Fortune Hi-Tech Marketing (FHTM) was a

Lexington, Kentucky Lexington is a city in Kentucky, United States that is the county seat of Fayette County, Kentucky, Fayette County. By population, it is the List of cities in Kentucky, second-largest city in Kentucky and List of United States cities by popul ...

based company which used

multi-level marketing Multi-level marketing (MLM), also called network marketing or pyramid selling, is a controversial marketing strategy for the sale of products or services in which the revenue of the MLM company is derived from a non-salaried workforce selling th ...

to sell consumer goods and services. The company was founded in January 2001. In January 2013, the

Federal Trade Commission The Federal Trade Commission (FTC) is an independent agency of the United States government whose principal mission is the enforcement of civil (non-criminal) antitrust law and the promotion of consumer protection. The FTC shares jurisdiction ov ...

(FTC) and regulators for three states shut down FHTM for being a

pyramid scheme A pyramid scheme is a business model that recruits members via a promise of payments or services for enrolling others into the scheme, rather than supplying investments or sale of products. As recruiting multiplies, recruiting becomes quickly im ...

Business model

Fortune Hi-Tech Marketing used multi-level marketing to recruit representatives to sell a range of retail services and products. Sign up fees ranged from $99 to $299. Representatives were paid a commission on products sold, as well as a bonus for recruiting more representatives. FHTM sold relatively low-profit margin products, and paid a commission of between 0.25% and 1% on products sold, which is extremely low compared to other multi-level marketing companies. Examples of items sold included mobile-phone services (offered through

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Dish Network DISH Network Corporation (DISH, an acronym for DIgital Sky Highway) is an American television provider and the owner of the direct-broadcast satellite provider Dish, commonly known as Dish Network, and the over-the-top IPTV service, Sling TV. A ...

television (as a third party contractor), a line of hair-care products, and others. In its marketing materials, the company emphasized its ties to well-known brands, such as

AT&T AT&T Inc. is an American multinational telecommunications holding company headquartered at Whitacre Tower in Downtown Dallas, Texas. It is the world's largest telecommunications company by revenue and the third largest provider of mobile tel ...

, Dish Network, and Sprint, although the company's ties were often through intermediaries, and the companies were not made aware that FHTM was using their names in such a way. In 2010 FHTM reported that about 95% of representatives made less than $3,100 a year, with 29% making nothing.

History

The company was founded in 2001 by Thomas Mills and Paul Orberson, who had both previously worked with

Excel Communications Excel Communications is a now defunct multi-level marketing (MLM) telecommunications company that was at one point America's fifth largest long-distance carrier after AT&T, MCI, Sprint, and Worldcom. Company history Excel was founded in 1988 ...

. Orberson had also previously worked as a high school basketball coach. In 2010, the company paid $1 million to settle charges brought by the

Montana Montana () is a state in the Mountain West division of the Western United States. It is bordered by Idaho to the west, North Dakota and South Dakota to the east, Wyoming to the south, and the Canadian provinces of Alberta, British Columbi ...

state securities commission. The charges accused FHTM of acting as an illegal pyramid scheme by primarily compensating affiliates for recruiting other affiliates, rather than for selling products or services. The company did not admit to any wrongdoing, and as part of the agreement, FHTM was required to lower its entry fee within the state from $299 to $75. In response to that and other investigations in other states, FHTM also lowered entry fees outside of Montana to $99. As part of the settlement, FHTM disclosed that 30% of representatives made no money, and 54% of those who did make money made an average of $94 a month before costs. Following the events in Montana, several other state and federal entities began investigations. In January 2013 the company was sued by the FTC and the Attorneys General of Kentucky, Illinois, and North Carolina. The company's Kentucky offices were raided, and the company was placed in

receivership In law, receivership is a situation in which an institution or enterprise is held by a receiver—a person "placed in the custodial responsibility for the property of others, including tangible and intangible assets and rights"—especially in ca ...

. At that time the company reported having 160,000 independent representatives. The FTC's complaint alleged that the bulk of profit made by affiliates was from recruiting more affiliates, and not from sales, which is a defining trait of pyramid schemes. Orberson died December 2013 at the age of 56 or 57 from cancer. In May 2014, the company reached a settlement with the state of Kentucky and the FTC to pay US$7.75 million to former customers, and company officials were banned from future involvement in multi-level marketing, or from selling or benefiting from customer's personal information. Under the settlement, the defendants neither admit nor deny that the company was a pyramid scheme.

References

External links

case page
at the law firm Robb Evans & Associates, the company's court-appointed receiver {{Multi-level marketing Companies based in Lexington, Kentucky Defunct multi-level marketing companies American companies established in 2001 2013 disestablishments in Kentucky