FRANKFORT, Ky. (AP) - A Kentucky-based company has been ordered to return $7.75 million in assets to more than 350,000 people who were caught up in what officials say was one of the country’s largest pyramid schemes.
Officials said Fortune Hi-Tech Marketing would charge people $249 for the rights to sell products like satellite TV service and home security systems. The company would target Spanish-speaking communities and promised them they could get rich if they sold the products. But state and federal officials said the company’s promotional materials focused on recruiting new members, not selling products.
“This was a classic pyramid scheme in every sense of the word,” Kentucky’s Democratic Attorney General Jack Conway said in a news release. “The vast majority of people, more than 90 percent, who bought in to FHTM lost their money.”
The Federal Trade Commission, along with Conway and attorneys general in Illinois and North Carolina, announced the settlement Tuesday with the Lexington-based company.
Kentucky officials started investigating Fortune Hi-Tech Marketing in 2010 after officials in North Dakota, Montana and Texas reached settlements with the company. Conway’s office said it received about a dozen complaints from consumers. He said his office contacted the Federal Trade Commission because the case had victims spread across the U.S., Canada and Puerto Rico.
“This is a ’wake-up and smell-the-coffee’ moment for any promoters of illegal pyramid schemes trying to hide behind labels like multi-level marketing,” Jessica Rich, director of the commission’s Bureau of Consumer Protection, said in a news release. “The FTC wants consumers to know that eventually, all pyramid schemes collapse, and nearly everyone who signs up with the companies loses his or her money.”
Tom Mills and Paul Orberson founded the company in 2001. Orberson died in 2013. Mills and Orberson’s estate denied all of the government’s allegations in a joint statement to the media.
“In order to avoid the additional emotional stress and costs of likely years of litigation, we felt it in our best interests and the interests of others to put this behind us and settle this matter,” the statement read. “We wish to thank the many individuals and companies that have given us an outpouring of support during this challenging time.”
Mills and Orberson’s estate said the company used the same business plan as Excel Telecommunications, another multi-level marketing company that at its peak in the 1980s was a multibillion company traded on the New York Stock Exchange. That company faced “no significant regulatory scrutiny,” the statement noted.
In addition to surrendering $7.75 million in assets, the settlement also permanently bans the company from multi-level marketing. The Federal Trade Commission is responsible for returning that money to consumers. The money includes assets from Orberson’s estate.
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