Forensic CPA And Certified Fraud Examiner Tracy Coenen Challenges Usana President On Distributor Loss Comments And Affirms FDI Findings In Newly Released Report.

SAN DIEGO -- The headline should read: Forensic CPA And Certified Fraud Examiner Tracy Coenen Challenges Usana President On Distributor Loss Comments And Affirms FDI Findings In Newly Released Report (sted: xxx Challenges Usana CEO).

The corrected release reads as follows:

Forensic CPA And Certified Fraud Examiner Tracy Coenen Challenges Usana President On Distributor Loss Comments And Affirms FDI Findings In Newly Released Report

The Fraud Discovery Institute (FDI) today released on its website a new report that challenges claims by Usana Health Sciences, Inc and confirms previous findings released by FDI.

Last week, during Usana's April 18th earnings call, President Dave Wentz stated in response to claims by senior citizens Jane and JC Bishop of losses of $5,000 as Usana distributors that such a loss could occur only if they "bought $5,000 worth of product and threw it in the garbage can."

Wentz's claims are clearly not the case according to a new report by Forensic CPA and Certified Fraud Examiner Tracy Coenen. The reports identifies Wentz's statement as a clear misrepresentation that is yet another in a "growing list of deceptions" by Usana. Ms. Coenen cites multiple examples of how distributors suffer material loss when they purchase non-refundable 'tools' (tapes, videos, DVDs, selling aids etc.), give away products, and lose profits from selling products at cost, at a discount, or at less than wholesale cost." According to Ms. Coenen's report, the fact that none of these costs are recoverable makes Wentz's statement during the April 18th earnings call "absolutely false."

"The underbelly of Usana has been covered up until Ms. Coenen's report," said FDI Co-Founder Barry Minkow. "The untold story of losses incurred by Usana's distributors lies in the significant expenditures for the books, tapes, videos and other tools pushed on distributors by the company in story after story that we have been hearing."

Other significant corroborating facts in the report include:

* The average income for North American Associates in 2006 was disclosed as $658.66. Apparently the company's mantra of "True Wealth" did not apply between 2005 and 2006, as the average distributor's income went down by 18%. Further, this figure is also calculated based upon "average distributors", so the actual average commission paid to distributors is less than $658.66 when we factor in all Usana distributors throughout the year.

* 87% of Usana distributors do not even earn enough in commissions to pay for their monthly minimum purchase requirements (required in order to be eligible to receive commissions). This figure speaks for itself. The bottom line is that the vast majority of distributors are putting more money into Usana than they can ever hope to get out. They may get some overpriced vitamins in return, but the bottom line is that this "business venture" is a money loser for the vast majority of Associates.

* 67% of Usana distributors never earn any commissions at all. All of the "average commissions" figures in the world can't tell potential investors and distributors this fact. Averages may be mathematically accurate, but they don't tell the whole story. Distributors have only a 1 in 3 chance of earning one cent of Usana commissions, and even if they do earn commissions, chances are it won't be enough to turn a profit (see point above).

* Gil Fuller, CFO of Usana stated on the most recent earnings call that only 12% of Usana Associates want to make money, and only about half of those actually try to make money. This is in stark contrast with everything else published by the company, with the following as a few examples:

* Recruiting literature touting "True Health, True Wealth"

* Recruiting literature overwhelmingly aimed not at vitamin consumers, but at those who want to build businesses

* Company promotions focused on "business building" versus the consumption of vitamins

Ms. Coenen closes the report by submitting a list of nine questions that Usana, based on their public company status, must be held accountable for regarding their business model. These questions about the company's business model include:

1. How much do distributors actually spend on "tools" purchased from Usana, other distributors, Usana insiders or other parties?

2. How many Associates and Preferred Customers were in Usana at any time during the years 2004, 2005, and 2006?

3. How does Usana calculate "average" associates?

4. On average, how long is an Associate and a Preferred Customer "in" Usana? (Let's define "in" as the time from sign-up until the last purchase of products.)

5. Since we know that "averages" can be misleading, please break down the numbers for us. Show us how many Associates in 2006 were "in" the company for one month, two months, three months, six months, nine months, one year, 18 months, 2 years, 3 years, 4 years, 5 years, more than 5 years.

6. While we're at it, please also disclose the commissions paid to the Associates at each of those milestones.

7. What was the average commission paid to distributors in 2004, 2005, and 2006 based upon all Associates active during the year?

8. Please provide the data supporting the assertion that only 12% of Associates want to build businesses, and that only about half of those put forth much effort.

9. What is the annual associate turnover rate?

Coenen's report 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.