Whistle-blower, Joseph Isaacs, who was made famous by exposing the Fortune Hi-Tech Marketing (FHTM) pyramid scheme and fraud back in 2010 finally gets vindicated by the Federal Trade Commission and the Attorneys general of North Carolina, Kentucky & Illinois last week. From the press releases circulating around the internet as well as hundreds of media accounts, FHTM was officially shut down on January 28, 2013.
In the morning of January 28th, the FTC and representatives from Roy Cooper's office (Kentucky AG) raided the Fortune Hi-Tech Marketing corporate offices at 880 Corporate Way in Lexington, Kentucky. Employees were sent walking and all files and computer systems were confiscated.
Federal Judge Darrah, from the Northern District of Illinois court issues a temporary restraining order to shut down this alleged pyramid scheme and a receiver was appointed to seize all assets in order to prevent the Defendants Orberson & Mills from fleeing the country and moving their money outside the USA. This action also prevented any of the related companies from liquidating assets.
According to the FTC, the operation affected more than 100,000 consumers throughout the United States, including Puerto Rico, and Canada. In some areas, including Chicago, the scheme targeted Spanish-speaking consumers.
"Pyramid schemes are more like icebergs," said C. Steven Baker, Director of the FTC's Midwest Region. "At any point most people must and will be underwater financially. These defendants were promising people that if they worked hard they could make lots of money. But it was a rigged game, and the vast majority of people lost money."
Did the FHTM titanic finally crash into its iceberg?
"This is the beginning of the end for one of the most prolific pyramid schemes operating in North America," Kentucky Attorney General Jack Conway said. "This is a classic pyramid scheme in every sense of the word. The vast majority of people, more than 90 percent, who bought in to FHTM lost their money."
In addition to charging the defendants with operating an illegal pyramid scheme and making false earnings claims, the FTC charged them with furnishing consumers with false and misleading materials for recruiting more participants. The attorneys general offices of Illinois, Kentucky and North Carolina joined the FTC complaint, as well as alleging violations of their respective state laws.
The defendants are Paul C. Orberson, Thomas A. Mills, Fortune Hi-Tech Marketing Inc., FHTM Inc., Alan Clark Holdings LLC, FHTM Canada Inc., and Fortune Network Marketing (NASDAQ:UK) Limited. On January 24, 2013, the court halted the deceptive practices, froze the defendants' assets, and appointed a temporary receiver over the corporations pending a trial.
The Commission vote, including Commissioner J. Thomas Rosch, authorizing the staff to file the complaint was 5-0. The complaint was filed in the U.S. District Court for the Northern District of Illinois, Eastern Division. The seriousness of these crimes finally came to a head.
The whistle-blower, after being frivolously sued in 2010 by FHTM in a bogus trademark infringement case for intellectual property, they never owned, began a campaign of truth-telling. He was interviewed in 2010 by WHAS11 ABC news affiliate out of Kentucky. He was also contacted in 2010 by USA-Today and interview for an investigative piece on FHTM that resulted in a trifecta of articles on this entity. That investigative report exposed that other Attorneys Generals were looking into FHTM's evil ways and confirmed Isaacs' analysis that all of the money was made by recruiting whereby minimal efforts and rewards actually came from the sale of products.
The FTC's own expert has now vindicated Mr. Isaacs when his analysis became part of the Memorandum in Support of the TRO for Federal Court.
According to Dr. Peter Vander Nat stated that after reviewing the financial data provided by FHTM, at least 88% of the compensation paid by FHTM is in the form of recruiting bonuses, not sales based commissions. Furthermore, most recruits will never recoup their investment into FHTM. Conservatively, at least 90% of FHTM participants earn nothing, and 94% of the recruits drop out within a year. In fact this massive loss rate is the mathematical consequence of FHTM's business model.
Dr. Peter Vander Nat wrote with his examination on FHTM... "If the more than a minuscule number of recruits were able to achieve the results touted by FHTM, the bonuses could never be paid and the company would quickly collapse. FHTM's mission is to enroll ever more victims and replace them as they suffer losses and quit the program. It's a rigged game." In other words, the FHTM compensation plan was derived to support the fraud. It was designed for people to fail.
"The perpetrators of this pyramid scheme promised big returns but instead delivered significant losses for thousands of families in Illinois and all across the country," Madigan said. "In collaborating with our state and federal partners, we're seeking to bring the full force of the law against this entity to ensure that it is put out of business for good."
Even the corrupt Direct Selling Association had to chime in on this FTC action in order to prevent any backlash. For years FHTM misrepresented their relationship with the DSA. They promised reps for three years their membership would soon be approved. They even went so far as to claim they followed the rules of the DSA and their compensation plan was approved by the DSA as well as all 50 states here in the USA. The had the DSA policies on the bottom of their website until 2011 when that tidbit was replaced by the disclaimer that they had no affiliation with Fortune Magazine or rights to use the Fortune logo.
The Direct Selling Association (DSA) has received numerous inquiries regarding whether FHTM is a member of the Association. "FHTM is not a member of DSA," confirmed President Joe Mariano. Additionally, he stated that "the Association's membership application process is rigorous, and isdesigned to ensure that only legitimate direct selling companies become members of the direct selling industry's trade association."
While DSA cannot comment on the specific allegations regarding FHTM, Mr. Mariano commended the FTC and state attorneys general "for their comprehensive, ongoing efforts to identify and prosecute illegal and fraudulent pyramid schemes, an approach that is consistent with concerns raised by DSA through its membership application process and its long-established self-regulatory efforts."
So where does this leave all of the high level representatives that are loyal cult followers to its founder Paul Orberson? Many have taken to the internet over the past week promoting prayer vigils for the company lead by Cheryl Orberson, Paul's current wife. Others have promised that FHTM will get through this minor speed bump in its business. One leadership call from the 30th said that all companies go through this type of investigations and that the FTC was performing a business colonoscopy on Fortune Hi-tech. Folks like Joel McNinch promised everyone that Paul and Tom were fighting for them with every grain and fiber of their soul.
I think Paul is fighting to keep his proverbial butt out of prison. He will probably throw the reps under the bus as he did with both the Montana and Texas AG actions. He has been lying for so long I am certain he himself isn't even aware of what the truth really is.
Has the Federal government ever lost a Motion or case when they attempted to shut a company operating as an illegal pyramid or Ponzi scheme? Just ask the folks from YTB ore Zeek rewards. The sad part is that the high level representatives and leaders currently left in FHTM have no clue what it means to have a receiver going after you to recover ill-gotten gains.
Why have so many leaders like Darla DiGrandi, Scott & Molly Aguilar, Ruel Morton, Mike Misenheimer and Alexis Adame run from this legitimate company over the past few months. Some left just in time and others fled right after the FTC action. All of these leaders are defendants in the multiple class action lawsuits too.
Have any of them received legal advice on what happens when a pyramid scheme collapses and a Federal judge orders assets seized by a court-appointed receiver? I doubt it.
Should the receiver have the ability to go after the net-winners and claw-back all of the ill-gotten funds made at the expense of the millions of net-losers? For sure and he will. What does this mean to the leaders that fled just in time? Nothing at all, they are not going to be immune to the pain that is about to come down on their families. The bigger question is "Do any of these people have any money left or was it all spent on the aura they had to create as an illusion for success? Was all the money spent on the lavish lifestyle to keep up the facade? How will the Fortune tellers spin a weave of lies to justify what is about to happen on the 7th of February? Only time will tell.
For more information on the whistle-blower responsible for these investigations please visit his website at www.joseph-isaacs.com
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.