Fortune Hi-Tech Marketing (FHTM) Settles with Montana Regulators but Disagrees over Headline

by louabbott on April 24, 2010

FHTM and Montana Disagree on the “Headline”

After the news came out yesterday, I received comments with two decidedly different tones. As always, news can always and is always spun according to our biases.

One commenter said, “We received notice today that the Montana case has been settled, with *no* accusations of wrongdoing. Yes, FHTM has been cleared of the accusations of being an illegal pyramid scheme once again.”

She was no doubt swayed by how Fortune Hi-Tech Marketing announced it in their official statement:

FHTM disagrees with the “headline” that it has paid $1 million to settle this matter. FHTM has paid $100,000 to settle this dispute and has agreed to contribute $50,000 to the Investor FHTM disagrees with the “headline” that it has paid $1 million to settle this matter. FHTM has paid $100,000 to settle this dispute and has agreed to contribute $50,000 to the Investor Protection Trust. We have also offered to refund fees paid to join the business for any Montana Representative who chooses to resign from the business.

Montana Commissioner of Securities and Insurance, Monica Lindeen, put it this way in her statement:

[FHTM] … agreed today to pay nearly $1 million to settle an allegation by Montana Commissioner of Securities and Insurance Monica Lindeen that the company was operating a pyramid promotional scheme in Montana.

How to reconcile the difference between $100k and $1000k?  Evidently, one number includes an estimate of the amonut that may be needed to “refund fees paid to join the business.”  Pretty simple.

The complete press release  from the Montana State Auditor’s Office is below.

FOR IMMEDIATE RELEASE
Contact:Jackie Boyle
Contact: Jackie Boyle, jboyle@mt.gov, 406-444-2040

Helena- Kentucky-based Fortune Hi-Tech Marketing (FHTM) agreed today to pay nearly $1 million to settle an allegation by Montana Commissioner of Securities and Insurance Monica Lindeen that the company was operating a pyramid promotional scheme in Montana.

On March 4, 2010, Lindeen ordered the company to stop operations in the state and filed an action against the company, arising from consumer complaints that her office received and investigated. “This agreement sends a clear message to businesses operating illegally in Montana that I am committed to protecting consumers,” Lindeen responded. “Montanans work hard to support their families and I will not tolerate the sale of false promises to them.”

The Order and Proposed Action alleged that FHTM representatives were marketing the company as income potential to participants who agreed to recruit new participants. Those individuals were asked to pay $299 to join the program. FHTM representatives also lured new participants by claiming it offered huge income opportunities through partnerships with large companies such as Travelocity, General Electric, and The Home Depot, when such partnerships did not exist.

Details of the Consent Agreement and Order with Fortune Hi-Tech Marketing (FHTM):
• FHTM agrees to refund up to $840,000 to more than 3,400 Montana participants.

• FHTM and the company’s founders, Thomas Mills and Paul Orberson, will pay a fine of $100,000 to the Montana’s general fund. Dianne Graber, a Montana FHTM representative, will pay a $5,000 fine to the general fund.

• FHTM will contribute $50,000 to the Investor Protection Trust, a non-profit organization that provides investor education in Montana.

• In addition, FHTM will be required to change its business practices in Montana:
– New participants in FHTM will only be required to pay $75.00 to become a representative,

– FHTM will conduct training seminars along with representatives of the Commissioner’s Office, in Billings, Bozeman, Great Falls, Helena, Kalispell and Missoula, and will conduct web-based training that is mandatory for all current or prospective representatives,

– FHTM will provide a disclosure brochure to each current and prospective representative outlining FHTM’s program, including the average amount of income achieved and the average amount of time in the program required to reach each level,

– FHTM will reinforce with representatives that product sales are not primarily for self-consumption but for sale to non-participants, and

– FHTM will require its representatives to maintain records of non-participant customers and submit those records on a monthly basis.

Approximately two weeks from the settlement, Montana FHTM representatives entitled to refunds will be receiving letters from Commissioner Lindeen outlining the requirements to get their money. The refund amount is equal to the participants’ cost less any earnings they received from FHTM.

The settlement agreement can be found at www.csi.mt.gov. For more information about FHTM, call the Montana Commissioner of Securities and Insurance at 1-800-332-6148.
###

What are the most important lessons for all of us in the network marketing profession in mho?

When joining a company, consider it a red flag if you have to pay more than $10 to $75 just to join.  Consider it an even redder flag if it is apparent that commissions are being paid out of the same funds that are collected from new sign up fees.  While companies like FHTM (and Excel before them) have put into place some legal machinations to get away with it in the past, they may not be so fortunate in the future.  Interestingly, FHTM, by the new settlement, can’t charge more than $75 to join any more.  What will that do for their business model in Montana?

Also . . . this action reinforces a key legal test for MLMs by emphasizing that the company’s product(s) must not be “primarily for self-consumption but for sale to non-participants.”

Note also that a company representative, Dianne Graber, was also fined $5000.

Of course, all of this and much more is taught in my course.

Do you see other lessons in all of this that could improve the network marketing profession? Comment below.

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{ 9 comments… read them below or add one }

Linda April 1, 2011 at 6:14 pm Thumb up 3 Thumb down 0

When I was introduced to FHTM spring 2010, I asked about a program with them that I could join and just get customers. They told me about the $75 one but I had to work to find out about it. I wanted to join but personal circumstances stopped me from it. I then called them to join at that price this Feb 2011 and they told me the price was now on $99 for a manager and you could get customers or reps or both to earn commissions. I think they are a good company and there can be bad reps. Since I joined they lost a vendor due to a bad rep.

Reply

Kody March 31, 2011 at 3:59 am Thumb up 0 Thumb down 1

For anyone feeling bad about Diane Grabler getting fined, she got ACN in trouble as well for the same kind of things.

Diane is the con, not FHTM.

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Robert Junker May 21, 2010 at 3:39 pm Thumb up 6 Thumb down 3

I carefully read the Montana ruling. I have been an FHTM rep since February 25, 2010, so know my bias in advance. When Montana says that FHTM agreed to only charge $75.00 for representatives, it perked my interest. When I signed up for FHTM as a Manager (not a Representative) I had the option to sign up as a Rep for that same $75.00 that is now available in Montana. When I asked the difference, here is what I was told: Reps are eligible to purchase products for themselves and others and gain customer points, for which they are paid a monthly commission. Managers are eligible to do the same thing (collect customer points & get commission for them) but are also eligible to sponsor others into FHTM who duplicate the efforts they have put forth (collecting customer points & monthly commissions) and achieve bonuses based on the new managers. If you want to recruit and be eligible for all the funds available, be a Manager. If you only want to collect commission on the points you accumulate for yourself, then be a Representative.
No arm-twisting here!

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Jeff A May 13, 2010 at 6:22 pm Thumb up 8 Thumb down 2

No one forced the folks to FHTM and if someone misrepresented the income potential that is unfortunate but that does not make the company illegal. Based on the article and Ms. Lindeen comments I wonder if she has a political agenda and FHTM just happened to be in the wrong place at the wrong time.

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Rachel Embry May 5, 2010 at 8:52 am Thumb up 3 Thumb down 2

My heart goes out to Diane – the Rep who has to pay a personal fine. I’m sure this has effected her life in a big way. And I know NO distributor of any company would ever want to be charged with doing an illegal activity, have to put up with the media coverage, have to put up with comments from friends, family & others in their community, and then have to pay a fine on top of it…just for running your business in the manner the corporate office taught you to do. Terrible for her…

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antete April 25, 2010 at 8:34 pm Thumb up 12 Thumb down 3

Someone please explain how FHTM is a Pyramid Scheme? If they have products and services, how does that make them illegal? If they were illegal before how does reducing the fee to $75.00 make them legal now? It doesn’t make sense to me.

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Roy Harper April 24, 2010 at 11:57 pm Thumb up 6 Thumb down 7

It’s good to see a company representative got fined in this case. I can’t help but ask if the fine should have been larger, so it would serve as a cause for alarm to company representatives of pyramid schemes which are disguised as legitimate MLM’s. After all, the MLM’s are made up of those people whom are “company representatives”, and it is them who perpetrates the crime against the distributors and consuming public, normally through ill-informed but well-intentioned distributors.

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David April 26, 2010 at 8:01 am Thumb up 20 Thumb down 7

It’s good? The entire case was made on the premise that people got ripped off! Nobody forced anybody to pay one dime to join FHTM. The cost is $299, (was $299 in Montana) and if people acted like it cost $2099, there would be fewer complaints! A McDonalds franchise cost a whole heck of a lot more than that and dont forget you have to have a specific amount of capital, oh, and of course, you have to pay a percentage of your gross sales to the corporation! Once and for all lets clarify FHTM’s payout. Louabbot joins FHTM by paying $299. Louabbot now has the right to represent the companies we market for. Whoever personally sponsored Louabbot will never be paid one dime until Louabbot sells three products (which are NOT company tools). Louabbot has a timeline of sixty days to gather those three customers, if that qualification is not met, then Louabbot’s upline will not get paid the Customer Acquisition Bonus of $100. If Louabbot does gather three customers within sixty days it will release a CAB of $100 to the sponsor. However at least one of those customers has to be maintained for a minimum of ninety days or the bonus will be withdrawn from forthcoming commission statement. That forces into place a dynamic that says, if I want to be successful, then I must do my best to ensure the success of other people! That being said, heres one more heads up to all who wont take the time to do there homework! (the lazy and /or prejudiced) For every $299 paid into FHTM, FHTM pays OUT $570! Thats not “Joining Bonuses”, thats customer gathering bonuses, (actual products sold)! No products sold, not one dime paid!

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Ray Evans April 24, 2010 at 6:56 pm Thumb up 6 Thumb down 0

It appears that if a valid product is not sold, that only a maximum of a $75.00 is not out of line fo any company for processing a new applicant/dealer. Most of the rest dosen’t seem to be very much different the the original Amway ruling many years ago, requiring written discription of earnings and time and % of people attaining each level.
I believe when live meetings or webinars are done by distributors and they use the term of “buy-in” or Investment they are asking for C & D orders, and worse.
For those companies not charging a fee for sign-ups, virtual offices, replicated websites,ect., who are selling a product or service that people would buy even if there wasn’t an income opp, as long as people don’t get carried away with “red flag” language and focus on earnings making it sound like it’s “free money” without time and effort envoluved, should not be a problem for any person building an honest networking business.
Many of us gladly pay $100. a year for our Costco and Sams Club memberships without commissions because of the savings we’ve enjoyed.
If they sold the membership for more money with a marketing plan, I doubt they would lose members. People just love to save money and buy with discounts, thankfully, thus network marking companies.
Thanks for the updates on what’s happening in the market place.

Reply

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