DSR so that in the extremely rare circumstance that more than 15 associates truly do share the same address they simply need to enroll by phone.
          - A DSR will then verify that the address is really their address and can complete the enrollment.
    - Second, as of January 26th our online product order system will not accept as payment for product any credit card that is already in use on more than 15 active distributorships. 
          - This rule will not apply for the time being in Mexico or the Philippines until we are comfortable that we have a working solution in those markets for distributors who do not have a credit card. 
          - In addition, this prohibition will not apply to an associate’s first order as it is common for a sponsor to lend his or her credit card to a new associate and take cash as payment for the first order.
          - As with the first system enhancement, this prohibition can also be manually over-ruled by a DSR where the DSR speaks to the associate and the upline and verifies that the associate has paid cash to the upline and the upline authorizes use of the card.
    - Note that these enhancements do not represent a change in policy.  The policy remains that each associate must pay for his or her own orders and provide a legitimate address to enroll.  These enhancements simply will allow us to better enforce rules that were previously more difficult to enforce.
    - Kevin Guest and Deborah Woo informed each of the IDCs about this new enhancement in November and there were no complaints.
    -  Brent Neidig will be writing a compliance corner article to remind associates of these policies.
    - In addition associates who have previously had a practice of signing many people up at one address or with one credit card will notice the restriction.
    - Please make sure you are prepared to respond to these associates and help them understand the restrictions and that your DSRs, compliance and field development staff
UNQUOTE

DSR stands for Distributor Services Representative
IDC stands for Independent Distributor Council

USANA's 2012-2013 Independent Distributor Council (IDC) is made up of the following distributors:

Zak Ross – 10 Star Diamond Director
Simon Chan – 3 Star Diamond Director
Tony and Tammy Daum – 2 Star Diamond Director
Daniel and Paige Hunter – 2 Star Diamond Director
Jordan Kemper – Diamond Director
Tom and Lorie Mulhern – Diamond Director
Jared Creds – Ruby Director
Soomin Kim – Ruby Director

USANA is only talking about restricting their ONLINE ENROLLMENT SYSTEM from allowing associates to sign up more distributors under the same address if they already have 15 active associates sharing that address. Obviously distributors have been doing this or else USANA would not have to put in place a limit on the online enrollment. Does it really matter though since all the associate has to do is call USANA's customer service to get an override.

This policy outlined in the internal memo about allowing over 15 associates sharing the same address contradicts USANA's published policies and procedures which states the following:
QUOTE
3.13 One Distributorship
 
An Associate may operate, receive compensation from, or have an ownership interest, legal or equitable, as a sole proprietorship, shareholder, trustee, or beneficiary in only one USANA Distributorship. However, notwithstanding this rule, your spouse may become an Associate and operate a second distributorship as long your spouse’s distributorship is placed below one of your business centers and not in a cross line sales organization. The second business must be a bona fide independent business that is operated by the person listed on the agreement and not by the owner of the first business.
UNQUOTE

Now unless USANA executives have been watching too much "Sister Wives" on The Learning Channel, there is no way somebody has 4 spouses let alone over 15! So aside from polygamy, USANA's policies and procedures limits a household to only two distributor accounts. The policies and procedures USANA publicly publishes serves as nothing more than lip service to federal regulators. USANA's unpublished set of policies shown in these internal memos are the real policies that the federal regulators should be interested in.

A couple years ago there was another internal USANA document regarding compliance and training for their employees that makes the following contradictory statements:

QUOTE (my emphasis in red)
VII. Questions from DSR
II. When can we get the computer to list accounts with same address, phone, ssn, etc.
 
i. We already have access to most of that information, it just doesn’t automatically show us it. We have spoken with IT and the more actions we place on the system, the more burdensome it becomes and the slower it  operates. So for now, we have to run our own little reports to try and find multiples.
UNQUOTE

At the time why would USANA be interested in finding distributor accounts that share the same address? USANA admits they have access to the information and is fully capable finding these "multiples". Obviously there was a problem back then with associates using the same home address.

Lets look at another quote regarding credit card fraud and usage.

QUOTE (my emphasis in red)
III. Fraud
iii. Credit card usage

1. If someone is trying to use a card other than their own, do not let them. There have been several instances of fraud lately where people’s cards have been stolen and used to purchased product.

2. A good response would be: “I noticed that the name on this card is different than your own. You may not be aware of this, but recently there have been several instances where credit card fraud has taken place. Because of this, we are trying to increase our associates protection by only allowing the account holders credit card to be used  on their account. So unfortunately I can’t let you use this credit card. I know it may be a bit inconvenient, but I’m sure you would be glad if we
stopped someone else from using your card on their account without  your authorization.”


VII. Questions from DSR
III. How rampant is credit card fraud in the system?
i. Lately we have had several issues with Fraud. I don’t have an exact  number on how many issues we have, but it is a growing concern. As a result, we are currently working on changing our credit card policy to ensure an added level of protection for our associates.
UNQUOTE

According to USANA's 2010 internal document, credit cards can only be used on the card holder's own distributor account. Here USANA discusses trying to tackle credit card fraud. Yet, in their latest internal document just recently written they allow over 15 active associates to all use the same credit card.


So why does any of this matter at all? For starters, it allows a distributor to recruit anyone from anywhere into their downline. All they have to do is use the sponsoring distributor's address and credit card. The sponsoring distributor is simply reimbursed by those in his or her downline who reside in countries that are not authorized to participate in MLM companies. This leads me to China.

For several years now I have been writing on my blog about mounting evidence that USANA has been signing up Chinese Nationals into their MLM compensation plan. It is against the law for Chinese Nationals to own or operate a MLM distributorship. USANA is not authorized to conduct MLM activities within mainland China.

So one possible way USANA can circumvent China's laws is to sign up Chinese Nationals in other countries such as Hong Kong and use the sponsoring distributor's Hong Kong address. By doing so, it removes any paper trails within USANA's computer system and from auditors eyes. The shareholders simply see USANA's Hong Kong market rise sharply while the rest of USANA's markets hold steady or even decline. This sharp rise in sales and distributorships in Hong Kong sends USANA's stock price soaring. When the price is right, insiders dump millions of dollars worth of stock (Myron Wentz sold over $30,000,000 in November and December).

In November, Citron Research released evidence of Chinese Nationals being recruited in USANA's MLM compensation plan by a distributor from Hong Kong. Each of the Chinese Nationals used the address of the distributor from Hong Kong. They were also instructed to open up bank accounts in Hong Kong as well. This internal memo is strong evidence that USANA has in place a policy that allows for such questionable recruiting activities. USANA filed a response with the SEC regarding the Citron report and simply stated that they operate BabyCare Ltd. in mainland China and do it legally. USANA's response diverges from the actual issue, which is the recruitment of Chinese Nationals into USANA's MultiLevel Marketing plan through Hong Kong, not the BabyCare SingleLevel Marketing plan already established in mainland China.

With unethical hidden policies like these it's no wonder USANA executives are leaving like rats on a sinking ship. Someone should ask USANA during their financial conference call next week "how many associates share the same address with three or more other associates and what percentage of net sales did they account for."

I'll finish with one of my favorite non-disclosures by USANA revealed in the older internal USANA document:
QUOTE
IV. What is the biggest market that buys our products that we are not eligible to operate in?

i. Once again I couldn’t give you an exact answer on this. Since I work with our Asian markets, I know that a large sum of product ends up in China, but I’m sure product somehow gets shipped to other unauthorized markets as well…
UNQUOTE

A Large Sum sounds like a lot to me.

Now that the FTC has shut down MLM company Fortune Hi Tech (FHTM), could USANA be next in their sights? I will discuss this in my next article.

Disclosure: I have no stock position in USANA or any of their competitors. I have never and will never hold a stock position with USANA. I am not paid to write this article. I make no money from this blog. I have never and will never be a USANA distributor or a distributor of any other MLM company.

17 comments:

  1. Nice blog post. Have you heard about Herb Greenberg doing a piece on USANA?

    ReplyDelete
    Replies
    1. No I haven't. If he is, I would be interested in a dialog with him. I believe I have more research and analysis done on USANA than anyone else in the world.

      Delete
  2. And just how do you get your hands on so called secret information reserved just for the elite distributors?

    ReplyDelete
    Replies
    1. Many years of research experience, that's how.

      Why does USANA have two sets of contradicting policies, one available to the general public and federal regulators and the other available only internally at USANA which the Independent Distributor Council is privy to.

      You know the 4 executives that left USANA and founded the MLM Ariix? They only allow 1 distributorship per address. I'm starting to think the reason USANA executives are leaving is because of these screwball policies that are highly questionable and that open the door to massive fraud in unauthorized territories such as mainland China.

      I know I know, shoot the messenger, right? Why else would you only question where the information was obtained instead of the details pertained within?

      Delete
    2. again mr.usana watch dog
      u didnt answer the question.

      if u said u got this secret information, how did u get it.

      usually the people can get this are inside, a usana distributor.

      meaning u are a usana distributor as well,
      most likely with a high position in usana that have been given this note.

      *rolled eyes*

      Delete
    3. Last time I gave up my sources or methods, I was no longer able to get any more information. I'm not going to give up my sources or methods this time.

      I'm definitely not a USANA distributor. People who believe in the tooth fairy make more money under their pillows than most USANA's distributors. Two thirds of distributors don't get paid any commission according to USANA.

      Delete
  3. Thank you for your hard work on this matter. We really need to get this information viral. I feel for anyone about to buy shares or invest in becoming a "distributor".

    ReplyDelete
  4. good job watchdog on the research.. It's also hard to answer these questions by brainwashed associates... I get irritated just reading their questions because they're always trying to attack you yet you still answer with truth and composure...

    like the question on top.. the answer to it is written in their bds kit that you get when you sign up for $19.99... they're always trying to attack your credibility when all you put on here is facts and truth.. Usana associates have no counter to your facts because we all know that the truth and the good will win in the long run..

    ReplyDelete
  5. I am the poster above who asked how watchdog gets their hands on secret information.

    I am not shooting the messenger and I do also beleive the Usana business is a scam.

    One can research a company all they want, but getting access to confidential internal documents is another thing all together.

    I am glad the watchdog is posting this information as the information is valuable. The only 2 deductive ways that the watchdog can gain access to this confidential material posted in this post and in some of their other posts that also include confidential material is if either the watchdog has a high ranking source within Usana, or if in fact watchdog is one of the elite distributors for Usana, which I find very unprobable that he/she is a distributor.

    Asking how one gets access to confidential information is a legitimate question, especially in a forum like this. The response of "through my research" is too vague.

    I do like the information posted on here but the more vague you are about how you get your information, the more skeptical one becomes of the authenticity and credibility of content.

    ReplyDelete
    Replies
    1. I've explained in the past how I got certain information or figured certain things out, and weeks later those sources or methods are no longer available. So now when it comes to information like this I won't give away my methods or sources.

      As for Authenticity or credibility of the content, I provided a direct link to the internal document on USANA's website. The information on the direct link can't be any more authentic or credible than that.

      Delete
  6. I just joined USANA, I read Usana Watchdog's blog but I joined anyway. Now I'm stuck with a lot of Vitamins at home! My upline wants me to expand but I myself is not even convinced that you can earn a lor of money in this business! I regret I joined Usana 😭
    When they were telling me to join they told me its not about business but product movement! Now that I'm in they are telling me to recruit so I could get commissions. I should have believed what I read in this blog and other's too. What I read is all true! the consumers of usana are actually their members! I used their products and i find it good but I feel sad because of their marketing policy..
    I just hope I could sell all the vitamins I have so I could get my money back

    ReplyDelete
    Replies
    1. Sorry you had to experience it for yourself, but that is usually the best way to learn. Good luck trying to sell the remaining products you have. Ebay is what many distributors and ex-distributors use to clean out their inventory. Have you tried to return the product to USANA? If you have, did they refuse to accept it back due to "unresellable conditions"?

      Delete
  7. About the mainland China thing I can tell you its true they have it under Baby Care Usana something like that..

    ReplyDelete
  8. To the poster above who just joined. Dont beat yourself up to much and just get out before you waste any more time. Forget about what your upline is telling you, they are only looking out for their best interest and not yours.

    Try returning the products back to Usana directly and cancel your distributorship. I think you have 30 days to recoup a lot of your money. Read Usana's return policy before you call them so they cant pull a fast one on you. You wont be able to return the starter kit but should be able to get money back for the product assuming it hasn't been a lot of time.

    If they for whatever reason wont take the products back, either use them yourself for as long as they last, or dump them on ebay or craigslist as so many others distributors have done.

    ReplyDelete
  9. I think that watch dog is in fact working at Usana most likely as IT support. Here is why:
    - he has partial knowledge with numbers but fails when it is a matter of expertise
    - he has web skills
    - he has access to the network and therefore to email information
    Or someone close to him works there, in this case, most likely as an admin.

    You have better? Post it!

    ReplyDelete
    Replies
    1. Maybe I'm one of Myron Wentz's children that he never speaks of.

      Delete
    2. Lol watch dog. That's a funny one which is going to be hard to beat. I now have that picture of the long lost son/daughter (my bet is daughter) that just finds out who the father is, tries to have a reunion and gets rejected. You could imagine the rest along the following lines: the son/daughter makes a blog to discredit his/her father work and after 6 years of conflict, revises its strategy and joins Usana to beat his/her father at his own game. 6 years have passed and the son/daughter is now a 10 start director fighting its father for control of the executive board. He/she can now get its revenge.
      :)

      Delete

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