Critics Say Nu Skin’s Beauty Is Fleeting : Marketing: Successful distributors say they can earn big figures, but investigators contend the skin-care firm is built on a perilous pyramid system.

They call it “The Dream,” reachable through hard work, a positive attitude and a product that promises what everybody wants--prolonged youth and vitality.

What it translates to is money, in some cases breathtaking amounts, earned partly through the labors of others.

Provo-based Nu Skin International Inc., in business just six years, anticipates 1991 sales of $500 million for its line of skin-care products.

Those who have successfully used Nu Skin’s multilevel marketing plan say they can make as much money as they want. It’s the pitch often used to bring others aboard, sometimes underscored with displays of canceled monthly checks bearing five- and even six-figure payments.

But Nu Skin’s many critics, including investigators in at least half a dozen states, worry that the company is built on a perilous pyramid of promotion, not product, that benefits the few and leaves thousands with closets full of soap and shampoo.

“When you ask how much the average distributor makes, or how long they stick around,” says Chris DeWitt of the Michigan attorney general’s office, “then the beauty of Nu Skin starts to fade.”

Nu Skin officials maintain that its line of more than 60 skin, hair and personal hygiene products, promising “all of the good and none of the bad,” drives the company’s success.

“All of our profits come from the sale of product,” said spokesman Jason E. Chaffetz. “We believe our line is superior.”

But Nu Skin sells more than lotions and creams.

“Nu Skin International Inc. provides you with a tremendous opportunity to achieve personal financial security,” says actor Bill Bixby in the company’s basic promotional tape.

It opens with Nu Skin’s version of The Dream: yachts, ski slopes and a luxury car with personalized “NU SKIN” license plates. Another tape promises that “exciting retail profits can be realized.”

It is a line that has attracted hundreds of thousands of customers and potential distributors--and some celebrity boosters.

Comedian Bill Cosby and former President Reagan were featured at Nu Skin’s 1991 convention in Salt Lake City. Distributors include former Gary Hart-throb Donna Rice and Donald Trump’s girlfriend, Marla Maples.

The Dream becomes real through Nu Skin’s multilevel marketing plan, the same sort of word-of-mouth retailing that has powered such companies as Amway and Mary Kay cosmetics.

It works like this:

Every customer is encouraged to become a distributor. “The Opportunity” costs $35 and allows them to buy products at wholesale prices and sell them for a suggested 43% markup, which the distributor pockets.

For every other distributor brought on board, the recruiter gets 5% of that person’s wholesale purchases from the company.

But the real money comes in “executive breakaways,” achievable by recruiting five others and maintaining set personal and group sales volumes for 90 days.

Executives are allowed to draw commissions of 5% on sales of groups that form when their recruits themselves become executives. The more executives, the more money flowing uphill to the recruiter.

But every time a distributor “breaks away,” the recruiter can no longer count him or her. Thus, there is a constant need for new blood.

There are six levels of executives in Nu Skin’s organizational plan, each named for a precious metal or gem. At the apex is the Blue Diamond Executive, who has recruited 12 executives and is entitled to commission from the group sales of six of them.

Of Nu Skin’s 100,000 active distributors, said Chaffetz, there are just “60 or 70” who are Blue Diamonds.

Chaffetz concedes that people at these levels often make tens or even hundreds of thousands of dollars a month in commissions. “But remember, their organizations are moving millions in product,” he said.

Most Nu Skin distributors will not make anywhere near that much, he said. Their version of The Dream is humbler.

A popular Nu Skin mantra goes: “It’s a lot selling a little, not a few selling a lot.”

Salt Lake’s Kelly Duffin and her husband, Shane, had planned to buy a house with their Nu Skin profits. People at the meetings where she was recruited “talked constantly” about the money to be made.

Instead, the 20-year-old broke even and gave up after a few months. The market, she said, was saturated--a common complaint of distributors.

“Everybody was trying to sell it,” she said. Another problem was the market. Her friends had too much hair and too few wrinkles to be interested in most of Nu Skin’s products, which are aimed at aging baby boomers.

It is the emphasis on recruiting, rather than selling, that has piqued regulators.

“The emphasis is on the sale of distributorships,” contends Michigan Atty. Gen. Frank Kelley. “The sale of a product is secondary.”

That, he said, smacks of a pyramid scam in which early participants profit from the sale of the scheme to buyers, who are promised riches if they, in turn, can sell it to others.

“Basically, it’s selling nothing for something,” said Michigan’s DeWitt.

Kelley has filed a notice of intent to sue Nu Skin, so far the only state to take formal action against the company. Florida, Illinois, Georgia, Texas and Utah, together with the federal Securities and Exchange Commission, are investigating.

Nu Skin responds to critics by pointing to its line of products.

“How can they accuse us of profiting on the sale of distributorships alone?” Chaffetz asks. “Nobody earns a dime unless they sell product.

“It’s all a factor of how much you and your network can sell. It’s sickening to hear this continuously referred to as a sign-up game.”

Chaffetz believes that Nu Skin has become a target of jealous rivals.

The company was founded in 1984 by Brigham Young University business graduate Blake M. Roney, who invested $5,000 in cosmetics on the advice of his sister.

In fiscal 1988-89, the company recorded $40 million in sales, which jumped to $230 million the following year. Sales for the fiscal year ending in September are projected at $500 million.

The debt-free company recently spent $8 million for a new, 10-story headquarters in Provo, in addition to paying cash for a 200,000-square-foot distribution center.

In recent months, Nu Skin has cautioned distributors against heavy-handed, carrot-and-stick recruiting techniques. More than 100 have been terminated for policy infractions in the past year.