The State-Boston Retirement System has become the latest shareholder to file a putative class action alleging that Nu Skin Enterprises and its CEO and CFO violated U.S. securities laws with optimistic statements about opportunities and growing markets in the People’s Republic of China (PRC) when its “opera- tions in China are nothing more than a pyramid scheme based on multi-level marketing where such schemes are strictly prohibited in China.” State-Boston Retirement Sys. v. Nu Skin Enters., Inc., No. 14-0217 (U.S. Dist. Ct., D. Utah, Cent. Div., filed March 24, 2014).
After the Chinese press reported in January 2014 that the company’s practices were unlawful and immoral in violation of that country’s laws, the company’s stock allegedly declined more than 25 percent, and a number of putative class actions against the company started appearing on the Utah federal district court’s docket. According to the complaint, an August 2012 analyst report concluded that the company’s China operations were based on multi-level marketing or pyramid selling schemes that “grossly violat[ed] the laws of the PRC.”Yet, the company allegedly filed a Form 8-K with the Securities and Exchange Commission that month claiming confidence that its “China operations are in compliance with applicable regulations as interpreted and enforced by the government of China.”
Alleging violations of Section 10(b) and Rule 10b-r5, as well as Section 20(a) of the Exchange Act, the plaintiff seeks unspecified damages, attorney’s fees, costs, and interest.
