Magnetic pitch attracts scrutiny.

Most people have probably never thought of magnets as possessing near-magical curative powers. But a company in West L.A. has.

Nikken U.S.A. Inc., in fact, appears to be making a killing off selling mattresses, pillows, shoe insoles, seat cushions and body patches with so-called "therapeutic" magnets.

The company does not have approval from the Federal Drug Administration, as is required to legally make medicinal claims about a product. But Nikken skirts that requirement by only implying, and never outwardly stating, that its magnets are health-producing. What the company does outwardly state is that it posted $41 million in sales in 1992 -- a figure which is backed up by credit reporting agency Dun & Bradstreet.

Nikken, which is in the business of selling "wellness" products, opened its U.S. headquarters on April 15, 1989 in a swank highrise in Westwood. The company is actually a wholly owned subsidiary of Nihon Kenko Zoushin Kenkyukai Corp., a Japanese company traded on the Tokyo Stock Exchange with a net worth of $7.5 billion, according to Dun & Bradstreet.

That Japan-based parent, which industry sources say is a household name in Japan, is also in the "wellness" business. But the parent's product line, which includes cookware and portable saunas, is much broader than that of its West L.A. subsidiary.

Skepticism is commonly expressed by consumer watchdogs and medical doctors when they hear about Nikken's magnetic treatments for ailments ranging from backaches to arthritis.

Nikken's credibility isn't helped any by the fact that its products are sold through a multilevel marketing (pyramid) organization, or by the fact that one of its top executive's last name is Proffit.

Larry Proffit, the company's vice president of marketing, has a ready answer for most any question, while admitting that public skepticism remains the company's biggest hurdle.

"Most of us were skeptical ourselves," concedes Proffit. "When I told my parents what I was doing, they said, 'Larry, you've got to be kidding.'"

Now, Proffit says, his arthritic parents swear by the company's products.

Medical doctors contacted by the Business Journal refused to be quoted by name, for fear of being sued. But off the record, they call the supposed curative powers of magnets "medical hocus pocus." They say magnetism is a far cry from anything they learned in anatomy, physiology or biochemistry courses and attributed people's sense of well-being after using Nikken's products to "the power of suggestion."

Proffit stresses that Nikken's products aren't for everyone, carefully pointing out that the company is forbidden by the FDA from touting within the U.S. borders the supposed medical benefits of magnets.

Promotional materials for the company claim only that the products produce a "restful and healthful sleep."

Proffit says he cannot discuss the medical studies that were supposedly done in Japan on magnets, nor can he discuss details about how Nikken distributors in Taiwan and Japan, who are free to describe the products as medical devices, promote the products.

In the United States, Nikken typically markets its magnetic wares by giving prospective customers a demonstration, or by loaning them a mattress to try out for a few nights.

The product "demonstrations," however, require prospective customers to take a mighty leap of faith. The demonstrations entail having prospects take off all their metal accessories (earrings, rings, belts, etc.) and lie face down on a Nikken mattress. A Nikken salesman then massages the prospect's back with a device that resembles a rolling pin with bumps.

After about 10 minutes of massage, prospects are asked to roll over and lay face up on the mattress. The prospect's head is laid on a pillow that is contoured to the neck and contains some 120 "curative" magnets and ceramic tiles to dissipate heat. Not exactly the ultimate in comfort, but the contouring does prevent outright discomfort. At this point in the "demonstration," the prospect (with back still atingle from the rolling pin treatment) is told that the sensation replicates the feeling of well being induced by a snooze on a Nikken mattress.

Depending on the size of the mattresses, anywhere from 72 to 144 magnets are embedded in its egg carton-shaped design. The mattresses are designed to give people a massage as they turn over in their sleep, says Proffit.

When asked what the magnets do, Proffit laughs at a question he's probably heard all too often.

"It's kind of like electricity," he says. "I don't know how it works, it just does."

No problem with overly technical responses here, as if Proffit anticipates that FDA inspectors will be evaluating his every word.

Seemingly to stress even more strongly that he is making no specific medicinal claims, Proffit points out that, when asked by his tingling prospects, "Is it in my mind, or is it the magnets?" He replies: "Who cares, if it works?"

Proffit undoubtedly realizes that his company is playing with fire when answering people's questions about the magnets.

His cautious approach seems justified in light of the less-than-sparkling track record of magnetic wellness in L.A.

The L.A. County District Attorney's Office came close to closing down a company called Japan Life a few years ago that was nearly identical to Nikken, reveals Louis Ito, a deputy district attorney. He says Japan Life sold the same types of "magnetic wellness" products using the same demonstrations and multi-level marketing methods.

County investigators, however, could never build a case that the company was promoting its magnetic products for medical benefits, he says. He says the California Attorney General's Office had told Japan Life repeatedly to "clean up its act" so, by the time the District Attorney's Office sent in undercover investigators to tape record the company's training sessions, there was no evidence of wrongdoing. Japan Life has since gone out of business, and some of its employees are now working for Nikken, reveals Proffit.

Judging from the 242 inquiries about Nikken at the Better Business Bureau of the Southland, prospective customers have not been shy about questioning the curative wonders of magnets. Yet, only four of those 242 inquiries became formal complaints and three of those were solved to the customers' satisfaction, says Lucy Hilliard, a spokeswoman for the bureau, which acts merely as a clearinghouse for complaints, not as an investigative agency.

She says three of the people who made complaints were given exchanges or refunds. The fourth claim was from a distributor who thought the promotional brochures should include the "medical benefits of the magnets."

Hilliard says the bureau does not recommend, endorse or disapprove of any particular products, but the bureau has asked Nikken officials to substantiate health claims regarding magnets and magnetism. She says the bureau received information on tests conducted in the Orient, but never did receive clarification on testing that was supposedly done at a major U.S. medical facility, as a Nikken promotional video claims.

As for the company's origins, the parent company was founded by a Japanese man in poor health who came across Japanese scientists studying magnetism, says Proffit. The founder, Isamu Masuda, formed Nikken's parent in 1975 with $15,000 and its first product was a magnetic shoe insole, says Proffit. Today, he says, the company's products are being sold in 12 countries. While Masuda remains president and founder of the Japanese parent company, a medical doctor in Japan is the chief executive officer.

Nikken's products don't come cheaply.

Mattress pads run from $300 for a twin size to $450 for a king size. Mattresses range from $490 for a twin "thin" size to $1,200 for a king "thick" size. A pillow is $120. A seat cushion is $120 or $140, depending on the size. Body patches -- which Proffit says have reduced wrinkles -- run between $18 and $90 apiece. Both its shoe insoles and a pair of magnetized metal balls that can be rolled around in one's hand are $60 a pair. Plus, Nikken sells a whole line of nutritional products. No doubt high in iron.

Proffit says the average order is around $1,000.

Although Proffit would not provide any audited financial statements on Nikken, Dun & Bradstreet's credit report gave the company high marks.

The credit report supplied by 21 vendors and dated Feb. 28, 1991, notes that there are no lawsuits, liens or judgments against Nikken U.S.A. Inc. What's more, there's been no record of financial difficulties for the business or the principals of the company. The president of Nikken U.S.A. Inc., Tom Watanabe, is listed in the credit report as having attended Brandeis University, the Massachusetts Institute of Technology and a law school in Tokyo.

The Dun & Bradstreet report also notes that Nikken has a healthy amount of working capital (current assets minus current liabilities) of $2.9 million. Dun & Bradstreet typically deems safe the granting of credit equal to 10 percent of a company's working capital. In Nikken's case, this would be equivalent to a $290,000 credit line. A spokesman for Dun & Bradstreet says that, although Nikken looks to be in "good financial condition," with a history of paying its bills, he would more conservatively recommend approving credit between $50,000 to $100,000.

Despite Nikken's apparent financial success, very few articles have been written about the company in the United States.

Proffit says the company has purposely discouraged publicity because it doesn't want to draw attention from drug companies, which are being hurt the most by the success of Nikken's relaxation products. Proffit expresses concern that drug companies might retaliate.

Instead of a high-profile national marketing campaign, the company relies on a network of some 30,000 distributors throughout the United States, who do their own advertising and selling through a multilevel marketing organization, better known as a pyramid.

Nikken has six levels of distributors in the United States. As a distributor generates more sales, he or she graduates to the next level and makes more and more money at each level.

Proffit says Nikken products are marked up 25 percent. And, as a distributor gets to higher levels, he or she receives a higher rebate from the company.

Proffit says two or three distributors in the United States have become millionaires.

Like Amway and other multilevel marketing organizations, Nikken pitches a way of life as much as it does its products. Its newsletters are devoted to articles on self-esteem and how to reach your dreams.

The company preaches five areas of wellness: physical, mental, family, societal and financial -- and company seminars are held on building healthy relationships and finding a purpose in life.

Proffit says he just tells people: "Try it. What do you have to lose?"