'Amway' already judged unlawful in India.

'Amway India Enterprises' Chief Executive Officer William S. Pinckney has been arrested for a second time this week; whilst senior Indian police officers are openly describing 'Amway' as an enormous 'racket.' Pinckney is reported as being of joint American and Indian nationality, but holding an Australian passport

http://innlivenews.in/2013/11/16/cid-cautions-public-against-amway/

Previously, the Indian police have issued clear warnings to the public not to get involved with 'Amway,' and they are treating the matter of 'Amway' as criminal fraud disguised as 'legitimate business.'

Meanwhile, US-based 'MLM Income Opportunity' racketeers are now doing everything they can to trivialise all these events and to have their own criminal activities effectively placed above the law in India. The 'Amway' Ministry of Truth has already swung into (reality-inverting) action, claiming that 'Amway' is the victim and that the Indian authorities simply don't understand how 'Amway' and 'MLM Direct Selling' functions.

http://online.wsj.com/articles/second-case-brought-against-amways-india-chief-1401388981

Sean MClain of The Wall St. Journal reports

NEW DELHI—The head of Amway Corp.'s Indian business was arrested for a second time this week as police investigate allegations that the American direct-selling company is violating a law against pyramid schemes.

Amway India Chief Executive William Scott Pinckney was already in jail in the Indian city of Kadapa when police from another municipality showed up Wednesday and transferred him to another jurisdiction for further questioning by police, in what Amway called "an interesting and curious sequence of events."

No charges have been filed in either case, and Mr. Pinckney has been remanded to custody for police questioning.

Mr. Pinckney had been arrested Monday at Amway's Indian headquarters outside New Delhi and taken to a police station more than 1,000 miles away in the southern state of Andhra Pradesh.

In both cases, police are investigating complaints alleging that Mr. Pinckney and Amway had broken an Indian law against informal lotteries and so-called money-circulation schemes, a kind of pyramid scheme.

Amway said neither Mr. Pinckney nor the company had done anything wrong, and that authorities didn't understand the nature of Amway's operations. Amway distributors earn money from products sold to consumers themselves and by other people they bring into the business.

The allegations are "frivolous and give a misleading impression about our business," Amway said in a statement. The company also noted the content of the complaints was "identical" and they were "filed by advocates or activists."

Police said both cases are related to alleged violations of the law banning pyramid schemes. The case for which Mr. Pinckney was first arrested was filed after P. Rama Jaganatha Reddy, a local lawyer, said he was approached to become an Amway distributor. The complainant in the latest case said he was told by other Amway distributors that he would lose his distributorship if he failed to recruit new distributors. Mr. Reddy couldn't be located for comment.

Mr. Pinckney, who was in custody, couldn't be reached for comment. His attorney didn't immediately respond to a request for comment.

Indian courts increasingly are willing to consider criminal liability for executives related to the actions of their companies, said Mritunjay Kapur, head of risk consulting at KPMG in India.

The biggest risk corporations face, he said, "is compliance with the various regulations that are sometimes complicated and have gray areas."

A dispute over payments between a Samsung Electronics Co. unit and one of its suppliers led an Indian court in April to summon Samsung Chairman Lee Kun-hee to come to India to face criminal charges. Samsung has denied wrongdoing and said Mr. Lee has no connection to the case.

These sorts of business-related complaints aren't new, but what has changed recently is that Indian courts are now responding with arrest warrants.

"It's a mind-set change," said Harish Salve, an attorney who has represented Amway India in the past. "This began four-five years ago," Mr. Salve said, adding that before that, "there was a feeling that the rich and mighty were above the law."

In India, even some civil-code violations can lead to jail sentences, said Rajat Mukherjee, a partner at Indian law firm Khaitan & Co. He said statutes now prescribe jail terms for offenses such as not complying with labor regulations or failing to contribute to employees' social-security plans.

On Wednesday, a magistrate in Kurnool—where the original complaint was filed—denied bail to Mr. Pinckney after local police sought to keep him in custody at the Kadapa jail for questioning, police said. Later that day, officers from the city of Khammam arrested him at the Kadapa jail, said Ramana Moorthy, a police inspector from Khammam.

"We drove with him overnight for 10-12 hours and produced him before a magistrate at 8 a.m." on Thursday in Khammam, Mr. Moorthy said. A magistrate in Khammam has ordered Mr. Pinckney held in Warangal central jail, 340 miles from Kurnool. Mr. Pinckney is under judicial custody until June 10.

A local resident Gollaubudi Rama Rao had filed a complaint on May 19 with the Khammam police, Mr. Moorthy said. "He told us that he took membership with Amway in 2012 and they asked him to recruit other members. He was told that if he didn't recruit others then his membership would be canceled," Mr. Moorthy said.

Mr. Rama Rao couldn't be located for comment.

The Khammam police filed an arrest warrant with a magistrate in Khammam after seeing on television that Mr. Pinckney had been arrested in Kurnool, Mr. Moorthy said.

Amway and other direct-selling companies want a law in India defining direct selling to make it clear that they aren't the same as a pyramid scheme. "There is no clarity in the regulations; they think we're doing money circulation," Amway spokesman Yoginder Singh said.

A money-circulation scheme is an Indian term for a type of pyramid scheme in which money is paid to the enroller for adding members to the scheme.

_________________________________________________________________

Unfortunately, 'The Wall St. Journal' has completely failed to report these key- facts:

(Readers should note that the WSJ has previously participated in covering up the 'Amway' racket http://mlmtheamericandreammadenightmare.blogspot.fr/2012/03/chairman-and-ceo-of-amway-have.html).

'Amway's' so-called 'MLM income opportunity' has already been closely examined, and judged unlawful, by the High Court of Andhra Pradesh in 2007. At that time, the court even began to examine how 'Amway' had got into India in the first place.

In June 1994, representatives of the US-based ‘Amway’ crime families approached the Indian Ministry of Commerce and Industry (Dept. of Industrial Development) bearing gifts.

By steadfastly pretending affinity with officials (who, naturally, wanted to believe that all external investment creates employment), the ‘Amway’ crime families initially sought an agreement (renewable biannually) which simply paved the way for the creation a privately-controlled, unlimited-liability, commercial company, ‘Amway India Enterprises.’ As a subsidiary (entirely owned by its American parent company), the representatives of the ‘Amway’ racketeers meekly accepted that ‘Amway India Enterprises’ would be forbidden to manufacture or import. The proposed company would be permitted only to use its ‘Multi-Level Marketing Business Model’ to sell products sourced from local, independent, Indian manufacturers. 





Furthermore, ‘Amway India Enterprises’ was obliged to file a separate agreement with the Reserve Bank of India, allowing the proposed subsidiary to transfer capital to, and from, its parent and, thus, act as a de facto, foreign exchange dealer.

Consequently, without any informed scrutiny, officials at the Indian Ministry of Industry, Secretariat for Industrial Approval (Foreign Collaborations II Section) rubber-stamped the application for the proposed 'Amway' company (within less than two months) on August 26th 1994.

Twelve months later, 'Amway India Enterprises' was legally-registered after final approval by the Indian 'Foreign Investment Promotion Board.'

In this way, America’s contemporary version of the Trojan Horse was dragged unnoticed into India with the assistance of the country’s own naïve regulators. However, it lay dormant until May 5th 1998 when a network of regional offices began to be established.

Six years later, the destructive contents finally began to spill out. On August 8th 2004, the (apparently safe) original (biannual) agreement was mysteriously altered (at the request of the corporate officers of ‘Amway India Enterprises’) allowing the unregulated manufacture, and/or importation, of ‘Amway’s’ own range of effectively-unsaleable household, beauty and health products.

At no stage did Indian officials bother to apply common-sense and ask how the so-called ‘MLM Business Opportunity’ could possibly be economically-viable, and lawful, when ‘Amway’ products were now, self-evidently, several times the price of equivalent (and often superior) merchandise widely-available in traditional Indian retail outlets? Yet, implicit to the modified agreement was the understanding that ‘Amway India Enterprises’ would respect Indian law and recruit non-salaried agents who could earn commission payments from retailing products to the public. In plain language, Indian officials were deceived by the de facto agents of US-based racketeers.

That said, it is not known what other inducements (if any) these conveniently-blind civil servants received.

The guts of above information comes from a landmark judgement given on July 19th 2007 against ‘Amway India Enterprises’ by Chief Justice G.S. Singhvi, and Justice C.V. Nagarjuna Reddy, of the High Court of Judicature, Andhra Pradesh, Hyderabad.

In 2006, the Criminal Investigations Dept. of the Hyderabad police raided, and sealed, the local offices of ‘Amway India Enterprises’ arresting various employees, following a particularly detailed complaint filed by A.V.S. Satyanarayana under the ‘Prize Chits and Money Circulation (banning) Act, 1978.’ This courageous individual confessed that he had been deceived into wasting a significant amount of time and money after having being subjected to overwhelming psychological pressure to join ‘Amway’ by two dominant men in his own social circle. Within three days of the registration of this complaint, aggressive lawyers acting for ‘Amway India Enterprises’ issued two writs against the Hyderabad CID. Typically, ‘Amway’ posed as the innocent victim under attack. Ignoring all quantifiable evidence to the contrary, the lawyers steadfastly pretended that their employer’s ‘MLM Business Opportunity’ was entirely legal and that ‘Amway India Enterprises’ was acting with the full-approval of the Indian government. Therefore, the Andhra Pradesh police had neither reason nor authority to launch such a heavy-handed investigation, and, thus, damage, a legitimate business. At the same time, both the lawyers and corporate officers of ‘Amway India Enterprises’ tried to convince the world that Satyanarayana was a pathetic liar who had filed a malicious complaint as the result of a marital/financial dispute which had, itself, resulted in his pursuing a vendetta against members of his family who were ‘Amway Distributors.’ 

Ironically, it was ‘Amway India Enterprise’s’ own malicious writs which brought the company under the rigorous scrutiny of the Andhra Pradesh High Court.

Simply by applying common-sense, Chief Justice Singhvi and Justice Reddy were immediately able to see that the ‘Amway MLM’ fairy story is far too good to be true. Then, by ignoring the scripted-lies of ‘Amway’s’ attorneys, and by concentrating on the compelling testimony of the victim (backed up by documentary evidence), they deduced that the so-called ‘MLM Income Opportunity’ is in breach of Indian legislation. Despite the mystifying, linguistic and mathematical complexity of ‘Amway’s’ corporate camouflage, de facto agents of the company actually propagate the self-gratifying delusion that limitless prosperity can eventually be obtained without any further effort simply by regularly purchasing products and recruiting others to do the same, etc., ad infinitum. As a consequence, the two writs were dismissed, and the High Court of Andhra Pradesh ordered that the Hyderabad Criminal Investigation Dept. should be allowed to continue to follow whatever procedures are permitted by law to hold the corporate officers of ‘Amway India Enterprises’ to account.

Seven years later, despite the boss of 'Amway India Enterprises,' and two other corporate officers, being arrested for, and charged with, fraud in the Indian State of Kerala in 2013, the 'MLM Income Opportunity' virus still continues to infect India, whilst India legislators continue to be approached by the representatives of US-based racketeers who, obviously, do not wish to have their real activities rigorously investigated by independent Indian law enforcement agents.

 

http://en.wikipedia.org/wiki/Sachin_Pilot

Although he is only 37 years old, Sachin Pilot (b. 1977) was the American-educated, Indian Minister for Corporate Affairs at the time of Willima Pinckney's first arrest in 2013. Sachin Pilot has previously worked for the British Broadcasting Corporation in India, as a well as for the American-based multi-national, General Motors. 

Sachin Pilot with his party, and nation's, leader, Manmohan Singh

http://en.wikipedia.org/wiki/Indian_National_Congress
http://en.wikipedia.org/wiki/Rajesh_Pilot

Sachin Pilot, whose late father, Rajesh, briefly led the the Indian National Congress party, is a member of the same party (now led by the former Indian Prime Minister, Manmohan Singh) as well as a member of Indian Parliament and a serving, regular officer in the Indian Territorial Army. 

Unfortunately, young Sachin Pilot (like his American equivalent, Sarah Palin) seemed to have been promoted to his lofty governmental post more for his clean-cut, good-looks, than for his intellectual capacities; for, if he sincerely believes that 'Amway India Enterprises' is a 'law abiding and reputable company' (as was reported last year), then he was probably far too stupid even to be making the tea at the Indian Corporate Affairs Ministry, let alone running it.

http://www.dnaindia.com/india/1841200/report-clearer-laws-on-tackling-fraud-schemes-soon-sachin-pilot-on-amway-issue
 

http://www.dnaindia.com/india/1841200/report-clearer-laws-on-tackling-fraud-schemes-soon-sachin-pilot-on-amway-issue

http://economictimes.indiatimes.com/news/economy/policy/corporate-minister-sachin-pilot-pitches-for-distinction-between-ponzi-genuine-schemes/articleshow/20345636.cms

Despite his previous, apparently well-informed pronouncements, on hearing of the arrest of the managing director of 'Amway India Enterprises' on fraud charges in 2013, Sachin Pilot is reported as saying:

'it is disappointing that such an eventuality came about.' 

'the government will remove as early as possible the ambiguities in laws aimed at tackling fraudulent investment schemes.'

'We (Corporate Affairs Ministry) will work closely with concerned ministries and industries to remove the ambiguity in the law (related to tackling ponzi and other fraudulent schemes) as soon as possible.' 

'While steps should be taken to crack down on fraudulent companies running dubious investment schemes, companies that are reputed and abiding by the law must be delineated,'

'Such events  might negatively affect the prospects of our country as an attractive investment destination,'

'While we take strong actions against ponzi schemes, we need to be careful not to create a vitiating atmosphere for reputed and law abiding companies.' 

When translated into plain English, Sachin Pilot has apparently said that he had absolutely no intention of allowing the Indian police or the courts to do their job and protect the people of the republic of India from the biggest 'MLM income opportunity' racketeers! On the contrary this young fellow is reported as having steadfastly pretended moral and intellectual authority whilst, at the same time, foolishly broadcasting his urgent intention to place all the biggest  'MLM income opportunity' racketeers above the law of the land, before their Indian agents can be convicted of fraud and sent to prison.

Apart from the fact that Sachin Pilot has already been approached by countless deluded 'MLM' adherents, begging him to save their 'businesses, there is another explanation for his morally, and intellectually, bankrupt commentary. Namely, the billionaire racketeers whom Sachin Pilot apparently claimed he selflessly wanted to protect in the wider-economic interests of the people of the Indian republic, have been following the same subversive tactics which have enabled them to dodge criminal prosecution in the USA, and elsewhere, for decades.

Thus, I have some common-sense questions which I would like to put to Mr. Sachin Pilot:

• What exactly has been your own, and/or your political party's, financial connection, with the foreign-controlled, major, organized crime group known as 'Amway?'

• What exactly has been your own, and/or your political party's, financial connection with the foreign-controlled, parallel organization known as the 'Direct Sellng Association?'

• What quantifiable evidence have you seen to prove that any member of the so-called 'Direct Selling Association' has actually been regularly retailing goods, and/or services (based on value and demand) to the Indian public, rather than operating a dissimulated closed-closed market swindle, or pyramid scam, in which unlawful investment payments (based on the false expectation of future reward) have been laundered as retail sales simply by offering a never-ending chain of temporarily-deluded victims of the swindle, effectively-unsaleable wampum?   

• What possible lawful reason can you supply to explain why you now, urgently don't want the above serious matters to be fully-investigated by independent Indian law enforcement agents and put before independent Indian judges by independent Indian prosecutors? 

In an ideal world, it wouldn't be me putting these common-sense questions to Sachin Pilot. Self-evidently, if they have been reported accurately (and I have no reason to doubt that they have), Sachin Pilot's thoughtless pronouncements are further evidence that, due to the length of time it has survived and amount of capital it has already unlawfully-generated, the absurd, but nonetheless pernicious, lie entitled 'MLM income opportunity,' represents an ongoing threat to democracy and the rule of law, all around the globe.

More than half a century of quantifiable evidence, proves beyond all reasonable doubt that what has become popularly known as 'Multi-Level Marketing' is nothing more than an absurd, cultic, economic pseudo-science, and that the impressive-sounding made-up term 'MLM,' is, therefore, part of an extensive, thought-stopping, non-traditional jargon which has been developed, and constantly-repeated, by the instigators, and associates, of various, copy-cat, major, and minor, ongoing organized crime groups (hiding behind labyrinths of legally-registered corporate structures) to shut-down the critical, and evaluative, faculties of victims, and of casual observers, in order to perpetrate, and dissimulate, a series of blame-the-victim closed-market swindles or pyramid scams (dressed up as 'legitimate direct selling income opportunites'), and related advance-fee frauds (dressed up as 'legitimate training and motivation, self-betterment, programs,' etc.).

David Brear (copyright 2014)

'Amway India' Boss, William Pinckey, arrested again

http://economictimes.indiatimes.com/news/politics-and-nation/hyderabad-police-arrest-amway-indias-ceo-s-pinckney/articleshow/35624394.cms

http://www.business-standard.com/article/companies/amway-india-ceo-william-pinckney-arrested-114052700587_1.html

http://timesofindia.indiatimes.com/business/india-business/Amway-India-CEO-William-S-Pinckney-arrested/articleshow/35627169.cms?

'Kurnool Superintendent of Police Raghurami Reddy said Pinckney was apprehended in Gurgoan on Monday and was brought to Kurnool on a warrant. The arrest was based on a complaint alleging unethical circulation of money through Amway's operations.

"He will be produced in the court shortly. The CEO has been booked under the Prize Chits and Money Circulation. Schemes (Banning) Act," Reddy said.

This is the second time that the Amway India CEO has been taken into custody. A year ago Kerala Police arrested Pinckney and two company Directors on charges of financial irregularities.'

Shyam Sundar Reports From

Hyderabad City:

 

Amway CEO William Pinckney arrested once again

Amway India Enterprises Chief Executive Officer William S Pinckney is arrested by Kurnool police headed by Superintendent of Police Dr Kolli Raghuram Reddy following a complaint lodged by an advocate Jagannadh Reddy.

It may be recalled that William Pinckney was arrested by Kerala police last year on the same charges of cheating and indulging in illegal money circulation schemes popularly known as Ponzi schemes. During that time also, not surprisingly, the Amway India Enterprises did not approach the judiciary for redressal of their grievance, if any, since it knew well that all the avenues of judiciary were already exhausted by the fraudulent company.

The Division Bench of Andhra Pradesh High Court has categorically stated in a landmark judgement that the business model of Amway India attracted the provisions of Prize Chits and Money Circulation Schemes (Banning) Act, 1978. Later, the Supreme Court upheld the judgement of AP High Court.

In essence, all the roads are closed on Amway and it is high time it closed all its illegal operations in the country.

It is hoped that the police would act soon on the other complaints pending against the Amway  and curb the illegal activities and put an end to the international fraud

A complaint filed against Amway

To                                                                                  Date: 22/3/2014

The Dy. Commissioner of Police,

CCS, Hyderabad City.

Respected Sir,

Sub:  Cognizable Offences of Promoting illegal Money Circulation Scheme, cheating and looting the gullible public with the promise of get quick rich scheme by the Amway India Enterprises and its promoters, members in Hyderabad City in the guise of sale of health and dietary supplement products – Request to inquire and take action against Amway India Enterprises, its promoters, members for indulging in cheating, promotion of illegal Money circulation scheme – Regarding.

*************

1.       I, M V Syam Sundar, Secretary, Corporate Frauds Watch Society, Hyderabad, humbly submit that Amway India Enterprises set up office near Yasoda Hospital, Somajiguda, Hyderabad (which lies in the jurisdiction of the officer) and has been promoting illegal Money Circulation Scheme in the guise of sale of goods by enrolment of members in chain system with the inducement of get quick rich. The details of the Amway India Enterprises are as follows.

2.       The Enrolment scheme of the Amway:

          Amway is a company registered under the Companies Act. The scheme of Amway is 6-4-3 scheme. The first person has to sponsor 6 persons and these 6 persons have to sponsor 4 persons each totalling 24 persons and in turn these 24 persons have to sponsor/enrol 3 persons each totalling 72 persons. Thus these 103 (1+6+24+72) persons are called as one leg for income calculation purpose and this chain keeps on goes unchecked. The person should be enrolled by an already enrolled member so as to maintain chain. Initially, the entrance fee of the Amway is Rs.4,500/-. Now waived this entrance fee, but the new entrants have to purchase products worth Rs.4,500/- otherwise their membership will expire. After payment of some amount, an identity card and some products will be delivered by the company at the time of joining in the name of business kit. Joining a member into the scheme is treated as sale of products. The new person who joined in the scheme is called Amway Business Owner or ADA or ABO or downliner. The person who made the new member to join in the scheme under him is called upline member. Commissions are given not only on the event of personal efforts of their direct enrolment/sponsoring but also on the contingency relative or applicable to sponsoring of new members by their downline members. The promise of commission on the enrolment of new members will be as follows:

Sl. No.	No. of persons to be joined by self or downline members	Promise of commission in percentage	Business turn over credited in the members account based on his sponsoring activity of new members
1.	3 Persons	6%	Rs.13,500/- (3 persons xRs.4500/-)
2.	10 persons	9%	Rs.45,000/-
3.	20 persons	12%	Rs.90,000/-
4.	40 persons	15%	Rs.1,80,000/-
5.	70 persons	18%	Rs.3,35,000/-
6.	100 persons	21%	Rs.4,50,000/-

          Apart from this Amway induces that it will give Rs.50,925/- per month if any person sponsor or enroll 102 persons under his downline. The commissions are said to be distributed to all the members in the chain/network from last person to Amway in U.S.A. as commissions on group turnover.

3.       Amway company further has been awarding titles to its members based on their enrollment of new members into its scheme. There are 22 levels in the scheme of Amway namely 1) Silver, 2) Gold, 3) Platinum, 4) Ruby, 5) Founders Platinum, 6) Founders Ruby, 7) Sapphire, 8) Founders Sapphire, 9) Emerald, 10) Founder Emerald, 11) Diamond, 12) Founders Diamond, 13) Executive Diamond, 14) Founders Executive Diamond, 15) Double Diamond, 16) Founder’s Double diamond, 17) Triple Diamond, 18) Founder’s Triple Diamond, 19) Crown Diamond, 20) Founder’s Crown, 21) Crown Ambassador and 22) Founder’s Crown Ambassador.  The title holders will get huge and fabulous easy money in the form of group income which purely depend on the enrolment of new members into the scheme but not depend on the sale of products.

 4.      During seminar, the members of Amway/speakers have brainwashed to target wives of Govt. officials, middle class, retired persons, unemployed youth to get them into the scheme so as to spread network.

5.       The Hon’ble High Court of A.P. also held vide WP 20470/2006 that the scheme of Amway is nothing but illegal Money Circulation Scheme and the Hon’ble Supreme Court of India also upheld the same vide SLP No.13414/2007.  Moreover  the Government of A.P. has also issued a G.O. Vide G.O.Ms.No.178 dated 15/9/2008 restraining the Amway from issuing advertisements, still Amway has been issuing advertisements in contravention of The Prize Chits and Money Circulation Schemes (Banning) Act, 1978.

6.       The Hon’ble High Court of AP in Speakasia case (CRLP 5626/2011) held that there is no need of any loss or misappropriation of funds to attract an offence under Prize Chits and Money Circulation Schemes (Banning) Act 1978. Mere informing a scheme, which covered under the money circulation scheme and enrolling members as subscribers, itself is an offence. Further Hon’ble Supreme Court of India in Kuriachan Chacko case (2008(8) SCC 710) held that the scheme of enrolment of members leads to mathematical impossibility that amounts to cheating, as such the Amway has been cheating and promoting the illegal money circulation scheme in the guise of sale of products.

7.       I submit that so far Amway India Enterprises has cheated lakhs of people in Hyderabad and looted crores of rupees from the members of the Hyderabad by promoting illegal Money Circulation Scheme.

8.       Hence, I pray that the Dy. Commissioner of Police, CCS, Hyderabad may be pleased to initiate criminal action against Amway India Enterprises, its promoters and members for cheating, looting by extortion the hard earned money of gullible public by making false promise of get quick rich, by putting mental torture in the name of seminars and for promoting illegal money circulation scheme in the guise of sale of products by enrolment of members into its scheme.

Yours faithfully,

(M. V. Shyam Sundar)

Copy to Addl. Commissioner of Police (Crimes), Hyderabad City.

Copy to Commissioner of Police, Hyderabad City.

'Fortune Hi-Tech Marketing' - FTC Press Release.

http://www.ftc.gov/news-events/press-releases/2014/05/ftc-settlement-bans-pyramid-scheme-operators-multi-level

The operators of a Kentucky-based pyramid scheme, which enrolled more than 350,000 consumers throughout the United States, Puerto Rico and Canada in the last four years, have been banned from multi-level marketing under a settlement with the Federal Trade Commission and the states of Illinois, Kentucky and North Carolina. The settlement also requires the operators to surrender assets totaling at least $7.75 million, which will be returned to consumers.

In January 2013, the FTC and the states charged the Fortune Hi-Tech Marketing (FHTM) defendants with deceiving consumers by claiming they would earn significant income through selling various products and services if they signed up as FHTM representatives. In recent years, the scheme targeted Spanish-speaking and immigrant communities. Participants were required to pay substantial start-up costs and monthly fees to retain their positions with the company. The court subsequently halted the deceptive practices, froze the defendants’ assets, and appointed a receiver over the corporations pending a trial.

After conducting its own investigation, the court-appointed receiver determined that FHTM’s main business was recruiting new members and not selling products and services as it claimed, and confirmed the allegations made by the FTC and the states. The overwhelming majority of participants – more than 98 percent – lost more money than they ever made. At least 88 percent of consumers did not even recoup their enrollment fees. To the extent that consumers could make any income, it was mainly for recruiting other consumers into FHTM’s scheme. More than 81 percent of the payments to participants were based on recruiting new members and not for the sale of products or services. Not surprisingly, at least 94 percent of consumers did not renew their membership after their initial year.

In addition to the multi-level marketing ban, the settlement order permanently prohibits Thomas A. Mills, Fortune Hi-Tech Marketing Inc., FHTM Inc., Alan Clark Holdings LLC, FHTM Canada Inc., and Fortune Network Marketing (UK) Limited from misrepresenting material facts about any product or service, including claims concerning how much money consumers can earn. The order also bars the defendants from selling or otherwise benefitting from customers’ personal information, failing to properly dispose of customer information, and collecting any additional money from customers.

The order imposes a judgment of more than $169 million, which will be partially suspended when the defendants have surrendered certain assets with an estimated value of at least $7.75 million, including assets of the deceased defendant Paul C. Orberson’s estate. The full judgment will become due immediately if the defendants are found to have misrepresented their financial condition. 

The settlement resolves all of the FTC’s claims against the defendants, as well as the claims brought by Illinois, Kentucky and North Carolina.

The Commission vote approving the proposed stipulated order was 4-0.  The order was entered by the U.S. District Court for the Eastern District of Kentucky, Central Division at Lexington, on May 9, 2014.

To learn more about multi-level marketing, read the FTC’s Multilevel Marketing and Business Opportunity Scams(Estafas de Oportunidades de Negocio).

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s website provides free information on a variety of consumer topics. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.

PRESS RELEASE REFERENCE: 

FTC Action Leads Court to Halt Alleged Pyramid Scheme

CONTACT INFORMATION

MEDIA CONTACT: 
Frank Dorman
Office of Public Affairs
202-326-2674

David A. O’Toole
FTC’s Midwest Region 
312-960-5634