Federal, State Regulators Shut Down Fortune Hi-Tech Marketing

by louabbott on January 28, 2013

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:

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.

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{ 11 comments… read them below or add one }

Skapegoat May 28, 2013 at 8:35 am Thumb up 0 Thumb down 0
matthew April 6, 2013 at 6:59 pm Thumb up 0 Thumb down 0

I have been approched by a friend promoting this companie selling silver coins on a multi level selling , and wondered if anyone could help me with some information on it please

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Daniel February 27, 2013 at 11:47 am Thumb up 0 Thumb down 0

I was suspicious about MLM and Pyramid schemes, but then I got introduced to ACN!!!!!!! and EVERYTHING changed.

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louabbott February 27, 2013 at 2:13 pm Thumb up 0 Thumb down 0

Daniel, do be aware that ACN may well face the same kinds of attacks as FHTM for at least one of the same reasons. I would advise learning more about the legal issues that affect MLM comp plans.

Here are good places to start:
http://www.mlm-thewholetruth.com/mlm-legal-issues/pyramid-scheme-or-legal-mlm-how-to-tell-the-difference/
http://www.insidenm.com/
http://www.mlmwatchdog.com/MLM_Compensation_pay_plans.html

Reply

jason bowles January 30, 2013 at 10:23 am Thumb up 2 Thumb down 0

I was approached about the fhtm opportunity & glad I didn’t join! One thing I hate is the fact how most companies give our industry a bad rap. Glad I’m with a company were I will never have to worry about being shut down! This company really allows people to earn serious income for helping people.

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Alan Eames January 29, 2013 at 12:41 am Thumb up 3 Thumb down 0

I’m with Dan, I’m surprised it took this long!

One minor critique, Conway is mentioned twice in the article but not identified, I had to go to the full article to find out who he is. But the bonus is you got quoted by USA Today, that’s great!!

Keep on doing what you do!!

Best,
Alan

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louabbott January 29, 2013 at 9:38 am Thumb up 0 Thumb down 0

Thanks Alan. I appreciate the good feedback.

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Brad Proctor January 29, 2013 at 12:08 am Thumb up 1 Thumb down 4

All I can say is, Back Off! FHTM is not a bad company. As a matter of fact I have a check in my hand that would be in the bank today if not for the FTC. AMWAY never put a check in my hand. In two days I was going to meet Paul, that’s just Great!

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Maggie Kress January 28, 2013 at 9:31 pm Thumb up 3 Thumb down 0

Thank Lou for sharing this information with me. My grandaughter thought of being involved with this company but after reviewing their history, she decided not to do so. I am glad she did not because I feel after working to make a business work and finding out they are just a scam could be very depressing. I feel sad for all that fell for this outrageous scam. Proves you must do your homework before investing any money in a company that you want to make into your business. Thanks for allowing me to share. God Bles Maggie

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Roberto January 28, 2013 at 6:26 pm Thumb up 5 Thumb down 0

I am always suspicious of companies that charge a membership fee to be a distributor, specially when the bulk of your earnings are to be generated from others’ membership fees. That’s a huge red flag for me.

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Dan January 28, 2013 at 3:06 pm Thumb up 2 Thumb down 0

All I got to say is….It’s about time!!!!

Reply

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