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United Sciences of America (USA) was a multilevel company based in Dallas, Texas. When it began marketing, its founder predicted gross sales of $150 million for 1986 and $1 billion by 1989 -- which would have made it the fastest growing company in U.S. history. Anyone could become a distributor by completing an application and paying $24.50 for a Success System Kit and Manual. By August 1986, USA claimed to have over 100,000 distributors and gross sales in line with its predictions. The company also set up a research foundation to generate research through grants and office-based studies. Its story is interesting because USA was the first MLM company to use high-tech videotapes and a prominent scientific advisory board as sales tools and was also the hardest hit by government regulators.
USA was founded by Robert M. Adler II, a Dallas businessman who had become wealthy by developing a computer that dials phone numbers and engages in interactive messages. USA's corporate brochure listed nine co-founders, including:
USA's corporate brochure listed 14 scientific advisors in addition to Dr. Good:
Most members of USA's Scientific Advisory Board were attracted by what they perceived as an opportunity to advance the cause of preventive medicine and the promise that more than $1 million a year in research funds would be made available to the scientific community. However, several members became upset that USA was using their presence on the board for marketing purposes. Between June and December 1986, Drs. Axelrod, Braunwald, Good, Henderson, Karmali, Leaf, and Schally resigned. Some were upset about USA's marketing practices, while others were concerned about unfavorable publicity the company was receiving.
According to Dr. Fisher, some of them and most of the remaining board members believed that supplements of the type promoted by USA could have valuable preventive health benefits -- and most of them used one or more of the company's products.
Most board members received annual stipends of $10,000 to $20,000 in return for attending one meeting a year and furnishing advice when requested. In line with USA's announced intention to generate nutrition-related scientific research, the USA Research Foundation awarded $100,000 grants for studies involving antioxidants or fish oils. The first 12 grants went to Drs. Leaf, Pryor, Cerutti, Good, Packer, DeBakey, Axelrod, and five other scientists who were not members of USA's Scientific Advisory Board.
USA's corporate brochure depicted it vice president of science and data information, John A. Wise, PhD, standing in a room full of computers. The brochure stated: "Never before has a nutritional base so complete been assembled by a single company. The USA computerized in-house index now holds complete information on every known vitamin, mineral, chelate, protein, antioxidant, amino acid, carbohydrate, electrolyte and dietary fber known to modern science."
I don't doubt that USA had information stored in an in-house computer, which I assume was a desktop model. However, the huge array of mainframe computers pictured in the brochure belonged not to USA but to Dialog Information Services of Palo, Alto, California.
The company's press packet stated:
At the heart of United Sciences of America, Inc.'s broad-based nutrition program lies its products, four state-of-the-art nutritional formulations that are based on over 50,000 published research and clinical studies interpreted by some of the world's foremost research scientists . . . to come up with the right amounts of nutrients to promote optimal health without any risk whatsoever of toxicity.
The four products were:
A kit containing a month's supply of the four products cost distributors $100 and "retailed" for $135.
In 1997, the American Council on Science and Health asked 48 of its advisors to examine USA's formulas and to complete a detailed questionnaire about one of them. (Twelve advisors were assigned to each product.) A total of 28 questionnaires were completed: Master Formula (10); Formula Plus (7); Calorie Control Formula (8); and Fiber Energy Bar (3). All 28 advisors felt that USA's marketing materials contained claims for product ingredients that were false, unproven and/or premature. In most cases, the advisors felt that the product formulations were irrational and that it has not been established that long-term use is safe.
Those who reviewed the Master Formula disagreed that it provides the body with the right nutrients in the right amounts or increases immunity in people whose diets contain the Recommended Dietary Allowances of essential nutrients. Those who reviewed Formula Plus felt that fish oils may turn out to have value in preventing or treating various conditions, but no data exist to recommend supplements for "everyone over 30" as USA recommends. Some who reviewed the Calorie Control Formula felt that "meal substitutes" are useful in weight control programs, while others felt they are not. Two advisors who commented on the fiber energy bar did not believe that daily long-term use would be beneficial, while the other said that insufficient data are available to evaluate the product.
According to an article in the February 1986 Inc. Magazine, Adler was aware that multilevel marketing had pitfalls and supposedly took steps to avoid them. He enlisted a scientific advisory board to help design USA's products, Mark Albion to design its sales program, and Jerris Leonard to provide legal guidance. And "to eliminate hyperbole on the part of overeager salespeople," USA produced videotapes for presentations to prospective customers.
From a marketing standpoint, the videotapes were impressive. The Company Introduction Videotape was narrated by William Shatner (Captain Kirk of Star Trek) and included scenes of a space rocket launching, a giant computer bank, scientific laboratories, prominent medical institutions, and medical journals. Shatner alleged that "our food, water and air are becoming contaminated" by chemicals ("toxic killers"), that cancer is on the rise, that our soil is being depleted of "vital, life-giving nutrients and important earth minerals," that one out of every three families will be stricken with some form of cancer, and that two out of five people will die of heart disease or stroke. Then he described how Robert Adler had developed a "brain trust of medical and scientific experts who have pioneered one of the most dramatic programs in the history of nutritional science . . . Their mission is clear: to develop a complete nutritional program to protect us from the growing dangers that are threatening the health of our nation." Shatner also suggested that investing in USA's program would result in "looking your best, feeling maximum physical energy and mental well-being, enjoying total health."
The Business Opportunity Videotape was combined with the Company Introduction into a 26-minute videotape. William Shatner explained multilevel marketing and stated that "the potential profits are staggering because the growth is geometric." Mark Albion suggested that anyone using USA's marketing package properly would be successful, and "with a medical and scientific credibility, United Sciences, Inc., is destined to become the IBM of nutrition." And five prominent athletes -- Joe Montana, Gary Carter, Chris Evert Lloyd, Bill Rodgers and Steve Garvey -- invited viewers to "join USA's winning team."
The Medical Library Videotape was a 90-minute tape in which Dr. Fisher answered about 100 questions about USA's products and the relationship of nutrients to disease. According to the tape's narrator, "Nutritional science is expanding so rapidly that only a company with USA's state-of-the-art computer technology and USA's advisory boards, comprised of world-leading medical doctors and Ph.D. researchers can properly inform the public."
Before the tapes were produced, USA released a 20-page Company Overview that described its purposes, scientific advisory board, research base, products, research goals, and marketing strategy. The company was described as "a major new entity with a revolutionary health concept." Its corporate mission was "to provide all Americans with the potential of optimum health and vital energy through state-of-the-art nutrition." The company was said to have established "the world's largest computerized data base in clinical nutrition" in the following manner:
USA's team of Ph.D. researchers searched and reviewed the collective data of more than 5 million references in 14,200 medical and scientific journals covering 150 countries . . . From this powerful body of clinical evidence came USA's own in-house index of 30,000 scientific studies covering 250,000 pages of documented research which was condensed to 10,000 pages of categories and studies . . . Never before has a nutritional information base so complex been assembled by a single company.
The Company Overview stated that media interviews with scientists and superstar athletes, combined with articles in major publications were "expected to elevate USA Inc.'s extraordinary concept into a new national movement." USA's Profit Plan was "designed to encourage all product-users to go into business for themselves -- with a minimal financial investment and without risk." It also offered "a vital new life -- and financial freedom for all who become involved."
USA also produced a 2-page flyer described the company's products and listing its scientific advisory board. According to the flyer, Harvard's Dr. Leaf called USA's products "the most complete nutritional program I have ever analyzed." Similar statements were attributed to him in USA's corporate brochure and sales manual.
Armed with all of this information, distributors who joined early placed classified ads in USA Today, The New York Times, American Health magazine, and many other publications. A typical ad would read: "Achieve optimal health and financial freedom selling nutritional and weight control products endorsed by Nobel Prize winning physicians and world class athletes." People who responded would be asked to invest up to $25 for an information packet that included the introductory videotape.
During the company's first six months, I bought a distributorship, attended a seminar at the company's headquarters, and spoke with about 20 active USA distributors. All believed strongly that USA's products had been designed and endorsed by the company's Scientific Advisory Board and that the products were effective against a wide range of health problems mentioned in USA's Medical Library tape. Most claimed that the products had made them more energetic, and one was absolutely certain that the Master Formula "removes the toxic pollution stored in your fat cells" and that Formula Plus "cleans the cholesterol from your veins."
USA's marketing program aroused the ire of Fredrick J. Stare, M.D., Ph.D., Emeritus Professor of Nutrition at Harvard University School of Public Health, and John H. Renner, M.D., president of the Kansas City Committee on Health and Nutrition Fraud and Abuse. In the September 1986 issue of Good Housekeeping, Dr. Stare accused USA of "peddling unnecessary supplements and calling it a breakthrough," and in the October 9, 1986, New England Journal of Medicine, he charged that "USA seems to want to outdo others in person-to-person peddling of unnecessary or unproved diet supplements." In the same journal, Dr. Renner wrote:
I doubt that United Sciences' products are "a highly effective program for optimal health." As far as I know, they were not tested before marketing. Moreover, an optimal health program should involve more than high-priced food supplements, protein powder, and candy bars.
These criticisms stimulated many other publications to examine what was going on. Invariably, they concluded that USA was making false or misleading claims for its products. This criticism, plus the resignation of several USA advisors, forced the company to announce that it would stop distributing virtually all of its promotional materials.
On October 28, 1986, NBC-TV broadcast a devastating exposé in which Dr. Leaf denied endorsing USA's products. Dr. George Bray, a prominent nutritionist, said he had suffered a near-fatal anaphylactic reaction to the Fiber Energy Bar. A Texas dietitian reported that USA products had made her quite ill. And the program's narrator, Connie Chung, said that USA was being investigated by the Texas Attorney General and the U.S. Food and Drug Administration.
Actually, the Texas Attorney General's Office had merely decided to investigate but had not begun to do so. But the TV program produced an avalanche of inquiries that stimulated a full-scale investigation. The program also curtailed USA's sales. Within a month, the company was headed for bankruptcy.
On December 12, 1986, the FDA sent a strongly worded regulatory letter ordering USA to stop suggesting that any of its products are effective in the cure, mitigation, treatment, or prevention of disease. The agency said that claims of this type in its videotapes made the products "new drugs" that are illegal to sell in interstate commerce because they lack FDA approval. In addition, all of the product labels were defective in other ways.
On January 21, 1987, USA petitioned in federal court for Chapter 11 bankruptcy, listing total assets of $7,300,000 and liabilities of $8,600,000. (The purpose of this type of bankruptcy is to stave off creditors to give the company time to restructure its indebtedness with the hope of remaining in business.) The petition named Robert Adler as sole shareholder and director of USA, Inc., and Jerris Leonard's law firm as its eighth largest unsecured creditor, with $121,379.69 owed. No official sales figures were released, but press reports suggested that USA's 1986 gross income totaled $60 million.
On January 28, the Attorneys General of Texas, New York and California filed suit in their respective states, charging that USA, Inc., had made improper claims for their products and that their sales plan constituted an illegal pyramid scheme. In addition, the Texas suit charged that USA had not properly registered as a manufacturer, and the New York suit demanded that Chris Evert-Lloyd, Joe Montana, Steve Garvey, Gary Carter and Bill Rodgers appear in court to explain their financial relationship with the company. The New York Attorney General's office indicated that many USA distributors were not paid commissions owed them by the company. The California suit, filed by Supervising Deputy Attorney General Albert N. Sheldon, who had successfully prosecuted Herbalife, demanded civil penalties of at least $1,000,000 plus the cost of prosecution.
On February 5, the District Court of Dallas County, Texas, issued a temporary injunction based on an agreement between USA and the Texas Attorney General. Its terms barred the company from:
During this period, the company was sold to T.J. Talley, D.D.S., a retired dentist with special interest in nutrition, and Peter J. Speckman, Jr., an attorney with a background in marketing and sales. On March 5, Speckman notified the FDA that he was sending letters informing USA's active distributors that: 1) he and Dr. Talley had completed purchase of the company; 2) the FDA had issued a regulatory letter; 3) three state attorneys general had filed suit against USA; 4) the company had agreed to an injunction; 5) products would soon be available for sale; 6) the company plans to develop new sales materials and a new marketing plan that do not violate state laws; and 7) all existing videotapes should either be destroyed or returned to the company for partial credit. Speckman told the FDA he would enclose a copy of the injunction and would warn distributors not to make any claim that USA's products are effective against any disease. He also said that henceforth, all USA products would bear the following disclosure:
IMPORTANT NOTICE The products you have purchased are a nutritional supplement. They are not intended for the prevention, treatment or cure of any disease, illness or other condition. Please disregard any claims you have been told to the contrary. Thank you for using USA products.
USA was then under completely new management. On March 24, the company's vice president for marketing (David Lough) told me that Jerris Leonard had resigned in November (a fact not revealed to most USA employees) and that Dr. Fisher and the rest of USA's original management team had left when the company went bankrupt. It seemed likely that adverse publicity and/or lack of payment drove away the rest of USA's scientific advisors and endorsing athletes. But Lough said he had no information on this because the company had had no recent contact with them. He estimated that Speckman's letter of March 5th went to about 5,000 of USA's most active distributors. But in February, USA's top distributor invited his downline to join Ameriplus, another multilevel company with products similar to those of USA. USA's remaining assets were liquidated at a bankruptcy auction on May 12, 1997.
On October 9, 1997, Robert Adler, Jerris Leonard, Jeffrey Fisher, M.D., and three other former USA officials settled the attorney general suits -- without admitting fault -- by agreeing to refrain from a long list of unproven, misleading, and/or illegal statements about USA's supplement products. Five of the defendants (not including Leonard) also agreed to pay a total of $35,000 to each of the three states. This case was especially significant because it was the first simultaneous multistate attorney-general action against a fraudulent health scheme -- and its success has encouraged many more such actions.
Although some of its stated goals were laudable, United Sciences of America promoted its products with enormous exaggeration. Its Scientific Advisory Board, though prestigious, had no monopoly on the ability to analyze scientific data. USA's products were formulated by pooling the opinions of Dr. Fisher and a few members of his advisory board who believe that virtually everyone should take dietary supplements. Skeptics were involved minimally if at all.
Considerable controversy exists about whether it is possible to determine "optimal" levels of nutrients at this time. Even if USA's formulations had turned out to be optimal -- which is very doubtful -- it was extremely presumptuous to represent them as "state-of-the-art nutrition." They were merely a guess by a small group of scientists who espoused minority viewpoints on supplementation.
USA's imagery and puffery certainly didn't reveal this. USA boasted of "analyzing 1,300 new research papers a month" to be sure its product formulations were up-to-date. That statistic might persuade laypersons that emergent scientific data were too voluminous for ordinary mortals (like their personal physician) to keep up with. However, it is doubtful that so many papers were relevant to USA's products. Even if they were, the number of papers entered in one's computer bank is not as important as the data they contain and the logic used to analyze them.
Nor was USA's method of gathering information anything special. Many medical facilities, researchers and practicing physicians have ready access to computerized data bases. And many scientists not only follow the scientific literature but know about important studies before they are published. Significant information is spread rapidly throughout the medical community through journals, lectures, informal discussions among doctors, cable television programs, and other channels of communication.
Exaggeration was also involved in recruiting distributors. Although those who sign up during the first few months of a successful multilevel company can make a great deal of money, the later the entry, the less the chance of success.
The fact that USA pledged to support research was laudable, but its approach was backwards. Before asking the American public to spend millions (or billions) of dollars on USA products, they should have been tested for both effectiveness and long-range safety.
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This article was revised on September 19, 1999.