The institute has had to wiggle out of legal tussles, as short sellers often must. In September 2007, the Reader publicized Minkow’s 500-page, footnoted report on Usana Health Sciences, a multilevel marketing organization. Among many things, Minkow learned that two of the company’s key officials, Denis Waitley and Ladd McNamara, both of San Diego County, did not have the credentials they claimed to have. Both resigned. Minkow had shorted the stock and had fully revealed his position. Usana sued. A federal judge decided most of the counts in Minkow’s favor. Later, Usana and the institute made a confidential settlement of remaining issues.
In 2008, Minkow’s institute revealed that the president of Herbalife, another multilevel marketing operation, did not have the MBA degree he claimed to have. He admitted his deception and resigned. The stock plunged immediately, and Minkow made $50,000 on his short position. But after Herbalife sued, Minkow retracted statements by the institute about the company’s products and business plan. He cannot discuss either case. Now, another company he attacked, Medifast, is suing. Minkow has reacted by stepping up his attacks.
Right now, he is shorting stocks of some of the companies he is exposing, such as InterOil and Pre-Paid Legal. But he didn’t short shares of the big builder Lennar, whose stock plunged after the institute’s exposé of alleged accounting tricks. “I didn’t want to distract from the seriousness of the charges,” he says. Lennar, too, has sued. All told, “Counting expenses, we do a little better than break even shorting,” says Minkow.