Nu Skin named in class action suit

PROVO -- Nu Skin Enterprises has been named as the defendant in a class-action lawsuit filed by stockholder Paul Siesser claiming that the Provo-based company failed to disclose sales practices and false claims related to the company's growth in China.

The suit, filed in the U.S. District Court in Salt Lake City, claims that the company failed to follow U.S. federal securities laws that ban pyramid schemes, which sent public stock prices tumbling.

"This action arises from Nu Skin's failure to disclose its fraudulent sales practices and non-compliance with Chinese laws and regulations," according to the suit.

In January, an article in a Chinese newspaper calling Nu Skin a "suspected illegal pyramid scheme" took a toll on the Provo-based company's stock.

News outlet Bloomberg first reported the falling stock of Nu Skin as it reported that its shares had plummeted nearly 16 percent in light of the article, which also accused Nu Skin of using "brainwashing" techniques on its marketers in China.

Nu Skin issued a statement denying the claims by the People's Daily and said it is working in full compliance with Chinese regulations.

"The article that appeared in today's People's Daily contains inaccuracies and exaggerations that are not representative of Nu Skin's business in China," according to a statement by the company. "The reporters did not attempt to verify any information with Nu Skin. We do not believe that the article was the result of any particular government inquiry."

According to Bloomberg, Nu Skin suffered its largest in-day stock value tumble since October 2004.

The suit filed this week claims that even after its stock began falling, Nu Skin continued to tell investors that "China is a 'growing market for the direct selling industry,' 'hold[ing] great promise' and 'represent[ing] a significant opportunity to expand [Nu Skins] business."

"We believe the allegations are without merit and intend to defend ourselves vigorously," Nu Skin stated in a press release issued in response to the suit.

The suit says that Siesser seeks a jury trial, and damages for class members including interest and attorneys fees as well as "further relief as the Court may deem just and proper."

Nuskin Lawsuit