(WHAS11) A Kentucky multi-level marketing company has been served with a federal class-action lawsuit.
Fortune Hi Tech Marketing has already been sanctioned by two states, which served it with cease and desist orders.
Agreements have been reached in both of those cases, but now four former members have filed a class action lawsuit, questioning Fortune's business practices and asking a judge to refund all of its members' money.
At Rupp Arena in Lexington, more than 5,000 people showed up this week for Fortune Fest, the company’s annual convention.
While nobody knows exactly how big FHTM is, since it is a privately held company, some former members have told WHAS-TV it has 200,000 members and revenues of $500 Million a year. The company says it makes its money marketing well-known products.
“It's just great. It's a wonderful company to be a part of,” said Donna Rauls of Arkansas. She says she is not yet making much money as a FHTM rep.
The 156 page class action suit named FHTM and 37 of its top managers.
The complaint says Fortune Hi Tech Marketing is a fraudulent pyramid scheme and refers to "the fortune pyramid" dozens of times.
It alleges the company’s business model is based primarily on continued recruitment, with members each paying around $299 to join and then paying hundreds of dollars each year in other fees.
“Once you make Executive, and I think that's when you have a hundred people, so many of these people have to be Regional Directors,” said Fortune representative Chris Bailey of Indiana, in describing a FHTM bonus program. “Then if you get 24 people four of the next 6 months, then you get the Lexis.”
In the complaint, it alleges most sales are to Fortune members themselves of other members of the Fortune pyramid.
Former Kentucky Attorney General Chris Gorman is Fortune's legal advisor.
“The best thing and the fairest thing for everybody is to try the case in the court and that's what we intend to do. We intend to fight this case vigorously,” Gorman said.
Gorman points out that Dish Network was giving a presentation at Fortune Fest, disputing the lawsuit's claim that fortune doesn't have a sales partnership with dish.
He says cease and desist lawsuits are now settled.
“Today, we're doing business in Montana. Montana does not think we're a pyramid. Otherwise they would not let us do business,” said Gorman.
As part of that settlement, FHTM was required to release their actual average compensation figures, which show that 94-percent of Fortune representatives earned less than $3,000 a year and less than half of one percent earned more than $30,000.
If the plaintiffs win the suit and the judge declares a class, tens of thousands of people could be eligible for refunds.
