A pyramid scheme shut down by Montana regulators earlier this month shows how a rocky financial landscape pushes people to do desperate things.
"Pyramid schemes tend to peak during tough economic times," says Zan Deery of the Better Business Bureau. "They prey on peoples' desperation, most definitely."
According to the state auditor's office, Fortune Hi-Tech Marketing (FHTM) bilked $1.8 million from 1,295 Montana residents, including several in the Missoula area, between July 2006 and June 2009.
The Lexington, Ky.-based company, which still operates in several states, claims that a $299 membership fee buys you low-sweat, high-yield income opportunities. According to the company's website, fee-paying sales reps earn money when friends, family members or acquaintances use discounted products or services provided by company partners like Dish Network, Travelocity, General Electric and The Home Depot.
"Becoming an FHTM Independent Representative can put you on the road to financial freedom today," the website states. "Be part of an industry that allows an entrepreneur like you to enjoy the flexibility that comes with owning your own business and the results of your hard work."
The auditor's office says the pitch is bunk, and on March 4 issued a cease and desist order to halt the company's Montana operations.
"From our understanding, you sign up and get discounts from Dish, Home Depot," says Jackie Boyle, a state auditor's office spokesperson. "All of those companies have said, 'We have no arrangement with them.'"
FHTM attorney Jason Baker referred questions to a statement posted on its website, which acknowledges the investigation and directs sales reps in the state to refrain from doing business until the case is resolved.
The state will hold an administrative hearing to determine whether FHTM is guilty of violating state law. If so, it faces a fine of $10,000 for each of the 1,295 alleged offenses.
Deery says as the economy lingers in the doldrums and people continue struggling to pay the bills, schemes like this will successfully lure the financially vulnerable with promises of fast cash.
"It all ends up being smoke and mirrors," she says. "These things operate based on an illusion."