Montana says Lexington company is a pyramid scheme

After receiving numerous phone calls from Montana consumers about a Lexington network marketing firm last year, officials there embarked on a five-month investigation and concluded that the company is an illegal pyramid scheme.

Montana has banned Fortune Hi-Tech Marketing, which has received as much as $1.9 million from state residents, from doing business there until there is a hearing or settlement of the case, said Jackie Boyle, a spokeswoman for the Montana auditor's office.

"Basically a lot of the claims they've been making are false," Boyle said.

The company was founded by former Danville basketball coach Paul Orberson, who became a millionaire with Excel Communications, another network marketing group. In 2000, he started Fortune, which promotes itself as a company that recruits people to sell services and products.

Jason Baker, the associate general counsel for Fortune, directed a reporter to Fortune's Web site, which had a statement from Vice President Tom Mills asking Fortune representatives not to work in Montana.

"We respect the right of the auditor's office to oversee the conduct of companies doing business in Montana," the statement said. "While we are in discussions with them, you must not engage in your Fortune business."

Orberson is also a University of Kentucky sports booster who recently gave $100,000 to the Hoops for Haiti campaign, earning the winning bid on a dinner at Coach John Calipari's house with actress Ashley Judd.

To become a Fortune representative, the company's literature says, a person pays $299, then sells services such as the Dish Network and True Essentials vitamins while recruiting a sales force of his or her own.

The person at the top of the pyramid receives commissions from each sale and each new membership. It's legal, Fortune officials say, because they sell products.

However, the Montana authorities disagree.

"FTHM is not a multilevel distribution company but rather a pyramid promotional scheme because the compensation each participant in the program receives is derived primarily from obtaining the participation of other persons in the program and not the sale of goods and services," the cease and desist order says.

Only two of 17 witnesses interviewed in Montana who signed up with Fortune made more than the $299 they paid to join the company. There are 1,300 people represented in the complaint, Boyle said.

"Recruitment has happened very quickly here," she said. "We've been getting a number of calls just in the past week, so that number could potentially grow."

The order also quotes a Web video from Fortune in which executive manager Mike Misenheimer says: "You don't have to understand how it all works; what you've got to understand is that it does work." Misenheimer also says that the "real way" to get wealthy is by "building a team of people."

The Montana order also names Diane Graber, who is at the "executive" level for Fortune in Billings, Mont., and who allegedly earned at least $65,458 through 2008 through Fortune.

Fortune had a similar problem in North Dakota, but Fortune officials convinced the attorney general's office there that it was a legitimate business, and the cease and desist order was dropped. Fortune paid the state a $12,000 fine.

The company could be assessed fines in the Montana case.

Robert FitzPatrick, the founder of Pyramid Scheme Alert in Charlotte, N.C., said Fortune's practice of selling other companies' services means the margins on sales can't be very big.

"So the big money has to be in the fees, so that looks to regulators like a classic pyramid scheme," he said. "It's the way it's supposed to work, the people at the top get the money from the people at the bottom."

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