LEXINGTON (AP) — A court-ordered report shows the top two executives of a Lexington company accused of running a pyramid scheme made almost $40 million in the last few years.
The Lexington Herald-Leader reports the document also shows almost all independent representatives for Fortune Hi-Tech Marketing made less than $1,000 per year in commissions.
Federal authorities shut down the company’s operations in January, alleging it was an illegal pyramid scheme because it rewarded representatives more for recruiting than for selling products.
Attorney Stephen Amato, who represents the company, denied that it was running a pyramid scheme. Amato said Fortune Hi-Tech was a legitimate business.
“Fortune was not operating as a pyramid scheme and in our opinion, Fortune Hi-Tech Marketing was operating a safe and legal business in the marketplace,” he said.
The report says founder Paul Orberson received $21.2 million in salary and dividends since 2007 and CEO Thomas Mills made $18.1 million in the same time frame.
“Other shareholders, many of whom appear to be family members of either Mr. Orberson or Mr. Mills, received approximately $9.5 million in dividends and salary,” the report states.
Meanwhile, the report said 98 percent of representatives got less than $1,000 a year and 74 percent received less than $10 annually.
“More than 88 percent of the representatives did not earn more than the enrollment fees to recoup their initial investments,” the report said.
The report also found that recruitment decreased significantly over a four-year period — from 81,358 enrolled in 2009 to 46,667 enrolled in 2012. In addition, the report noted that the number of people who dropped out remained high. More than 90 percent did not renew after their first year in 2009 and 2012.
Federal Trade Commission attorney David O’Toole said on Wednesday that the report corroborates thoughts on pyramid schemes.
“At some point they saturate the market; there aren’t enough people who want to sign up to continue to fund it,” he said. “It looks to me like it confirms the theory that at some point you can’t find anybody anymore.”