According to the complaints, Nu Skin’s Chinese business model relies on independent distributors who recruit more distributors and then earn a piece of their sales. On Jan. 15, 2014, a Chinese newspaper reported that Nu Skin was in violation of Chinese laws that prohibit pyramid schemes. Two Chinese agencies announced investigations of the company in the days following the publication of the article.Revenue from China played a significant role in the company’s growth over the last several years. Sales in China accounted for nearly one third of Nu Skin’s total sales. Hagens Berman’s investigation shows, according to data compiled by Citron Research, that a major Chinese newspaper published an exposé on “illegal” operations in China in June 2013 that included a look at Nu Skin’s business model. Nu Skin never revealed this exposé to investors and did not seek to address the allegations until the Chinese government announced its investigation in January 2014. Following the announcement of the Chinese government’s investigation, Nu Skin’s stock price declined dramatically, losing nearly half of its value in three days of trading. The stock price fell from a close of $136.47 on Jan. 14, 2014, to a close of $79.57 on Jan. 17, 2014. The stock continues to trade well below previous figures, closing at $77.40 on March 6, 2014. Bloomberg reported on Feb. 17, 2014, that China’s State Administration for Industry and Commerce plans to tighten direct selling rules following the claims brought against Nu Skin, and the Wall Street Journal said recently that January brought sharp declines when China announced its investigation of the company’s sales practices. Hagens Berman is continuing to investigate what Nu Skin’s management knew, and when, in light of the Chinese government’s investigations and the subsequent decline of the stock price. The deadline for investors to move for lead plaintiff in the case is March 24, 2014.
Persons with non-public information who want to consider their options to help in the investigation or take advantage of the SEC Whistleblower program may contact Reed Kathrein at 510-725-3000 or email the firm at NUS@hbsslaw.com for more information. Under the new SEC Whistleblower program, whistleblowers who provide original information to the SEC may receive rewards totaling up to 30 percent of any successful recovery made by the SEC.About Hagens Berman Hagens Berman Sobol Shapiro LLP is an investor-rights class-action law firm with offices in nine cities. The Firm represents investors, whistleblowers, workers and consumers in complex litigation. More about the Hagens Berman and its successes can be found at www.hb-securities.com. The Firm’s Securities News newsletter is at http://www.hb-securities.com/newsletter. The Firm’s blog is located at www.meaningfuldisclosure.com.