USA: The strange rise and fall of one MLM
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(MONEY Magazine) – No multilevel company has had a wilder history than United Sciences of America (USA), a nutritional-supplement company based in Carrollton, Texas. Endorsed by Star Trek's William Shatner, Chris Evert, New York Met Gary Carter and other athletes, USA took off in January 1986. Seven months later, USA had signed up 140,000 -- that's right, 140,000 -- distributors. By the fall, the company was pulling in $8 million and 10,000 to 15,000 new distributors a month. USA's chairman Robert Adler, a former computer entrepreneur, and president Jerris Leonard, a former U.S. assistant attorney general under Richard Nixon, had a multilevel company that looked as though it would never stop growing. Company executives were quoted projecting sales would top $100 million in 1986 and $1 billion in 1989. Then the pyramid started crumbling. In October, NBC's 1986 show aired a critical report about USA. The company failed to mail some commission checks in November. In December, USA's checks to its distributors started bouncing. At that time, the Food and Drug Administration issued a regulatory letter challenging the propriety of four USA products: Master Formula, Calorie Control Formula, Fiber Energy Bar and Formula Plus. The FDA said the products were promoted with unproven claims that they helped prevent cancer, AIDS, arthritis, alcoholism and heart disease. A few weeks later, USA filed for Chapter 11 bankruptcy protection with debts of $8.6 million and assets of $7.3 million. One week later, attorneys general in California, New York and Texas simultaneously filed lawsuits ordering USA to change its marketing plan and sales claims in their states. USA executives told the FDA in February they would make the necessary changes in labeling and sales materials to come into compliance. But a month later the company appeared to give up any comeback efforts when it filed for Chapter 7 bankruptcy liquidation.

To borrow a line from Shatner's Captain Kirk, USA boldly took multilevel marketing where no MLM had gone before. The company produced two awesome videotapes, designed to be played on VCRs of prospective USA distributors. Shatner narrated the first tape and spoke of ''a brave new world of optimum health and vitality'' that ''could change your life.'' He then launched into an apocalyptic view of the world. Advanced technology, said Shatner, ''has given us valuable gifts'' but ''with a deadly price tag.'' Toxic chemicals. Cancer. Nuclear waste. But, Shatner said, ''one man in Dallas, Texas, believed that something could be done.'' That man: USA chairman Robert Adler. The tape said USA had created a 16-member executive advisory board of doctors and scientists, including heart specialist Dr. Michael DeBakey and the chairman of Harvard Medical School's Department of Preventive Medicine, Dr. Alexander Leaf. The tape did not say that board members were scheduled to receive $5,000 to $20,000 consulting fees. Several of USA's board members also got $50,000 or $100,000 research grants from the company in 1986. As USA drew negative publicity in late 1986, half of the medical advisory board members, including Leaf and DeBakey, resigned. A few said they were misquoted or improperly used in USA's sales materials. Leaf told Money: ''They used my name with false statements to advertise the products.'' A second videotape, explaining USA's marketing plan, featured the athletes. Chris Evert urged viewers to ''join me and hit your financial ace now.'' Marathoner Bill Rodgers said USA was dedicated to providing Americans with ''financial security.'' And Gary Carter said: ''Join me and hit your financial grand slam now.'' Today, Evert's agent says the tennis star liked the USA products and was impressed by the company's credentials. Bill Rodgers told Money: ''I was as surprised as anyone to hear about USA's legal problems.'' Carter's agent had no comment.