It is nothing new for direct sales and network marketing companies to receive negative press, which often demonstrates a negative bias against direct sales or an influence by one of the media’s larger advertisers from a competing industry to the direct sales industry. Government authorities that may be interested in personal career gains have also found our industry is an easy target. Several of our larger public companies have fallen victim to class action suits by unscrupulous law firms who also find the direct sales industry to be vulnerable.

In recent months, three well established, proven network marketing companies, USANA, Mannatech and FreeLife, have found themselves victims of vicious, unfair attacks. What is behind these attacks? Are they part of a conspiracy?

The Network Marketing Business Journal (NMBJ) conducted interviews with the management of all three companies. Did we find an underlying conspiracy? The answer is both yes and no. I will give a brief review of each interview and then offer a few suggestions for everyone in the direct sales/network marketing industry.

USANA

In an interview with USANA’s Executive Vice President of Finance Gil Fuller, Executive Director of Finance Riley Timmer and Vice President and General Counsel James Bramble, two things became apparent. There may have been two motivations for the attack in the press.

First, USANA was chosen because it is one of the cleanest network marketing companies, perhaps even a role model. Approximately only 25 percent of purchasers of USANA products work to build the business, the balance just purchase products. Half of its 160,000 product purchasers are preferred customers. Distributors must have at least five retail customers to qualify for commissions. USANA is proactive in ensuring these policies and make sure that at least 70 percent of the products purchased are consumed before its representatives order more, per the Federal Trade Commission (FTC) versus Amway ruling. USANA does a five percent random audit each month. It also searches the Net for distributor false claims and violations. USANA has a 100 percent 30-day and 90 percent for a year refund policy. USANA seems to be a model direct sales company.

Then why did a March 15th article in the Wall Street Journal, written by Barry Mincow, of the Fraud Discovery Institute, attack USANA as an illegal pyramid scheme worthy of a FTC investigation with almost all of USANA’s sales to those participating in its income opportunity (internal sales)? Obviously, the facts don’t bear this out. Since March 15th, Mincow has released numerous other follow-up articles. What could be his motivation?

First, Mincow admits he was paid to do the article but refuses to disclose who paid him. However, several persons from Pyramid Scheme Alert (PSA) contributed to these articles, if not actually wrote them. These may include PSA’s president, Robert FitzPatrick, Douglas Brooks, an attorney, Jon M. Taylor, Ph.D. (a former Nu Skin distributor himself), and Tracy Coenen, CPA, CFE. They are on record as having a negative bias towards direct sales and network marketing for their own personal reasons. They have admitted to third parties, including Len Clements, that USANA was chosen because it is the cleanest model company and if they can bring USANA down, all other network marketing companies would be easy. The next question is why did they use Mincow?

Mincow is an ex-con, who is supposed to be reformed and runs a crusade against investor scams. Therefore, the Wall Street Journal and the rest of the national press would give his articles credence, even if the PSA was not known to be a credible source. One thing for sure, Mincow is an expert on investment scams. Mincow has as many as 57 charges of investment fraud himself. Was USANA part of a crusade against investment fraud or a victim of one?

Mincow admits he sold “puts” (contracts to sell USANA stock at current high prices at a later date in hopes that USANA stock prices would fall so he could by the stock cheap and sell it at substantial profits) and sold USANA stock “short” (selling stock without yet owning it in the hope to purchase it later for less than it was sold for). In fact, it appears that there may have been many short sellers of USANA stock and it worked. USANA stock has fallen from about $60 to $39. USANA stockholders have lost $350 million in USANA’s stock equity. Could these attacks be profit motivated?

Network marketing companies have been victims of class action suits and short sellers before. Recently, one of the largest legal firms that had conducted billions of dollars of such actions has come under fire itself. Could one of these lawyers been behind the attack? USANA wants to know.

USANA has provided the Securities and Exchange Commission (SEC) with the facts as to how Mincow’s and others’ appeals have attempted to manipulate the press against USANA to gain from his shorting the stock. This seems to be a blatant violation. USANA, of course, has been communicating with its distributors and sales have continued strong. The company also has placed a lawsuit against Mincow. By doing this, USANA should find out during the discovery process who paid him to do the articles and who is responsible for its investors’ loss in stock equity.

When asked, “As members of the Direct Sales Association (DSA), has the DSA been of much help,” Fuller, Timmer and Bramble said, “No, they sent out a press release for us, but the DSA asked what can they do?”

Mannatech

Recently Mannatech found itself as a victim of an ABC “20/20” exposé. In an interview with Sam Caster, founder, CEO and chairman of the board of Mannatech, he explained that the status quo health industry tries to paint a picture that its integrated health care approach is trying to take advantage of sick people. He says Mannatech has developed technology as a compliment to modern medicine and does not try to replace it. “We make it clear that Mannatech products are not designed to treat any illness. They are designed to increase the quality of life.” This is stated in all of Mannatech’s literature, at the beginning of its tapes and its meetings.

In the aired “20/20” interview, a testimony was aired of a health claim at a Mannatech meeting. It was not reported that the person was not a company official or a distributor; she was a retail customer. In fact, about 80 percent of Mannatech’s customers are consumers who never sign up anyone. The only logical conclusion is that they must be purchasing Mannatech products because they are getting a benefit.