Fortune Hi Tech Marketing has been ordered to cease and desist operating in the State of Montana according to a report from the AP:
HELENA, Mont. (AP) – Montana has ordered a Lexington, Ky.-based company to cease operations in the state, accusing it of running a pyramid scheme.
Monica J. Lindeen, the state Commissioner of Securities and Insurance, says Fortune Hi-Tech Marketing took nearly $1.9 million from at least 1,295 Montana participants between July 2006 and June 2009.
Lindeen says the company lures new members with income opportunities with companies such as Dish Network and General Electric. But, she says, members only benefit if they recruit others to join in the alleged scam.
Here is a copy of the Montana Complaint Against Fortune Hi Tech Marketing.
Here is a link to the FHTM Statement to Montana Reps.
This action comes on the heals of North Dakota taking similar action back in December where the State Attorney General files a Cease and Desist against FHTM.
Attorney General Wayne Stenehjem has issued a Cease & Desist Order against Fortune Hi-Tech Marketing of Lexington, KY and its principals Paul C. Oberson, Jeff Oberson, and Thomas A. Mills for violations of North Dakota transient merchant, consumer fraud, and home solicitation sales laws. The Order was filed late yesterday, December 10, 2009.
I continue to find these type of rulings troubling. Nobody gets paid in Fortune Hi-Tech Marketing unless a certain number of customers are generated. The owners of FHTM derive significant income from the purchase of legitimate products by end consumers.
Obviously, as with basically any sales organization, the ability to develop a network of sales producing associates results in greater income. This is capitalism.
Thanks for clearing that up Ken.
Ken, the problem is that very little money is made on the products that are promoted (Dish Network, etc) and most of the money is made on recruiting. This is basically the same comp plan as YTB Travel had and they ran into the same trouble because so little of the money was coming from Travel. There is virtually no money in the products (companies) that are truly being promoted.
Actually no money is made on recruiting. With FHTM’s plan not a dime is paid out until the service or product has been sold.
Yes, they pay a hefty commission, but they are quite open about where the money actually comes from.
I’ve been to two of their meetings and looked at the plan, and it sounds solid from a legal standpoint. Unfortunately plans like that don’t have longevity as they tend to crash and burn, so you won’t see me joining FHTM any time soon.
Personally I wouldn’t join it either, but for what it’s worth, FHTM has already been around for nearly a decade.
I still think it is relative. I’m in the insurance business. There are some products where I make 100% or more in commission. On other products, my commission is as low as 2%. To maintain that business, I have licensing fees, continuing education costs, annual registration fees for each company that I represent, etc. I have to spend hundreds of dollars each year before I ever make a penny, and there is no guarantee of return. Roughly 90% of insurance agents in my state are out of business within 5 years. Many others are never more than part-time or maintain a license just in case.
Some of FHTM’s products do not lend themselves to high commission rates. That doesn’t mean that money isn’t being generated from the volume of product (or service) being moved.
For that matter, FHTM has their own line of nutritionals. They are taking advantage of their established network to profit handsomely from this product line.
At the heart of the FHTM business, the owners are establishing a distribution network for the products so that they (the owners) can profit from the sale of the products. Like any sales organization, there is a balance between what the owners take in and what they distribute to the field. Maintaining that balance is one of the keys to continuing to grow.
I don’t want to come off as a cheerleader for Fortune. Actually, I have some good friends who were top earners with Fortune and left precisely because they felt the pay plan didn’t compensate them well enough for the long haul.
My beef is with the states who take this kind of action. They stop a company from doing business before they get a hearing. I think this is unfair. For the most part, I think it is about control and regulation. If multi-level companies were regulated in the same way as insurance companies, then these AGs wouldn’t care if 90%+ of the reps made little or no money and wasted their time. As long as the state got to extract their fees and maintain control, everything would be fine.
I am positive that Fortune’s ownership has spent a lot of money to be sure they are within the law. I am also positive that Fortune, like most MLM companies, has representatives who mis-represent the company’s policies and compensation plan to the public. For the sake of this industry, I hope that these type of decisions do not become the norm. I realize this is not a black and white case, but most in our industry are not. I just want to see AGs side with entrepreneurialism over heavy-handed bureaucracy.
Ken, I like your perspective. I can’t speak to FHTM specifically, as I haven’t researched their plan much. I have to agree with you on the point that MLM is a legitimate business model. Unfortunately, people look to it as “get rich quick” or simply a “right place at the right time” industry. Funny how nobody sees insurance sales as a “get rich quick” idea. And yet the money you can make from selling insurance can be extremely lucrative.
I am also NOT saying that MLM should be regulated like insurance. Just hoping MLM could clear up the reputation it sometimes has and people respect the fact that it takes hard work and effort to build a long-term, sustainable income.
I thought this was going to happen when I first saw the plan a few years ago. The law is distributors can’t make money off the enrollment fees period.
Like the company I am with charges a $39 enrollment fee. No money from that goes to anybody but the company. The sale of products or services are the ONLY way commissions can be paid on.
That is what happened to YTB and now FHTM. I think there are several other big companies that I have seen that will be looked at eventually because their comp plan also pays distributors commissions off the enrollment fees.
Chris
The majority of the money in FHTM is generated by acquiring a customer. If you sign up for Dish Network at Radio Shack, they will get a customer acquisition bonus of about $300. I am sure the same holds true for Phone service as well. I makes sense to me that substantially more money would be paid out for delivering the customer than the monthly residual from their bill(which is probably only a couple of bucks a month). I am sure Fortune will be exonerated and will be back in business soon. I sure hope our state officials will have the humility to acknowledge that they were wrong, and apologize to the Fortune reps that have been held hostage while this inquisition is going on.
Tthe State Auditor made it very clear in the cease and desist order of what did not favor well when they said they “found that an overwhelming portion of revenues earned by FHTM participants was derived by participants who must personally buy products in order to become managers or recruit new participants into the program.” & “existing managers generate income for themselves by bringing on new participants (recruits) who then must also buy products in order to become managers.” & “the cost associated with becoming an FHTM participant is essential to paying other managers to bring on other new members, with increases in income being directly related to the number of managers brought on who must also spend money for their membership.”
The faulty logic here lies in whether the “must” buy the products. There is no requirement that one must buy a certain amount, only that one must sell a certain amount. It is easier to sell to ones self rather than others, so that is the route chosen by most reps. That is where this case loses merit and I think FHTM will win this one.
In Fortune you can buy products for yourself and earn a small commission and other people can buy products through you. Each of these are considered customer points that also qualify your position and ability to earn commissions from other levels. Some people choose to get all of their own customer points because they already use the products or services that are offered. And why not get paid a commission on something you already use unconsciously and habitually?
What makes this model different from the other MLM models out there other than there is a whole umbrella of different products and services?
“What makes this model different from the other MLM models out there other than there is a whole umbrella of different products and services?”
Are you serious? Have you been living under a rock?
Is it me or have you never heard of Amway…Quixtar…Amway Global? You should look at my salt water deal. It is awesome. Little salty but awesomer than you think. I am a winner.
I “enlisted” in FHTM a few months back…and quickly got out on the advice of our staff attorneys with the company I work for. They warned me of this very thing and that I should steer clear of it. I am sooooo glad I did!! It did take 6 weeks though for FHTM to refund my money…and they still kept $20 of it. I feel sorry for everyone that got sucked into their scheme.
I think Montana made the wrong move claiming that nobody makes money except its owners and a few other high up executives in the company. I happen to know three people in Montana who recently retired from their old jobs and are now making a living with FHTM. But that was before that blank with the fat salary in the Auditor’s Dept had nothing better to than wreck their lives for political gain. Remember, the state auditor in Montana is elected. I’m not connected with FHTM in any way, except by the people I know who had their income taken away through a biased investigation that was more than likely politically motivated. Monica’s action only proved she is not working on behalf of Montana residents by taking away their jobs. Isn’t the economy bad enough?
Ultimately the problem isn’t with the business model. MLM is a great way to market and I think most of the commenters here would be hard pressed to define statutory income PERCENTAGES that have to be met. It is my understanding that the only legitimacy test is whether actual products and services are being sold not what percentage of revenue comes from those products and services.
The problem comes with an increased failure rate inherent to the lower barrier to entry afforded by MLM’s. Statistics show that well over 90% of traditional businesses fail. These are businesses that people saved for years to start in most cases. Businesses which required far more out of the initiator if they were to ever have a chance to succeed. Now imagine that anyone can start a “business” for only a few hundred dollars, regardless of business skill level. You are told all you have to do is sell to a few friends and convince them to do the same. Anyone who has done well in network marketing knows that is bunk. It’s a great theory but doesn’t work. So all of these recruits perpetuate the cycle by trying to convince others who have no entrepreneurial skill set to get involved. Meanwhile, rather than be confronted with the truth that they do not know how to own or run a business, the overwhelming majority blame the company and run through the streets crying “SCAM”. Public officials want to be reelected so they respond to the voting masses regardless of the merits of the case.
The next great turn in MLM as I see it, will come when a company decides to be very exclusive about who they let in or either put their recruits through serious business training. Pep talks and conferences don’t work. Education does. I’m just not sure if the model I am talking about would be profitable.
@Brett Banks…You are right on the money — for the most part. I believe that any GOOD MLM does a great job providing the right environment for its people to learn in. Ultimately, however, (as is the case with diets, etc.) it is up to the individual as to whether or not they will develop into the business person who can lead an organization and therefore be successful. It’s not about selling, it is about leading and influencing and giving people hope that they, too, can be successful. I’ve seen normal people make incredible money ($100K per month or more) in MLM. It obviously works. The only question is will YOU work?
Thank you for today’s entry, honestly, can you sign up as a writer for wikipedia because the current stuff submitted there for our hobby is quite frankly next to useless. I can’t say I agree exactly with it but I agree with it on the most part and I certainly applaud your effort in putting it so ably.