Kevin Thompson, The MLM Attorney has posted information about a new Class Action lawsuit against Fortune Hi Tech Marketing (FHTM).
Here’s a snip:
I cannot predict if the allegations will prove true or not because I know very little about the FHTM model; however, it seems like the complaint focuses squarely on the FHTM policies and the pay plan, which means there’s not much wiggle room for FHTM. It will be hard for them to defend their practice of paying commissions on training fees, which I think is their largest problem.
FHTM reps habitually say “we have former state attorney generals on our legal team.” Allow me to address this point: simply because a company has hired “former AGs” as their attorneys, it does not mean that those AGs understand the industry.
Read the rest of Kevin’s post including a copy of the lawsuit.
Here’s more on the lawsuit:
A class action lawsuit was filed against Fortune Hi-Tech Marketing (FHTM), its officers, directors, Presidential Ambassadors and all National Sales Managers claiming fraud, pyramid scheme and RICO violations in the Eastern District of the Federal Courts on September 2, 2010
Defendants listed in the lawsuit include: Fortune Hi-Tech Marketing, Paul C. Orberson, Jeff Orberson, Thomas A. Mills, David Mills, Billy Stahl, Simon Davies, Ruel Morton, Todd Rowland, Ashley Rowland, Todd & Ashley, Inc., Mike Misenheimer, Steve Jordan, Joel McNinch, Chris Doyle, Ken Brown, Jerry Brown, Bob Decant, Joanne McMahon, Terry Walker, Sandi Walker, Sherri Winter, Trey Knight, Kevin Mullins, Scott Aguilar, Molly Aguilar, Nathan Kirby, Dwayne Brown, Aaron Decker, Susan Frank, Ramiro Armenta, Angelina Armenta, Alexis Adame, Teresa Adame, Darla DiGrandi, Matt Morse, Matt Barrett and Roberto Rivera.
This is an action by plaintiffs on behalf of themselves and those similarly situated to recover damages caused by the defendants’ operation of an inherently fraudulent pyramid scheme. The pyramid scheme is fraudulent because it requires the payment by participants of money to defendant Fortune Hi-Tech Marketing, Inc. (“Fortune”), in return for which participants receive (1) the right to sell products and (2) the right to receive in return for recruiting other participants into the program rewards which are unrelated to sale of the product to ultimate users.
This action is brought on behalf of a national class of persons who serve or have served as independent representatives for Fortune, pursuant to the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1961-1968 (“RICO”), the Kentucky Consumer Protection Act, KRS Chapter 367, and the laws of Kentucky.
Under the Compensation Plan utilized by Fortune until at least July 1, 2010, IRs are able to earn compensation from two sources: (1) bonuses for recruiting and sponsoring new representatives; and (2) commissions from sales of products and services by themselves and by recruits in their “downline.
Fortune operates as an illegal pyramid scheme because this compensation plan affords IRs the right to receive in return for recruiting other participants into Fortune rewards which are unrelated to the sale of products or services to ultimate users outside of Fortune. Fortune’s compensation plan involves an elaborate set of bonuses which are effectively the only way to earn money in Fortune and which are all tied not to real sales to outside customers, but rather to recruitment of new IRs.
To perpetuate the fraudulent pyramid scheme described above, Fortune claims to have special relationships with or to be a “partner” of several large major national companies whose products and services Fortune offers. These companies include, but are not limited to, AT&T, Verizon Wireless, Sprint, Dish Networks, General Electric Security (“GE Security”), DuPont and Home Depot. Fortune has used the trademarks of these and other companies in marketing materials and business presentations in order to convince prospective customers that Fortune is a legal business. In reality, Fortune does not have any sort of special relationship with these companies. Fortune is not a “partner” with Dish Networks. Rather it is a third-party independent contractor authorized to sell Dish Networks service. There are numerous other such third-party vendors of Dish Network.
All of the defendants in this action collectively form an “enterprise” under RICO, 18 U.S.C. § 1962, in that they are a group of individuals and entities associated in fact, although not a legal entity.
The defendants’ promotion of an illegal pyramid scheme is a per se scheme to defraud under the mail and wire fraud statutes; thus, the defendants have committed racketeering acts by promoting an illegal pyramid scheme by using and causing others to use the mail and by transmitting and causing others to transmit, by means of wire in interstate commerce, writing, signs, signals, pictures and sounds, all in furtherance of and for purposes of executing a scheme or artifice to defraud, namely an illegal pyramid scheme.