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Tag: Pyramid Scheme

  • FBI Herbalife Investigation: What’s Going On?

    According to reports, weight loss and nutrition company Herbalife Ltd. is at the center of a federal investigation. Both the Federal Bureau of Investigation and U.S. Department of Justice are alleged to be looking into the business practices of the organization.

    The news, which was first reported by the Financial Times, led to a fourteen percent drop in Herbalife’s stock prices.

    The FBI is being fairly tight-lipped in the matter. Spokespersons for the agency will not confirm or deny that an investigation of Herbalife is taking place. It is known that there have been no charges of any kind filed at this time.

    Sources close to the ongoing FBI probe have not been willing to give many details beyond the fact that a investigation of the Los Angeles, California based company has been occurring for some time.

    Reuters reported that former Herbalife distributors had been contacted by the FBI with regard to the company’s business practices. This includes the method in which new members are brought into Herbalife.

    Former distributors are also said to have handed over Herbalife documents to federal investigators.

    What’s the reason for an alleged probing of Herbalife?

    In the past, the company had been accused of being a glorified “pyramid scheme” by hedge fund manager William Ackman. It seems the notion of such a scheme isn’t too far away from the concerns expressed by government agencies about Herbalife’s business practices.

    In such a scheme members are told to sell products or services, but are made to understand that they will not be making as much money until they bring in other individuals. The money flows upward, with persons on the bottom of the “pyramid” are paid very little or not at all.

    Herbalife said that it has not been directly contacted by the FBI regarding any investigation and it also vehemently denies being any sort of pyramid scheme. Apparently it’s not unusual for the government body to conduct a serious investigation of a company without having notified it of a probe.

    These series of federal investigations are just the latest.

    The Federal Trade Commission is also said to be taking a close look at how the business operates.

    Herbalife is a company with a network of distributors in 80 countries. China is said to be its fastest growing market.

    Image via YouTube

  • Paul Orberson, Head of Fortune Hi-Tech Marketing, Dies at Age 57

    Paul Orberson, the founder of infamous multi-level marketing company Fortune Hi-Tech Marketing (FHTM), has died at age 57. According to a report from the Lexington Herald-Leader, Orberson died of kidney cancer, which he was diagnosed with in 2003. He is survived by his wife and two children.

    Born in 1956, Orberson grew up in Danville, KY and later attended Western Kentucky University on a basketball scholarship. Following college, Orberson began working as a teacher and basketball coach at a Casey County High School, Kentucky School for the Deaf, and Boyle County High School. During that time, Orberson began working with multi-level marketing company Excel Communications, eventually making millions by recruiting new salespeople to work underneath him.

    After retiring briefly in 1996, Orberson moved to Lexington, KY and founded FHTM. The business quickly grew and soon became one of the most recognizable multi-level marketing schemes throughout North America.

    For a time the company was able to dodge charges of being a pyramid scheme by paying fines in states such as Texas and Montana. In January 2013, however, the U.S. Federal Trade Commission (FTC) and the states of Kentucky, Illinois, and North Carolina cracked down on FHTM, with Kentucky Attorney General Jack Conway calling it a “classic pyramid scheme.”

    The company’s headquarters and warehouse were raided and shut down, and charges were filed against Orberson and other top FHTM executives. The charges included operating an illegal pyramid scheme, making false earnings claims, and providing customers with “false and misleading materials for recruiting more participants.” FHTM is also in the midst of a class-action lawsuit, and is currently negotiating a settlement agreement in that case.

    (Image courtesy Wikimedia Commons/Mreno11)