(ISA INC. BITES THE DUST In October 1986, we featured a story about the high-gloss, high-grossing United Sciences of America Inc., the Dallas-based multilevel distributor whose 100,000-plus associates sold the company’s four diet supplements nationally. Back in October, USA Inc.’s founder and former computer whiz Robert M. Adler II was riding high. His company, boosted by endorsements from superstar athletes, Nobel Prize-winning clinicians, and a videotaped promotional pitch by Star Trek’s William Shatner, racked up $34 million in sales during its first seven months in business.
In October, we could only speculate whether USA Inc.’s meteoric rise would follow the self-destructive descent of other multilevel marketers selling miracle-diet mumbo jumbo, pyramid organizations like Her-balife International and Cambridge Diet that were quick to burn out. Our skepticism was warranted. According to Stephen Gardner, an assistant attorney general, 99 percent of that USA Inc. product was being bought wholesale by the company’s associates. Very little was ever really sold at retail prices. The pyramid scheme required its associates to purchase $100 worth of the product each month; they then sold it to their recruits-who were also required to purchase $100 worth of the stuff-ad infinitum. ’It was just being passed around from garage to garage,” Gardner says.
On January 21, 1987, USA Inc. filed for Chapter 11 protection in federal bankruptcy court. At the time. USA had been criticized by the Food and Drug Administration for mislabeling products and had endured a prime-time expose on NBC-TV’s “’1986” program. On January 28, states attorneys in Texas, California, and New York filed suit against USA Inc. for deceptive trade practices and on February 5 won the temporary injunction that keeps USA’s doors closed.
On March 25, USA Inc. converted its Chapter 11 to a Chapter 7, which, in Gardner’s words, “means the corporation is dead.” As D went to press, Gardner and his counterparts in California and New York were trying to negotiate a judgment and a permanent injunction that would not only keep USA Inc. out of business but would ensure that Adler and his partners wouldn’t form a new corporation and try their hand at pyramid building again. Although the amount of the judgment has not been determined, Gardner says Adler and company will pay. “In addition to making them stop this practice in the future, we want to make them hurt a little now,” he says.
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