Fortune Hi-Tech Marketing – FHTM – has been waving some red flags and finding itself at the negative end of publicity for many years now. See Related Posts below.
Today, The Federal Trade Commission and three state attorneys general took action:
Federal, state regulators shut down Fortune Hi-TechJayne O’Donnell, USA TODAY1:45p.m. EST January 28, 2013
The Federal Trade Commission and three state attorneys general announced Monday that they shut down a national multilevel marketing company they called a “global pyramid scheme” that rewards people for recruiting others.
FortuneHi-Tech Marketing of Lexington, KY., and its top two executives were sued by the FTC and the attorneys general of Kentucky, North Carolina and Illinois for “unfair and deceptive actions” that violated state and federal laws. Among the charges: Misrepresenting that the company is “a good way for average people to make substantial income and achieve financial independence.”
“Today’s actions are the beginning of the end for one of the most prolific pyramid schemes operating in North America,” said Kentucky Attorney General Jack Conway.
The headquarters and a warehouse for Lexington, Ky.-based Fortune Hi-Tech Marketing were raided Monday morning and the contents confiscated by a receiver appointed by the U.S. District Court for the Northern District of Illinois. The receiver, Robb Evans, and his firm met with FHTM employees today and sent most home.
The multilevel company was the subject of a USA TODAY investigation in October 2010, which reported top FHTM representatives for the company often told their rags-to-riches stories in videotaped meetings, a book written by President Paul Orberson and marketing materials.
Orberson is a prominent figure in Kentucky, where the University of Kentucky built a Paul Orberson Football Office Complex in 2002 after he made a $1.6 million contribution. In an interview at the 2010 conference that USA TODAY attended, Orberson defended his company against allegations that it is a pyramid scheme: “If it were illegal, I wouldn’t be standing here.”
…Multilevel or “network” marketers pay commissions to salespeople for the products they sell, on products sold by others they recruit and often bonuses when their teams reach a certain level of sales. The Direct Selling Association, which represents companies that have multilevel compensation plans, estimates there were 15.6 million “direct” salespeople in 2011.
According to the lawsuit against FHTM, its “complicated and convoluted compensation plan” ensures most people make little or no money.
“The fact that they targeted people who just wanted to better themselves in this economy is unconscionable,” Conway said in an interview.
More than 85% of the compensation paid is from recruiting new members, the complaint said. The compensation plan is designed so the majority of people will spend more than they earn. As Conway noted in an interview, about 90% of people made less than $15 a year, yet were asked to spend about $1,500 a year on products and membership fees.
The judge issued a temporary restraining order against the company, which requires FHTM to stop any pyramid operations. Receiver Evans will report back to the court about its findings after his firm reviews FHTM’s finances and business model. The FTC and states are seeking permanent injunctive relief prohibiting the operations of FHTM, along with civil penalties, damages and restitution for consumers.
FHTM could not immediately be reached for comment.
See the full article at USA Today site.
Editor’s Comment: Fellow networkers, there are lots of companies that are not vulnerable to attacks by regulators. Why gamble your and your family’s future on companies that are drifting too far into the grey areas? There’s just no need for it. And it’s not like any of this should be a surprise to anyone in FHTM. See the Related Posts below.