Pyramid scheme banned from business, AG Cooper says
Release date: 5/13/2014
Fortune Hi-Tech Marketing to repay $7.75 million to consumers
Raleigh: The people behind pyramid scheme Fortune Hi-Tech Marketing are now banned from all multi-level marketing and must repay consumers $7.75 million, Attorney General Roy Cooper announced today.
“This classic pyramid scheme relied on payments from new recruits to enrich those at the very top,” Cooper said. “Most people who participated actually lost more money than they made, and thanks to today’s agreement they’ll have a chance to get some money back.”
Fortune High-Tech Marketing (FHTM) operated a pyramid scheme out of Kentucky that recruited more than 350,000 participants between 2009 and 2012, including approximately 20,000 in North Carolina.
FHTM claimed participants could earn tens of thousands of dollars a year by buying into the operation to sell satellite television services, home security systems, beauty products and other consumer goods and services. Most participants made little if any money through the scheme.
The ban and refunds are part of a court settlement approved today by the U.S. District Court for the Eastern District of Kentucky, where FHTM was based. Today’s settlement resolves a lawsuit filed in January, 2013 by Cooper, the Federal Trade Commission, and the attorneys general of Kentucky and Illinois.
In addition, the court order permanently bans defendants FHTM, Thomas A. Mills, Alan Clark Holdings LLC, FHTM Canada Inc., and Fortune Network Marketing (UK) Limited from misrepresenting any products or services, including how much people could potentially earn for selling them. The defendants are also banned from selling or using customers’ personal information for their gain and from collecting any additional money from customers. One of the original defendants, Paul C. Orberson, passed away during the course of the case.
Refunds of at least $7.75 million are to be paid from assets surrendered by FHTM and the other defendants. The refund process will begin once all funds have been collected from the defendants. If the defendants are found to have misrepresented their financial situation, they will owe $169 million under the court order.
Despite FHTM’s claims of high earnings, nearly every consumer who signed up with the company lost more money than they earned through the scheme. A receiver appointed by the court to handle FHTM’s assets determined that more than 98 percent of consumers who participated lost more money than they ever made, and at least 88 percent never made back what they initially paid to join FHTM, typically around $250.
Those who did make money through FHTM did so by recruiting others to join the scheme, not by selling anything, the classic definition of a pyramid scheme. More than 81 percent of payments made by FHTM to participants were for recruiting new members rather than selling products.
Any North Carolina consumer who participated in FHTM and may be eligible for a refund should file a complaint with Cooper’s Consumer Protection Division, if they have not already. To file a consumer complaint, call 1-877-5-NO-SCAM toll-free within North Carolina or fill out the form at ncdoj.gov.
Consumers from any state can file a complaint with the FTC at 1-877-FTC-HELP or online at www.ftccomplaintassistant.gov.
“If you’re looking to earn extra income or join a new business, do your homework before you invest any money,” Cooper warned. “Be very skeptical if someone tries to recruit you into something that could be a pyramid scheme.”
Under North Carolina law, a pyramid scheme is any plan in which a participant pays money for the chance to receive money upon the introduction of new participants into the program, whether or not a product or service is offered as well. Read our tips on pyramid schemes for more warning signs.
Contact: Noelle Talley (919) 716-6413