SOURCE: Fraud Discovery Institute

May 02, 2007 17:25 ET

Fraud Discovery Institute Releases List of Contradictory Statements Made by Usana Management

FDI: Usana Health Sciences, Inc. (USNA) Is Tale of Two Companies

SAN DIEGO, CA -- (MARKET WIRE) -- May 2, 2007 -- The Fraud Discovery Institute (FDI) today released a new compilation of blatant contradictory statements issued over the past several years by the management of Usana Health Sciences, Inc.

"The company has misrepresented critical facts that both Wall Street and distributors rely upon to make decisions," said Barry Minkow, Co-Founder of the Fraud Discovery Institute.

In one example, Usana CFO Gil Fuller stated in a June 2005 earnings call: "We now have 125,000 active associates who are pursuing a home-based business opportunity." Myron Wentz, the company's founder, made a similar claim about business builders when he said: "I have no question that I made the right decision by launching Usana the way we did. Not only has it delivered true health to consumers, but it has also delivered true wealth to our associates."

However, during Usana's April 2007 earnings call, Gil Fuller appeared to back off the number of 125,000 business-building associates by stating: "So you only have something on the order of about 12% of people who get into this business with the intent of making money." Further adding to the mass of contradictions, Usana President Dave Wentz, in the same April 2007 earnings conference call, stated: "So making money for them [the associates] isn't the goal. Just covering the cost of their products may be the goal. For others of course, it's just customers with our survey. 75% joined just focused on the nutritional benefits, and 25% joined on the business aspect."

Are only 12% of the Usana associates trying to make money? "If so, how can there be 125,000 active associates building their businesses," FDI's Minkow asked. "This is significant because 86% of Usana's revenue comes from distributors, of whom only 12% are actually trying to succeed."

In another example, President Dave Wentz, in an April 2004 earnings call, provided the following assurance regarding the company's tangible commitment to research and development for its products: "I've encouraged Tim Wood, our Vice President of R&D to make sure that we stay on a leading edge with scientific products and so I've encouraged him to increase his clinical studies, increase his research to make sure that we're ahead of everyone else. And so I've asked him to continue to try to maintain a high percentage of R&D going forward, because at the fast pace of sales, that percentage would drop quickly and I want to maintain that we are a science-based and an advanced nutritional company."

"This assurance appears to be an empty promise," said Minkow. "Annually, Usana spends less than 1% of net sales on R&D. Our contention is that apparent misrepresentations are a pattern of behavior for this company. The examples above appear to bear that out."

The full compilation of contradictory statements, "A Tale of Two Usanas," can be read in its entirety at www.frauddiscovery.net.

About Fraud Discovery Institute

Over the past 5 years, the Fraud Discovery Institute and Barry Minkow has uncovered and stopped over $1 billion in financial fraud. With experience on both sides of the law concerning financial fraud, FDI is uniquely positioned and qualified to help companies and individuals as it relates to maters of fraud.

Once a fraud does occur, the costs in earnings, manpower, possibly hostile litigation, higher insurance premiums, and corporate credibility are hard to contain. FDI's proactive fraud detection and awareness program can save time, money, embarrassment, and potential damages in a class-action lawsuit.

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