A group of former marketing representatives have sued a Lexington company in a class action lawsuit in federal court.
The lawsuit against Fortune Hi-Tech Marketing accuses the company of being an illegal pyramid scheme because it emphasizes recruiting new members over the sales of products it represents.
Fortune was founded in 2000 by Paul Orberson, a Danville native who made millions with network marketing in the Excel communications company. Fortune's business model is based on new representatives joining the group for $299. Representatives receive commissions for selling goods and services — such as security services and nutritional products — and for bringing other people into the sales force. Orberson estimates the company has 160,000 representatives worldwide.
In most network marketing groups, people who join early can make a lot of money because commissions automatically flow to the early members of a pyramid-shaped sales force that is based on recruiting new people. Illegal pyramid schemes are generally defined as those that only recruit new people, rather than selling products.
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Earlier this year, Fortune agreed to pay nearly $1 million to Montana to settle allegations that the company was operating an illegal pyramid scheme there. Fortune had a similar problem in North Dakota and paid a $12,000 fine.
Fortune's general counsel, Jason Baker, said officials would have no comment on the lawsuit, which asks for a jury trial and unspecified damages from the defendants.
The four plaintiffs are former Fortune representatives; none of them is from Kentucky. The lawsuit was filed in U.S. District Court for the Eastern District of Kentucky by their attorney, Kenyon Meyer of Dinsmore Shohl in Louisville.
"Once you get past a certain level in the pyramid, it's statistically impossible to make any money," Meyer said. "People are lured into believing that by paying $299 they can change their life at a time when people are desperate. They're preying on the vulnerable."