Lehi MLM draws criticism for continuing to do business in Russia

Lehi MLM draws criticism for continuing to do business in Russia
(The Nature’s Sunshine headquarters in north Lehi, pictured Aug. 21, 2018. Karissa Neely, Daily Herald file photo)

By Sara Tabin

The following story was reported by The Utah Investigative Journalism Project in partnership with the Daily Herald.

As war rages and evidence of atrocities and mass murder surfaces in Ukraine, many U.S. companies have stopped doing business in Russia. But not everyone is pulling out.

Nature’s Sunshine, a Utah-based multilevel marketing company that sells vitamins and essential oils, is one of hundreds of businesses that have been flagged in a national database for continuing to operate in Russia. The company claims that it has taken prompt action by suspending exports to Russia, but the Yale University  researchers behind the database say Nature’s Sunshine hasn’t done enough.

A review of corporate filings shows Nature’s Sunshine has deeper ties to Russia than most of the many multilevel marketers (MLMs) who find a haven in Utah. The Lehi company in 2020 reported more than $60 million in sales in Russia, Ukraine and Belarus and it circulates U.S. dollars in Russia, a valuable crutch to help prop up the economy in Vladimir Putin’s autocracy amid a barrage of international sanctions.

The U.S. International Trade Administration has made clear that it is still entirely legal for U.S. companies to engage in a “broad range of business activities” in Russia, as long as it’s not with specifically sanctioned individuals or entities. But the war has drummed up enough concern that many businesses have decided to pull out operations. Many others have also struggled with the decision, having established significant investments and having hired many employees in the country years before the conflict began.

Why a boycott?

The United States is among more than two dozen countries that imposed sanctions on Russia after it invaded Ukraine in February. These have included bans on gas imports and flights as well as international companies pulling out of Russia.

An economic boycott of Russia is “one step short of bombs and bullets,” according to Steven Tian, research director at the Yale Chief Executive Leadership Institute who helped create the database of companies remaining active in Russia.

Tian said voluntary corporate withdrawal exerts economic pressure on Russia to change its course of action. Otherwise, he said, the next step is war and potentially “nuclear disaster.”

“When you have a business blockade coupled with sanctions, you can put pressure on tyrannical regimes,” said Georgia Hirsty, a Yale researcher who also worked on the database.

Businesses not usually known for taking political stances, like oil and gas companies and professional services, were some of the first to legitimately pull out of Russia, Hirsty said. Those choices were, to some extent, motivated by pressure from employees and consumers to take a stand.

But she said some companies are using “smoke and mirrors” to create the illusion that they are doing more than they are by using manipulative statements, misleading wording or hiding behind subsidiaries.

(Nature’s Sunshine products are displayed in the company’s Lehi headquarters April 11, 2017. Karissa Neely, Daily Herald file photo.)

Nature’s Sunshine and Russia

Nature’s Sunshine currently has a D grade on an A to F scale in the Yale database, assigned by researchers who characterized it as “postponing future planned investment/development/marketing while continuing substantive business.” It is one of three Utah companies with a D grade — all MLMs with product lines of essential oils. The other two are Young Living and doTerra.

Young Living and doTerra have already faced criticism in the press for their involvement, with the companies pushing back against the Yale list and noting their significant humanitarian donations to Ukraine.

Both those companies are privately owned, making it difficult for the public to assess their relationship with Russia.

Nature’s Sunshine, however, is a publicly traded company that is required to disclose detailed information — including about its business in Russia — in its publicly filed reports.

The company lumps together its earnings in Russia, Ukraine and Belarus with net sales of $51.2 million in 2020 and $61.4 million in 2021, according to financial records the company filed with the federal government. Nature’s Sunshine reported $6 million worth of assets in the region at the end of 2021.

“Due to the uncertainty surrounding the duration and magnitude of this conflict, at this time, we are unable to estimate the impact to our business, financial condition or results of operations,” the company said in its filing on March 8, days after the Russian invasion of Ukraine.

During an earnings call at the time, CEO Terrence Moorehead said three to five month’s worth of inventory remained in the region.

Nature’s Sunshine spokesman Chris Monteiro told the Utah Investigative Journalism Project that exports to both Ukraine and Russia have been suspended. He said the company looks forward to resuming sales in Ukraine as soon as logistics permit, but did not give a clear answer as to whether the company plans to resume exports to Russia once current inventory is depleted.

“We are saddened by the suffering, loss of life, and humanitarian crisis caused by Russia’s invasion of Ukraine,” he said in a company statement. “We pray for peace and hope for a swift end to this conflict.”

He also pointed to the company’s support of the Impact Foundation, which has pledged over $80,000 to support relief efforts in Ukraine.

U.S. currency

Tian said Nature’s Sunshine’s involvement in Russia is particularly troubling because it uses U.S. currency in the region. The company’s filings note that the dollar is more stable than the ruble.

It’s true that the ruble is an especially volatile currency, Tian said. But he said the company is undermining U.S. foreign policy by supplying dollars to the Russian economy at a time when the administration of President Joe Biden is trying to choke off its flow of foreign currency.

Tian also pointed to other steps the company could be taking to reduce its operations in Russia, including preventing distribution centers from putting products into the hands of retailers.

Hirsty said international companies can also help the pressure campaign against Russia by taking down social media pages and websites there.

Nature’s Sunshine’s financial filings suggest the company controls its international operations directly or through contracts with third parties.

But Nature’s Sunshine claims Russian operations involving the company are outside its control. Monteiro said any Nature’s Sunshine products in the Russian markets are already with individual sellers because the company doesn’t have facilities in the country and hasn’t since 1999. He said the company’s Russian website and Instagram page “are owned and managed by the team in Russia that purchased the business in 1999.” This appears to clash with publicly filed documents indicating the Russian operations are part of Nature’s Sunshine business, not a separate entity.

Robert Fitzpatrick, an MLM critic and author of “Ponzinomics, the Untold Story of Multi-Level Marketing,” said no significant number of independent sellers can operate in opposition to the wishes of an MLM company. These companies typically have rigid control all the way down their chains of sale, he said. If the company wants to stop selling its products, it can simply say sales are no longer authorized.

“MLMs don’t just sell products,” he explained. “They sell enrollment in the business plan. Buying products is part of the model for the enrollees, who then make money by recruiting others who must similarly buy. The business is closely integrated in lines of recruiting and monitored for each enrollment.”

Fitzpatrick said MLMs are inherently unethical businesses because only a tiny percentage of sellers at the top of the pyramid can ever make a profit, and they will do so at the expense of the vast majority of those downstream. He said Nature’s Sunshine is not unique in this regard, but he would hesitate to believe the word of any such organization.

Russian distributors for Nature’s Sunshine appeared optimistic about prospects for their region during an April 5 conference in Moscow, according to a recording of the event.

A conference speaker assured listeners that business will continue as normal, and said there will be no issues with product supplies. There was no direct mention of the war.

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