By Judah Taylor | @JTaylorKernel
A donor of more than a million dollars to UK athletics is under investigation following allegations of an international pyramid scheme that may involve more than 100,000 victims and hundreds of millions of dollars in damages.
Kentucky Attorney General Jack Conway announced Monday that legal action has been taken against Fortune Hi-Tech Marketing, a Lexington-based marketing operation, and its founder, Paul Orberson, for what he called “one of the most prolific pyramid schemes operating in North America.”
Orberson, who told the Lexington Herald-Leader in 2010 that he makes $600,000 a year, gave $639,000 to UK Athletics for the 2012-13 school year, according to UK spokesman Jay Blanton, Orberson has donated more than $1.6 million to UK Athletics, the Herald-Leader reported Monday.
He is the title sponsor of the Paul Orberson Football Office Complex at the Nutter Training Facility.
In a pyramid scheme, a member of a company makes payments to another member ranked higher than him or her, usually the one who recruited him or her.
Simultaneously, he or she is receiving payments from members below.
Eventually this model collapses, and most members loose the majority of their invested money. In this case, Conway said the losses are estimated to be in the hundreds of millions of dollars.
Steve Baker, the Federal Trade Commission’s midwest regional manager, told the Herald-Leader FHTM was pulling in more than $30 million monthly while most of its representatives were making less than $15 monthly and were paying $1,500 a year to be involved with the company.
This is not the first time that FHTM has been accused of a pyramid scheme.
Between 2010 and 2011 the company settled with the states of Montana, North Dakota and Texas out-of-court when those states took legal action.
The Kentucky attorney general’s office started its own investigation following those events. Then, after receiving notice from the attorneys general of both North Carolina and Illinois regarding complaints in their states, the Kentucky offices decided to contact the FTC.
The states and FTC are seeking civil penalties, damages and restitutions against FHTM along with permanent injunctive relief.