Beauty Supply Company Sees an Ugly Scam

PROVO, Utah (CN) - A beauty supply company claims a former employee scammed it out of more than $1 million in products, which he promised to donate to charities for "malnourished women and children in the Third World," but which he actually sold on the Internet for $470,000, then used some of the money to fly to Guatemala with Paris Hilton.

Nu Skin Enterprises sued Scott Lazerson and Nu Lite Sales, in Utah County Court.

Nu Skin says that Lazerson, who worked for it in security in the 1990s, began collecting vitamins from its employee store in the name of his charity, Interface Charitable Foundation, in 2009.

The products were deemed "non-saleable," meaning they had been opened for demonstrations or were near expiration, and a Nu Skin employee agreed to donate them to Interface.

Lazerson said he would not charge for the vitamins, but would send them to Africa, Haiti, Mexico and Guatemala, with toothbrushes and toothpaste donated by other companies, "and commented that children in Guatemala could not afford to buy such products in any events," Nu Skin says in its complaint.

But Nu Skin says Lazerson did not donate the stuff. It claims he held it in storage units, and with help from Nu Lite Sales, sold it "through commercial channels, including online auction sites such as eBay and Amazon.com."

"Representing himself as the head of a charity that gave nutritional supplements and hygiene products to malnourished women and children in the Third World, Lazerson repeatedly duped two Nu Skin employees, who lacked authorization to make charitable product donations, into allowing him to take Nu Skin products that had been set aside for Nu Skin employees (and could not be sold to the public) by falsely representing that he would give those products to individuals in the Third World," the complaint states.

It continues: "In fact, few if any of the donated products were ever delivered to any needy person in the Third World. Instead, Lazerson worked with others to set up a secretive operation in four storage units in Orem, Utah, where he caused this illegally obtained Nu Skin product to be stored, processed, and then sold on the Internet. Lazerson took elaborate precautions to conceal the sale of these products from Nu Skin. For example, he partnered with others, including defendant Nu Lite Sales, LLC, to sell the product for him so that they unauthorized sales could not easily be traced back to him. Before his scheme was discovered, nearly half a million dollars was generated by selling this stolen product. Much of this money was spent on Lazerson's personal expenses, such as his mortgage and cell phone, the purchase of two vehicles, and on other non-charitable matters. It appears that no funds were ever received by Lazerson's purported charity or any Third World individual."

Lazerson's "brazen scheme to steal," as Nu Skin calls it, lasted for about a year and netted more than $470,000 in profits, the company says.

To top it off, Nu Skin says, "Lazerson caused another $1,500 of the fraudulent proceeds to be used to pay for an airplane ticket for Paris Hilton to accompany Lazerson on a trip to Guatemala."

The complaint does not say what, if anything, Lazerson did in Guatemala with Paris Hilton, who is not a party to the complaint.

But Nu Skin adds: "In February 2010, after nearly a year of this activity, the police arrested Lazerson and seized control of the storage units" where he stashed the stuff. "Based on the police inventory, more than $1 million of Nu Skin product remained in the storage facilities, all of which was unusable for any purpose by Nu Skin. ... As of the date of this complaint, the criminal proceedings against Lazerson are still pending."

Nu Skin says police also seized a computer, shipping supplies and a shrink-wrap machine, and records linking the Internet auction sales to customers in Asia.

Nu Skin seeks "to recover the value of the diverted product," and punitive damages for fraud, conversion, negligent misrepresentation and unjust enrichment.

It says it "has no desire to profit from this misplaced generosity. ... If Nu Skin is successful in recovering these amounts, Nu Skin intends to direct or donate these proceeds to a real and legitimate charity that actually serves humanitarian needs."

Nu Skin is represented by Robert Clark with Parr Brown Gee & Loveless.

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