From Deseret News archives:

As stocks plunge, Usana sues Minkow over report

He's scheming to reap $$ from lower share prices, health firm says

Published: Saturday, March 17, 2007 12:00 a.m. MDT
 |  E-MAIL | PRINT | FONT + - 
After watching its stock plunge 15 percent on Thursday, Usana Health Sciences filed a defamation lawsuit against Barry Minkow, a San Diego resident, who has claimed that the Salt Lake-based multi-level marketing company is little more than an over-priced pyramid scheme.

In a complaint filed Thursday in U.S. District Court in Salt Lake City, Usana charges that Minkow authored and published a report "calculated to defame Usana and lower its stock price, so as to allow Minkow to benefit from his short position in Usana's publicly-traded stock."

Minkow distributed a 500-page report to officials at the U.S. Securities and Exchange Commission, the Federal Bureau of Investigation and the Internal Revenue Service.

The Wall Street Journal picked up the story, running it Thursday on the cover of its Money & Investing section.

That helped to fuel a sell-off of Usana's shares, which closed down $8.92 at $49.85 Thursday on the Nasdaq Stock Market. On Friday, Usana shares lost another 60 cents, or 1.2 percent, to $49.25.

"Minkow is simply looking to line his pockets based upon a hodgepodge of misinformation, half-truths and outright lies," said D.J. Poyfair, an attorney for Usana. "Usana is regularly identified as the gold standard in network marketing by state and federal regulators."

Story continues below
Minkow does not deny his stock interest in Usana. In fact, he said he disclosed his short position — 225 put options — in a letter to Usana that accompanied his report.

Usana issued a statement Friday saying that Minkow's campaign was financed by a paying client and Minkow will profit personally.

Minkow charges that Usana's senior management and directors exercised $95 million in stock options even as the company authorized $140 million in stock repurchases.

"None of that is illegal," Minkow said. "But where did they get the $140 million? From the people that they lied to and told that they were going to succeed in this multi-level marketing business. That's wrong. That's evil."

Minkow alleges that 85 percent of current Usana distributors are losing money and 74 percent of distributors fail within the first year.

"These distributors account for 86 percent of the company's multi-level marketing revenue," Minkow said. "In today's Internet economy, there is simply no need for multi-level marketing or the overpriced products that they sell, meaning that the only thing they are selling are memberships in anticipation that future memberships will be sold in the future, which is the classic definition of a pyramid scheme."

Comments

You can be the first to comment on this story.

previousnext

Latest comments

but, there's a 100% chance you don't know what you're talking about if...

Different year, same result! South Sevier you wanted it so badly to be your...

5A volleyball: Vikings snare title

You are right on one thing, PG is amazing and played amazing last night....

4A volleyball: Warriors top Flyers

What maybe one more year for Graft? Please make Alaina Parker the head...

Rookie's big game dooms Jazz

Size Centers =3 Agility Centers =4 Boozer = size of power forward but...

5A football: Darts edge PG

Congrats, want a medal or something? I also called the 1968 world series...

BYU does well with extra time to prepare and mediocre, average...

TCU 4th in AP poll; U. 16th, Y. 22nd

for definition of clueless, see mirror "if TCU were to play Florida or...

If you dont like the officiating, and you think there needs to be new...

Shakerin hits century mark

just fyi! everyone keeps saying that Shak got 2 injuries on his first run!...

Advertisements
Advertisement