Pyramid scheme claims spark Nu Skin review in China
Seller of skin-care products plans to stay in market and take corrective actions while an internal assessment into its sales practices is under way
Nu Skin Enterprises, the seller of skin-care products that is under investigation by the mainland, plans to continue to sell its merchandise while conducting an internal review there.
Shares of Nu Skin plunged last week after the People's Daily said the company was running a "suspected illegal pyramid scheme". In a letter to customers in China yesterday, Nu Skin said it would review employee and sales-force practices and intended to take "corrective actions".
Chief executive Truman Hunt, who oversaw a sevenfold gain in the direct-seller's shares in the past seven years, said last week that Nu Skin was "absolutely not a pyramid scheme".
Some of our sales people failed to adequately follow our policies
His comments followed a report in the state-run newspaper saying Nu Skin brainwashed trainees and sold more products than allowed.
"As part of our initial review, we were disappointed to learn that during our recent rapid growth, there were instances where some of our sales people failed to adequately follow and enforce our policies and regulations," Nu Skin said in yesterday's letter.
The Utah-based company said it would provide additional training to reinforce its existing policies and educate employees on laws and regulations in China. It will release an update on the status of its review on February 6.
Nu Skin fell 2.6 per cent to US$77.39 at the close in New York. The stock declined 6.3 per cent on January 17 and 26 per cent on January 16, the day after the People's Daily report.