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The Wall Street Journal reports that Barry Minkow -- "convicted stock-fraud felon turned private investigator" -- has bought put options on Usana Health Sciences Inc. The vitamins/nutritional supplements marketer has set sales records in each of its last 18 quarters, during which share prices have jumped over 1,600%. Usana uses at-home associates to sell its products, who earn commissions based on a pyramid structure not unlike those used by multilevel marketers. It holds 500 recruitment meetings a week, and boasts 153,000 associates -- who account for 86% of its sales. Last year the Usana 15 03 2007 Chartcompany made $41 million on $374m in sales; analysts expect 20% earnings growth for 2007. It currently trades for 27x 2006 EPS. Minkow says the sales model is unstable; the company will eventually run out of new associates, and those at the bottom of the pyramid will have no incentive to continue buying its vitamins, which cost more than double the price of similar premium multivitamins. Myron Wentz, Chairman, renounced his U.S. citizenship in the mid 1990s, and controls his 45% stake through a company in the Isle of Man, which in turn is controlled by a company registered in Liechtenstein. Minkow has sent a critical report to the SEC and the FBI; people familiar with the matter say the FBI plans to question the company.

Sources: Wall Street Journal
Commentary: Superior Earnings Growth Makes Usana Health Sciences AttractiveMLM Legislation Ignites Short Sellers
Stocks/ETFs to watch: Usana Health Sciences Inc. (NYSE:USNA)
Related: Barry Minkow on Wikipedia, 60 Minutes segment on Minkow

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Source: Usana Heath Sciences Draws Ire of Felon Turned Stock Detective