Fortune Hi Tech Marketing: Multi-Level Marketing Scam or Pyramid Scheme?

Fortune Hi Tech Marketing is one of hundreds of multilevel marketing companies that operate in the U.S through a combination of clever lawyering (“Let me show you how to set up your MLM so it appears to abide by the laws.”) and failure of law enforcement to enforce the laws against pyramid schemes and business opportunity scams (aided in large part by the Direct Selling Association and its lobbying efforts).

What makes FHTM different? Nothing, really. Every multi-level marketing company seems to claim it is different! It either has magic juice, special vitamins, the supposed opportunity to make money on things you already consume anyway, or any of a number of claims of uniqueness.

FHTM was founded in 2001 by former Excel Communications superstar Paul Orberson. This news story on Fortune Hi Tech Marketing from WHAS11 in Louisville, KY say that the company has 200,000 representatives and brings in revenue of $500 million per year. (Although the company’s CEO, Tom Mills, claimed he didn’t know how many representatives FHTM had. Incredible!) Oddly enough, this multi-million dollar business is run with only 60 employees at headquarters.

The company claims to provide products and services at competitive prices for customers, although research shows that this is likely not the case. Fortune makes money by selling overpriced services, some claim.  Independent Representatives (IRs) are required to sign up for services themselves or get other people to sign up, in order to qualify to receive payments from the company.  If the services are indeed priced higher than consumers could get on their own, there is an obvious profit for Fortune High Tech Marketing.

As explained in this news report posted on YouTube, the company says you can make money by simply representing products you already use, such as Dish Network, Travelocity, and the like. You simply sign up with FHTM, pay their entrance fee, sign up for services through FHTM, recruit others to do the same, and the money begins to flow your way.

Sounds great, but it’s not quite so easy. As noted in this article on Fortune Hi Tech Marketing in USA Today:

Critics of Fortune, including the Montana Commissioner of Securities and the plaintiffs in a new lawsuit seeking class-action status, say Fortune is a “pyramid scheme” because salespeople are primarily paid for recruiting, not product sales, and more recent recruits can’t earn anything close to what the early entrants do.

I”m sure the company denies being a pyramid scheme. But I’d suggest you take a look at the image to the right (click to enlarge), which shows how to make lots of money in the business. Notice that the number of representatives keeps growing as you go down the pyramid, requiring an ever widening base of people at the bottom (who aren’t making any money if they’re at the bottom). If companies don’t want to be called pyramids, then I suggest they stop setting up systems that look exactly like…. PYRAMIDS. (See the full presentation here. 3MB file.)

Former FHTM member Joseph Isaacs points out the flaw in the system: He made almost nothing from the “residuals” they advertise you can earn from people using the services. The commissions are so low on the services, that it makes no economic sense for representatives to try to sell them beyond their “qualifying” levels.

USA Today reported the following figures:

Fortune documents show its sales reps are paid $100 to $480 for recruiting customers who pay fees to become representatives and buy or sell a small number of products. They receive commissions of up to 1% — or less than $1 on a $100-a-month cellphone bill — on products and services, which they are often encouraged to buy for themselves or give away. Former sales managers including Isaacs and Yvonne Day, a plaintiff in the lawsuit seeking class-action status, say their product commission checks were often less than $20, while income from bonuses totaled several thousand dollars. A lawsuit filed by Isaacs alleges 82% of 100,000 Fortune representatives last year “failed to earn a single residual commission over $20 despite making personal purchases.”

Of course, the company denies paying representatives for recruiting:

“All compensation is based on sales, and sales alone,” Mills said in his written response. “There is never any compensation for recruiting, only for the acquisition and retention of customers.”

“Customer acquisition bonuses,” he says, “reward the (independent representatives) for acquiring new customers.”

 

Isaacs contends, however, that he made almost all of his money from the fees paid by the company for bringing in new recruits. And he says that Fortune HighTech Marketing is not all it claims to be. He alleges:

  • Paul Orberson had not made any special arrangements with the companies mentioned at the business opportunity/presentation seminar or in the company produced videos
  • The only way to earn a significant income and be promoted up the ranks was to recruit additional IRs
  • FHTM had not received regulatory approval for its pyramiding scheme in every state
  • Only a handful of IRs had earned anywhere near the residuals projected
  • The prominent businessmen, politicians, former attorney generals and sports figures to whom FHTM constantly alluded were in fact IRs actively promoting their own FHTM business
  • A growing number of state attorneys general had already begun investigating FHTM in response to numerous complaints.

Multi-level marketing companies pull out all the stops to recruit new members. They rely on manipulating your emotions and hitting you in your weak spots to reel you in. As seen in this television news story, this news story, and this news article, the recruiting pitch includes slimy things such as:

  • “Don’t leave this business!  For your children’s sake!  For your wives and husbands.”  – Fortune founder Paul Orberson
  • “The Lord wanted you to be here today. Can’t survive. Can’t pay your bills and all of the sudden, the Lord opened a door.” – Kevin Mullens, aPentecostal preacher and Fortune HiTech Marketing representative from Crawfordville, FL
  • Fortune is “…a ministry that can produce whatever it is that you need.” – Kevin Mullens, aPentecostal preacher and Fortune HiTech Marketing representative from Crawfordville, FL
  • “You’re gonna get paid $100,000 a year for doing exactly what you do today.” – Florida Trey Knight, FHTM representative in Florida
  • “Last month, what I was paid on a monthly basis was more than I would have been paid in five years coaching at the high school level.” – Todd Rowland, FHTM representative from Arkansas.

But distasteful tactics aside, what is so wrong with multi-level marketing?

The debate over whether a particular company is running a pyramid scheme or Ponzi scheme has been ongoing for years. Companies like Medifast Inc. (NYSE:MED) with a multi-level marketing division called Take Shape For Life (TSFL) acknowledge the risk of being deemed a pyramid scheme in filings with the SEC:

Our Business is subject to regulatory and legislative restrictions
A number of laws and regulations govern our production, operation, and advertising.  The FTC and certain states regulate advertising, disclosures to consumers, privacy, consumer pricing or billing arrangements, and other consumer matters. Our direct selling distribution channel is subject to risk of interpretation of certain laws pertaining to the prevention of “pyramid” or “chain sale” schemes. Although we believe we are in full compliance, should the governing body alter or enforce the law in an unanticipated way, there may be a negative result on the company’s operations.

Multi-level marketing companies are regularly exposed as nothing more than pyramid schemes which our governmental authorities allow to exist. In his report When Should an MLM or Network Marketing* Program Be Considered an Illegal Pyramid Scheme?, multilevel marketing expert Jon Taylor, PhD explains that the FTC’s definition of a pyramid scheme (1. commissions paid simply for recruiting, and 2.  ignoring the marketing of products and services) is inadequate to determine whether an MLM is a pyramid scheme. Multilevel marketing companies can easily set themselves up to appear to avoid those two descriptors, but detailed analysis of compensation plans and recruiting activities of distributors or representatives would show that many MLMs are indeed pyramid schemes.

In his report The Myth of Income Opportunity in Multi-Level Marketing, court certified expert on multi-level marketing and pyramid schemes Robert FitzPatrick revealed that his extensive research found that  99% of all sales representatives each year in the sample of companies analyzed earned less than $14 a week in commissions. This figure is before all business expenses, inventory purchases, and taxes are deducted. The figure therefore represents a significant financial loss for virtually all that join these schemes. He also reported that on average no net income is earned by MLM distributors from door to door “retail” sales.

MLM continues to be ignored as a problem by most regulators because the companies claim that representatives are making profits on retail sales.  According to FitzPatrick, “…the retail sales potential is held up as a defense against pyramid scheme charges since the payments to the upline are based on the product purchases of new recruits, not chiefly on entry or membership fees.”

But this retail sales argument is a myth. The products and services, while appearing legitimate, are typically overpriced (even at “wholesale” prices) in order to generate enough cash to pay multiple levels of commissions. This makes them difficult (if not nearly impossible) to sell in any volume that would provide a living wage to a representative. FitzPatrick’s research shows: “A statistical review of twenty-one (21) MLM companies representing 5 million sales people and “projected” retail sales of $10 billion reveals that even if retail sales are assumed to be occurring, the average MLM sales person is not earning a net profit from retail sales.”

Coming Soon: The focus on recruiting new representatives to FHTM.

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10 Comments

  • Gomer Pyles says:
    29 March 2011

    Great story…Hope you publish more about these guys

  • Shah Patel says:
    4 April 2011

    Fortune Hi-Tech Marketing loses Verizon Wireless from product offering

    So many questions and not enough answers. In a world fighting for customers and companies watching over their reputations like a hawk, what do these companies all have in common? I am referring to major Fortune 100 icons like General Electric, DuPont, Time, Verizon Wireless and AT&T as well as some smaller ones like Travelocity, Peter Lamas and BSP Rewards Mall.

    The answer is simple, somehow over the past 10 years and probably unbeknownst to them, they became aligned with a Multi-Level Marketing company known as Fortune Hi-Tech Marketing (FHTM). This was mainly accomplished because Fortune Hi-Tech does business with some of their authorized dealers and 3rd party affiliates. Fortune’s attempt to prove it’s legal by association has backfired, as it normally does. It is very difficult to build your reputation at the expense of someone bigger, when they have no idea who you are.

    Should these companies have a say in who gets to use their brand in the pursuit of the almighty dollar? For the first time in FHTM’s history the number of companies represented by it on the menu board at fhtm.net is shrinking. How can that be good?

    According to court documents and a major USA Today expose, last September, none of these companies had direct relationships with FHTM.
    In March 2010, Monica Lindeen, the Securities Commissioner for the State of Montana, issued a cease and desist against Fortune HI-Tech Marketing for operating an illegal endless recruiting pyramid scheme. Since then Texas has demanded documents in an investigation, South Carolina AG Roy Cooper, has opened an investigation into Fortune’s business practices, as part of the FTC’s “Operation Empty Promises”, and its own home state of Kentucky has done the same.

    Two blistering heart pounding class-action lawsuits have pummeled FHTM in 2010 as well. The first was filed in Federal Court in Kentucky in September 2010 and the other in Federal Court in Southern California two days before Christmas last year too. Neither of these lawsuits have been certified as a class yet, and mainly due to some extensive manipulation of the legal system by the Fortune legal team.

    What is the cost of that battle? Some estimate legal costs upwards of $500K monthly. That certainly will take a huge chunk out of any business’ cash flow. Fortune is not the first MLM or pyramid scheme to be involved in major lawsuits. Amway just agreed to pay a record settlement of close to $150 Million. Most top law firms and executives know they can’t win these types of suits, and mainstream media leaves a negative impact on their business. Attorneys have very little defense to RICO and pyramid scheme allegations, and after spending millions trying to defend the allegations, usually make arrangements for settlement conferences. They may win some of the small battles but not the war. What is the depth of the scars these lawsuits leave to deter others to join?

    So the important question now remains, why did these huge conglomerates allow their names and reputations to potentially be smeared by a company like FHTM? The answer is simple – they didn’t know what was happening.

    According to ex-representative, Joseph Isaacs from Tampa, Florida, “When these companies find out that their trademarks, names, logos and reputations are being used by FHTM in order to aide FHTM in proving its’ legitimacy they will issue a cease or desist, insist on the actions to stop or not allow FHTM to market their products”. Which others will walk when they find out the real business model and litigation history of Fortune Hi-Tech?

    As of March 2011 every one of the companies listed above has either issued a cease and desist or no longer allows itself to be aligned with Fortune Hi-Tech Marketing. How has this affected their aura of legitimacy? How do they explain all of this to new and even existing independent representatives?

    In reviewing some FHTM business presentations on YouTube, it was apparent that the logos of GE, DuPont, Verizon and AT&T were there for one reason. What are the repercussions of only being legal by association? According to Joseph Isaacs, “Top leaders would tell prospects during the business presentation that they must be legal because no iconic Fortune 100 company would affiliate with a scam”. “All of these major companies sent their CEO’s and legal teams to meet with founder Paul Orberson to evaluate FHTM and check out their books. This cannot be so and was nothing more than a lie used to recruit”, he added. What rhetoric do these leaders use today to explain the loss of such major brands? Only time will tell.

    Will FHTM leaders and owners blame the latest Verizon fiasco on the reps like they did in their announcement pertaining to DuPont only a few weeks ago? How long will this saga continue? Which other company will research the true business model of Fortune Hi-Tech Marketing and un-align themselves next? It is too early to tell but this story is far from over.

    If the massacre continues then Fortune will be nothing more than a vitamin and dog food MLM. That is not very hi-tech and not too many fortunes will be made by affiliation. How much representative revenue has been lost as a result of these major companies walking away? How many current representatives are scrambling to replace so many customer points? How many Regional and Executive managers won’t get bonuses because their team points are greatly depleted because of the latest loss? We searched high and low for the answers but didn’t find any.

  • JAMEY WILLIAMS says:
    22 June 2011

    I JOINED FHTM IN DEC. 2010 WITH THE PROMISE THAT I WOULD GET MY MONEY BACK, SO I WAS BASICLY TRYING IT FOR FREE. I WAS TOLD THAT ALL I HAD TO DO WAS SIGN UP 3 PEOPLE AND GET 10 POINTS WITHIN 30 DAYS AND I WOULD GET MY $100 ENROLLMENT PLUS THE$100 EACH MONTH FOR THE BUNDLE PACK IF (I) KEPT IT FOR 120 DAYS. IT’S BEEN 6 MONTHS AND I JUST GOT WORD THAT THERE ISN’T GOING TO BE A $500 BONUS FOR ME.THE REASON GIVEN IS, THE 3 I SIGNED UP DIDN’T KEEP THERE 10 POINTS ACTIVE FOR 90 DAYS,(NOBODY TOLD ME THAT), AND I DIDN’T SUBMIT A CLAIM FORM FOR THE BONUS, (NOBODY TOLD ME THAT).IF ANYONE IS THINKING OF JOINING FHTM AND HOPING TO TRY IT FOR FREE AS THE SPONSORS SAY, YOU’D BETTER MAKE SURE TO ASK QUESTIONS CONCERNING THE QUALIFICATIONS FOR THE BONUS OR YOU’LL WIND UP SPENDING, AND SPENDING AND IT WON’T BE FREE. OH, I’M CANCELLING TOMORROW!!

  • Khurshid Ahmed Khan says:
    10 October 2011

    It is commonly perceived that face is the mirror to soul. Now, if we want to know about a company, we surely need to assess its website, which definitely will give us rather a very clear picture of the legitimacy of the company concerned. For some months, I have been trying to understand the hidden story behind the sudden emergence of a Multi Level Marketing (MML) Company in Bangladesh, named Destiny 2000. Just in the span of three odd years, this company virtually has emerged into a huge giant, thus investing in newspaper, TV channel and many such projects. It may be mentioned here that, newspaper of this MML Company named Dainik Destiny is incurring huge amount of loss every year. But the management of Destiny 2000 is continuing to publish this least circulated daily newspaper, in order to save its skin from being attacked by the Bangladeshi media. In its website http://www.destiny-2000.com, the company says “Destiny-2000 Ltd. is one of the largest multi-level marketing companies of the world. About 3.6 million Distributors have joined the company since its inception in December 2000. Having its corporate office in Dhaka Bangladesh, it has branches all over the country.

    “With the goal to create self-employment opportunities for millions of educated-unemployed youths of Bangladesh, the company started its journey on a very rough road. Since the marketing concept was new in Bangladesh, the company started to face with many difficulties from the beginning. The concept was misunderstood by many people, even by some of the government agencies.

    “However, under the dynamic leadership of its Managing Director, Mr. Mohammed Rafiqul Amin, the company could overcome those, and made a remarkable progress down the road.”

    Dear readers, just look here! Destiny 2000 already confesses on its own website that they already have deployed 3.6 millions “distributors” in a country of 150 million populations, for alluring people to various ridiculous profitable ventures of this company, thus ultimately extracting people’s hard-earned money. Bangladeshi people are already scared enough after losing money with another fraudster MLM Company named Unipay2u, which is owned by a ruling party lawmaker named Mizanur Rahman Dipu. People also are scared after becoming visibly pauper in the stock market, where, once again, some of the influential figures of the ruling party have mercilessly robbed off people and swindled a couple of billions of Taka.

    Now before describing series of irregularities and corruption inside Destiny 2000 Limited, let me first of all give a brief about the head of the musketeers in this fraudster ring. Mohammad Rafiqul Amin returned to Bangladesh from Canada in the year 2000 with empty hand but with the brilliant idea of MLM Company concept, which he thought to be the easiest way of making millions. Initially, Mohammad Rafiqul Amin formed a MLM Company named GGN, which disappeared after robbing a few hundred million Taka from the innocent investors. With the amount of money received through GGN, Mohammad Rafiqul Amin then undertook rather a larger cheating project under the name and style of Destiny 2000. That was the beginning of this master musketeer who now possibly has turned into the worst ever Don of MLM fraudster rackets in Bangladesh.

    In their website, Destiny 2000 Limited displays the photographs of its “Founder Board of Directors”, where the photograph of Tariqul Huda Sarker is not on display. Why? Please check this link to verify my statement:
    http://destiny-2000.com/index.php?option=com_content&task=view&id=48&Itemid=80

    Now look into another page, where Destiny 2000 displays the pictures of their “High Officials”. Surprisingly enough, you will discover that, they have put the name of Noel G. Carey as “Overseas Director”, though his photograph is not shown. Why? See this link: http://destiny-2000.com/index.php?option=com_content&task=view&id=52&Itemid=92

    Now the biggest evidence of the fraudulent tendency of Destiny 2000. The link is here: http://destiny-2000.com/index.php?option=com_content&task=view&id=19&Itemid=42

    You will see the name of Destiny Electric & Electronic Industries Ltd, while there is no description of this venture. Why? Because, it is non-existent project of the bogus MLM Destiny 2000.

    Next is Destiny Multi-Purpose Cooperative Society. Well this is the enterprise, through which, the Destiny 2000 is in reality continuing alternative banking businesses, which is illegal as per provisions of the Bangladesh Bank.

    The most interesting venture is Destiny Tree Plantation Limited and Alysha Destiny Agro Complex Limited. You will see, Destiny has claimed to have planted 9.4 million trees on 6,293 acres of land. But, where is the location of such plantation? Does Destiny at all own even a fraction of such lands? On the other hand, each of the distributors of Destiny has sold at least 4 trees to the customers. So, just calculate the total number. Interestingly, Destiny has collected roughly TK. 1500-2000 for each of the so-called trees in their plantation projects from the investors, giving them the hope of “huge profit”.

    Best Air Limited, a venture of Destiny, prominently displayed at the same page, is also another blank project of this fraudulent MLM Company. In reality, Best Air is only existent in 3-4 vehicles roaming in the city as well as an office at city’s Shahjadpur area. It has not been able to purchase any aircraft till date and it is indicated that the venture will ultimate disappear soon.

    On the website of Destiny 2000, at least a few bogus or non existent companies are shown as enterprises of the MLM fraud-racket, which is simply aimed at alluring innocent people. The fake projects are:

    1. Destiny-Hitachi Electric Industries Limited
    2. Destiny Medical College and Hospital Limited
    3. Destiny Media and Publications Limited
    4. Destiny Environment Savings Energy Limited
    5. Configure Engineers and Construction Company Limited
    6. Destiny Builders Limited
    7. Destiny Tea Limited
    8. Destiny Life Insurance Company Limited (according to Registrar of Joint Stock Companies in Bangladesh, no such company is registered with them. In other words, it is a fake enterprise of Destiny 2000 Group)
    9. Configure Housing Limited
    10. Bondhishahi Cold Storage Limited
    11. Telebarta Limited (according to Registrar of Joint Stock Companies in Bangladesh, no such company is registered with them. In other words, it is a fake enterprise of Destiny 2000 Group)
    12. D2K Express Limited
    13. Destiny Transit Limited

    And finally, at the bottom of the website, you will see a clock tricking to anti-clock style, under the caption of ‘WE ARE WORKING FOR THE ECONOMIC FREEDOM OF BANGLADESH.’ And it claims that, Bangladesh will gain “Economic Freedom” in 500 plus days. Wao! Isn’t that the tenure of the current Awami League led coalitions government? This very clock shows clearly that Destiny 2000 is nothing but a huge scam.

    Now take notes of the few things. Destiny’s Mohammed Rafiqul Amin is a Canadian citizen. He is already sending his entire family to Canada, where they already have shifted reasonable amount of cash. Similarly, other two top aides of Mohammed Rafiqul Amin, Sayeedur Rahman and Gofran are already settled in overseas with substantial investments. All of them will simply disappear from the show in a fine morning, thus swindling billions of Taka from the innocent people in the country.

  • Wayne Z says:
    8 January 2012

    Check out this new FHTM marketing site:
    http://www.fhtmscamnews.com
    All of the information on them and Xoom Energy is there.

  • skapegoat says:
    4 April 2013

    Whistle-blower Joseph Isaacs (www.joseph-isaacs.com), who was made famous by exposing the Fortune Hi-Tech Marketing (FHTM) pyramid scheme and fraud back in 2010 has just released his memoir called, “Skapegoat – the FHTM Blame Game Story” via Amazon at http://www.amazon.com/dp/B00C43JKQG

    This compelling, true and personal, story is about a successful semi-retired 30+ year entrepreneur that turned whistle-blower after getting involved with an illegal Ponzi style MLM called Fortune Hi-Tech Marketing (FHTM) in 2009. Top FHTM leaders and its founder Paul Orberson tried to destroy his life after he developed a FREE Facebook style tool-set for the industry. Subsequent to FHTM receiving their 2nd cease and desist from Montana, he filed a complaint with the Kentucky BBB explaining their fraudulent ways, in an effort to get reimbursement for unwanted inventory. Shortly thereafter they make him the global scapegoat for everything bad happening to FHTM.

    Mr. Isaacs is hit with a frivolous lawsuit claiming trademark violation for marks they never owned. The “fortune mark” is owned by Time, Inc. and FHTM was under an order to stop using it themselves. This was a foolish attempt to gag him and stifle his “Freedom of Speech” rights to prevent FHTM from being further branded as an “Illegal Pyramid Scheme”. The stress of the harassing litigation caused multiple life-threatening heart attacks. Mr. Isaacs almost died in 2011 from the heart issues caused by FHTM. This story will keep you mesmerized by the deceit, sexual harassment, lies, judicial manipulation, influence peddling and the drama that unfolds over the next couple of years.

  • bankalchemist says:
    13 May 2013

    SCAPEGOAT listed above is Joseph Isaacs trying to honk his “tell all I am the victim” narrative. The intrigue is he got caught trying to lift the marketing materials of FHTM. This has nothing to do with FHTM being a MLM or Pyramid Scheme. Joseph Isaacs has been caught in other situations stealing materials and is an avid marketer of Russian Brides, Bikini Models, Telecom, Banks that don’t open, Scientology and Florida Real Estate sales without investment registration.

  • Tracy Coenen says:
    13 May 2013

    Yes, of course it is Joseph Isaacs. He has spammed this site many times with his materials. I let this one comment through because I don’t mind if people have access to his stuff. That being said, I’m not going to let Joe spam this site repeatedly, because I simply don’t believe his story. He is STILL looking for a get rich quick scheme all these years later. And his conduct in his litigation with FHTM has been shameful, in my opinion.

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