Nu Skin co-founder embroils company in her marital maelstrom
When Sandra N. Tillotson left its board, Nu Skin Enterprises Inc. gave only faint notice of the departure of one of the founders from the 28-year-old highly successful and publicly traded Utah company that had record revenue of $1.74 billion last year.
But then two months later, the wealthy Tillotson sued one of her three ex-husbands for $60 million and brought attention to a hurricane of soured marital relations that may have prompted her board exit.
In tandem, Nu Skin's shares have taken a steep nosedive. Tillotson's suit blames one of the ex-husbands for the decline, although the real reason probably is that a star hedge fund manager asked sharp questions on May 1 about the multilevel-marketing (MLM) model used by Nu Skin and other companies.
Tillotson filed her lawsuit in 3rd District Court in Salt Lake City on May 21 against her second ex-husband, Diederik van Nederveen Meerkerk, a ruggedly handsome 6-foot-7 Dutch model and actor.
She accused van Nederveen of extortion for allegedly seeking payment in return for not releasing a book about their marriage and Nu Skin, despite a court-approved agreement he would not seek more money from her.
It also claimed Tillotson was defamed by parts of the book van Nederveen had posted online in which he alluded to some of the allegations from a recent tell-all book by her third ex-husband, a former male stripper named Adam S. Baker.
Van Nederveen wrote that as far as he knew there was no independent evidence to back Baker's sensational allegations about sex and drugs. But Tillotson said in the lawsuit that as a result of his statements, she "was forced to resign from the board of the company that she founded."
For its part, Nu Skin, through spokeswoman Kara Schneck, said Tillotson had voluntarily decided not to seek another term on the board and was not forced out.
"That was her choice," said Schneck.
Troubles grow • Tillotson helped create the company in 1984 and was one of its most prominent officers, featured at numerous conferences that it uses to attract new distributors. The reputations of MLM enterprises are an important asset because they are in competition with each other to entice people to join.
Tillotson's troubles apparently began to spill over when Baker published his book last year.
Formerly Filthy Rich: My Scandalous Life with a Billionaire Cougar is Baker's lurid tale of his relationship with Tillotson, whom he met sometime around 2001 at a South Salt Lake night club called Rascals, where he worked part time as a male stripper with the stage name of Dirty Dalton, he said
She carted him around on a private jet to Nu Skin conferences, bought him houses, cars and an airplane, and, once, $15,000 worth of clothes in Singapore, the book claims.
Eventually, however, Baker said he petitioned for divorce in March 2007 because he got tired of being a kept man, with Tillotson holding all the financial strings and controls of his life.
"At that point, I'd already had 20 cars and four aircraft, and I had traveled the world and I had lived the lifestyle of a billionaire," Baker said in a recent phone interview. The marriage "really didn't have anything left going on that was interesting for me. I wanted to find somebody to partner with and build a life with."
But after the divorce in 2009, things turned really nasty, with Tillotson turning her money and energy into "ruining my life," he said.
Tell-all • His revenge was the book that was being distributed by Amazon.com, Barnes & Noble and other websites before it was taken off late last year.
Tillotson referred questions to one of her attorneys, Joshua Peterman, who said Baker was prohibited by a court order that came during their divorce from using Tillotson's name in any way and that entities selling the book were made aware of that order.
But then, after Baker's book was removed, van Nederveen started posting chapters from his own upcoming book about his marriage to Tillotson.
Van Nederveen said he met Tillotson on Valentine's Day in 1995, a few years after her divorce from her first husband, at a Nu Skin meeting at Club Med in Cancun, Mexico. He is tall and handsome and had acted in television shows and movies. They spent about five months together before Tillotson asked him to marry her, van Nederveen said.
She got pregnant soon, and the two had a daughter together. But in 2000, Tillotson asked van Nederveen for a divorce and he agreed, he said.
"I was tired of the control," van Nederveen said in a recent interview.
According to van Nederveen, he got little money out of the divorce considering her millions. Peterman, Tillotson's attorney, said van Nederveen received a "significant lump sum" in 2005.
They also got joint custody of their daughter. But then, van Nederveen said, Tillotson started doing everything she could to cut off contact with the daughter, whom he was able to see only sporadically.
Peterman said Tilloton "has been fully supportive of Mr. van Nederveen's visitation and consistently provided access to their daughter." Van Nederveen vigorously denies that is the case, and the lack of visitation seems to be at the core of his anger.
Beyond a family feud • The proposed title of van Nederveen's book is Trophy Husband: My Time Observing the 1% Feed on the 99%. As the title suggests, it is not just about their marriage and the aftermath, but also about Nu Skin.
Parts of the book posted online attack the company's nutritional and personal care products and particularly its multilevel marketing model. It claims that only the very top distributors many of them relatives of the founders ÂÂ are taking almost all profits, while the vast majority of distributors lose money and quit. Critics in past years have made the same types of allegations against Nu Skin and other MLMs.
The book also makes claims about the quality and effectiveness of Nu Skin's products. The posting online prompted a phone call from Nu Skin CEO Truman Hunt, a conversation that van Nederveen recorded.
Hunt was upset about van Nederveen's allegations concerning a skin scanner the company sells that is supposed to measure antioxidant levels in the skin.
"When I see these arguments I say to myself, 'This is laughable. He's going to eviscerate himself by making this laughable argument,' " Hunt says, according to the recording provided by van Nederveen.
Van Nederveen invites a lawsuit, saying it would force the company to prove its claims. "Bring it on because you'll be going down in flames," he said.
"Diederik," says Hunt, "you're using these issues to fight your personal battles."
Hunt also brings up allegtions van Nederveen posted about Nedra Rooney, another co-founder of Nu Skin, and tells him he's being "mean."
Van Nederveen erupts.
"It's totally mean, and I've got a lot more coming for you," he says. "I will use anything to destroy people who have systematically hurt me the way I've been hurt."
Financial fallout • As if all that wasn't sideshow enough, Nu Skin's stock took a plunge. On April 25, Nu Skin's shares were trading at $59.62 and by May 15, they had declined to $40.03.
Tillotson's lawsuit blames the decline on van Nederveen, who it says "boasted to numerous third parties that his communication with 'Wall Street insiders' has precipitated the recent decline in the share price." She says the drop cost her $60 million.
Van Nederveen said he did talk to Wall Street analysts who called him seeking information on Tillotson and Nu Skin. He declined to name them and denies those conversations led to the decline in the value of the company's shares.
Instead, what seems to have prompted that fall were questions that prominent hedge fund manager David Einhorn of Greenlight Capital asked during an earnings call with executives of Herbalife, a California MLM like Nu Skin.
Einhorn seemed to be raising questions about the MLM business model.
Analyst Scott Van Winkle, managing director at Canaccord Genuity who follows Nu Skin and other MLMs, said Einhorn's questions raised doubts among investors.
"It's not new, but investors don't understand the direct-selling business all that well," he said. "But any time you have new questions or the thought of new questions about the model, it impacts the valuation."
Investors lose confidence any time there is a question about a public company that can't be answered, he said, adding that although Nu Skin's share price has fallen, it is still above its level in 2009 when it was around $10 because of concerns over international sales.
Nu Skin's Schneck declined to comment on the share price drop.
Tillotson's lawsuit has now been sealed at the request of her attorneys, even though it contains allegations about her exit from the board of a publicly traded company and about its share price.