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Bad Business Under Jon Huntsman

As governor of Utah, Huntsman helped boost an industry that preys on victims with pyramid-scheme-like practices.

| Tue Sep. 13, 2011 5:00 AM EDT

Usana has had similar run-ins with investigators and has been the subject of numerous lawsuits accusing the company of being a pyramid scheme. The company's founder, Myron Wentz, renounced his American citizenship in the 1990s, reportedly to avoid paying taxes. In 2007, he owned 45 percent of the company's stock, which he held in the off-shore tax haven Isle of Man. Usana has been the subject of SEC probes, stemming from irregularities in its financial reporting.

In 2007, several of Usana's board members had to step down after revelations that they'd misrepresented their credentials in SEC filings. As it turned out, the company's chief financial officer wasn't, as he'd said, a CPA, nor was its "audit committee's financial expert." Another board member had to quit after the news broke that his Ph.D. was in forestry, not biology, as he'd claimed. Meanwhile, a "doctor" on its medical advisory board was forced to resign after the discovery that he had actually surrendered his medical license in 2004 to avoid disciplinary proceedings in Georgia. The company's accounting firm quit and Usana was threatened with delisting from NASDAQ.

Consumer advocates have called on the FTC to investigate the company based on information showing that the company's earnings are based almost entirely on recruiting new distributors rather than selling anything. (The Wall Street Journal found in 2007 that only 14 percent of Usana's products were sold retail. The rest were sold to the company's distributors, the hallmark of a pyramid scheme.) A Salt Lake Tribune study found in 2010 that distributors for Usana earned commissions of, on average, about $600 a year, while a tiny percentage of top sellers made more than $800,000.

The Consumer Awareness Institute's Taylor says that while Huntsman may have thought he was helping the local business community when he went to bat for these sorts of firms, he was instead furthering a scam that hurt thousands of people, both in Utah and far beyond its borders.

The Huntsman campaign did not respond to a request for comment on this story.

Taylor says he thinks Huntsman is a good man, but that the MLM industry is awash in money and has outsized political influence. Utah has the dubious distinction, he notes, of serving as home to more MLM companies per capita than anywhere else in the country. "When money controls the decision making" for politicians, including Huntsman, he laments, "this is just what happens."

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