Usana Shares Jump on SEC Inquiry Closure
Usana Shares Soar After SEC Closes Inquiry Into Business Model With No Action January 11, 2008: 12:06 PM EST
NEW YORK (Associated Press) - Usana Health Sciences shares soared
Friday after the nutritional and skin care products company said the
Securities and Exchange Commission had closed its inquiry into the
company's marketing model. Shares jumped $8.93, or 25.1 percent, to $44.50 in midday trading. In
addition to closing its inquiry, Usana said the SEC didn't take any
action against the company. The investigation began after a San
Diego-based investigator, Barry Minkow, accused Usana of fraud and said
its direct-marketing business model was a pyramid scheme. Goldman
Sachs analyst Simeon Gutman said the closure of the SEC inquiry "should
further put to rest any remaining concerns about the integrity of
Usana's business model." Usana sells its products to a network of
at-home distributors who recruit new employees into the network and
then receive commissions on the recruits' purchases. The
allegations were only one factor depressing the company's stock price,
which dropped 29 percent in 2007. During the year, Usana also was faced
with a lawsuit filed by independent distributors claiming they lost
thousands of dollars after buying business kits and products they said
could not be sold at elevated prices. That lawsuit is still outstanding. The
company's independent accountant also resigned as an auditor in July,
and several executives were forced to revise their resumes. 
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