Fortune Hi-Tech Marketing, an
alleged pyramid scheme in Kentucky that recruited more than 100,000
participants including consumers in North Carolina, has been shut down and its
assets frozen, Attorney General Roy Cooper announced Monday.
"Operations
like this claim to offer career success and high earnings. But the reality
is that only the few at the top make money, and they make it at the expense of
new recruits who end up losing," said Cooper.
Cooper
partnered with the Federal Trade Commission and attorneys general in Kentucky
and Illinois to ask a federal judge to shut down Fortune Hi-Tech Marketing
(FHTM) last week. A court-appointed receiver now has possession of FHTM's
assets and secured the company's headquarters and warehouse in Kentucky this
morning.
Cooper,
the FTC, and the other attorneys general filed a lawsuit on Thursday, January
24 in federal court against FHTM and its principal operators, Paul Orberson, president,
and Thomas Mills, vice president. U.S. District Court Judge John W. Darrah
issued a temporary restraining order against the
company, which required FHTM to immediately cease operations. The lawsuit
seeks a permanent ban on FHTM's illegal operations, civil penalties, and
refunds for consumers.
As
alleged in the complaint filed with the court, FHTM claimed
participants could earn tens of thousands of dollars a year by buying into the
operation to sell satellite television service, home security systems, beauty
products and other consumer goods and services. Consumers paid $249 to
join FHTM. To qualify for sales commissions and recruiting bonuses, they
had to pay an extra $130 to $400 and agree to be billed monthly for products
unless they canceled the plan. Despite FHTM's claims, nearly every
consumer who signed up lost more money than they ever made.
Those
who did make money did so by recruiting others to join the scheme, not by
selling anything, Cooper, the FTC and the other attorneys general
contend. FHTM's promotional presentations and materials focused almost
entirely on recruiting new members rather than selling products, and FHTM
distributors had no incentive to sell products. For example, FHTM distributors
only received pennies for selling multi-year service contracts, but received
substantial payments for each new FHTM member they recruited.
"This
is a classic pyramid scheme in every sense of the word," Kentucky Attorney
General Jack Conway said. "The vast majority, more than 90 percent, who bought
in to FHTM lost their money."
FHTM
affected more than 100,000 consumers throughout the United States and in other
countries. Cooper's Consumer Protection Division received 37 written
complaints and inquiries about FHTM starting in 2008, and opened its
investigation into the company in 2010.
North
Carolina consumers can file a complaint about Fortune Hi-Tech Marketing with
the NC Attorney General's Consumer Protection Division by calling
1-877-5-NO-SCAM (toll-free within NC) or online at www.ncdoj.gov. Consumers
from North Carolina or other states can file a complaint with the FTC at
1-877-FTC-HELP or www.ftccomplaintassistant.gov.
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