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All’s Not Well at Mannatech

Dietary supplement maker and multi-level marketer Mannatech (MTEX) is feeling pretty sickly. Just days after slashing its dividend by 77%, the company disclosed that its CFO and Audit Committee Chairman have received a Wells Notice from the SEC. The Notice stems from a seemingly innocent auditor change in October 2007, which normally involves a routine 8-K filing. Not so at Mannatech.

Mannatech’s original 8-K claimed that the Company terminated former auditor Grant Thornton after Grant demanded that the Company either remove Sam Caster (the Chairman and Founder of Mannatech) from all responsibilities, or get a new auditor. The SEC sent a comment letter claiming that some of MTEX’s disclosures were too vague, Mannatech revised the filing, and that appeared to be the end of it. Then, buried in Item 9 of Mannatech’s 2007 10-K was the news that MTEX was being informally investigated by the SEC and NASDAQ over the auditor change. Fast forward to Friday, when suddenly the SEC elevates the matter to a Wells Notice, alleging that the CFO and the Audit Committee Chair violated Rules 13a-11 and 12b-20 of the Exchange Act. For those who don’t have their securities law desk reference handy, the SEC is claiming that Mannatech didn’t disclose the auditor change in a timely manner and there was more to the story than MTEX told.

For its part, Mannatech says it has “fully and voluntarily cooperated with the SEC inquiry” and that it “presently intends to respond to the Wells Notice”. Still, for a Company that bills itself as a “global wellness provider”, things aren’t looking very well at all.

Image Credit: Direct Selling Association