UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF KENTUCKY

CENTRAL DIVISION AT LEXINGTON
CIVIL ACTION NO. 5:10-cv-123-KSF

Honorable Carl Forrester

In the Matter Between )

)
Fortune Hi-Tech Marketing, Inc. ) Case No. 52 147 00308 10
)
vs. ) Judge Carl Forrester
)
) Arbitrator: Mr. David Huff
Joseph Isaacs-Fortune Social, LLC )
)

AMICUS CURIAE BRIEF OF ROBERT L. FITZPATRICK, PRESIDENT OF

PYRAMID SCHEME ALERT

PRELIMINARY STATEMENT

Amicus Curiae Robert L. FitzPatrick (hereafter Fitzpatrick) is the co-author of False

Profits: Seeking Financial and Spiritual Deliverance in Multi-Level Marketing and
Pyramid Schemes (ISBN: 0-9648795-1-4). He is President of the Pyramid Scheme Alert
(PSA, website: http://www.pyramidschemealert.org), the largest and most prominent
non-profit organization in the world that is dedicated to exposing, studying and
preventing pyramid schemes.

This organization is focused on broad-based pyramid schemes that are disguised as

"direct selling", "multi-level marketing" (MLM) or "network marketing" companies and
that engage in recruitment of millions of consumers worldwide.

The work of PSA and Robert Fitzpatrick has been featured on national and international
news media. FitzPatrick has been interviewed and quoted in numerous daily newspapers
and national magazines, including Wall Street, New York Times, Journal, Money
Magazine and National Business Employment Weekly. He was interviewed on the NBC
Today, Canadian Broadcasting Corp. Marketplace, CBS 60 Minutes and several BBC
radio shows.

In 2005, FitzPatrick was invited by the Central Bank of Sri Lanka to deliver a
presentation on combating multi-level marketing pyramid schemes at an international
seminar in Colombo, Sri Lanka, attended by central bankers from four other countries,
including India.
Amicus Curiae Robert L. FitzPatrick

He has been retained as a consultant or expert witness by the US. Dept. of Justice, the
Attorney General offices of Tennessee, Kansas and North Dakota in cases involving
multi-level marketing schemes. He has served as expert witness or consultant in more
than 20 state and federal court cases brought against network marketing companies.
Additionally, he was the featured speaker at the 2003 Annual Meeting of the National
Association of Consumer Protection Investigators and has been invited to speak again at
the 2006 annual meeting.

FitzPatrick is a nationally recognized expert in analyzing the viability and legitimacy of

business models that utilize third party independent distributors. He has been the featured
speaker at national conferences of trade associations of several industries. In 2006, he is
one of the keynote speakers at the international trade show, IPEX, in Birmingham,
England, on the subject of distribution models in the printing and graphic arts industries.
Other keynote speakers at this event include the CEO of Eastman Kodak. The trade show
attracts more than 100,000 visitors.

Pyramid Scheme Alert provides research, analysis and technical support to journalists,
law enforcement officials, legislators, attorneys, students and consumers regarding
consumer-based pyramid schemes disguised as legitimate direct selling companies. Most
of the educational material is available free at the PSA website,
http://www.pyramidschemealert.org. Founded in 2000, PSA is all-volunteer and non-
profit.

The plaintiff, Fortune Hi-Tech Marketing. (hereafter FHTM), argues that public
statements and claims made by defendants Fortune Social, LLC and Joseph Isaacs
(hereafter Isaacs) constitute a smear campaign designed to harm the company.

FHTM seeks to halt this exercise of free speech and ascribe motives to Isaacs of seeking
to restrict competition.

GENERAL ARGUMENTS

FitzPatrick holds that the warnings about the business practices of FHTM, which Isaacs
published, are justified and constituted a public service. Raising questions about the
solicitations and the incentives offered by FHTM for selling its products is appropriate
and valuable to consumers. The analyses and facts published by Isaacs are useful to
consumers, especially to consumers who may not be familiar with FHTM’s business
model or how FHTM allocates its commission payments.

The same kind of criticism and questions published by Isaacs are raised routinely by
government agencies and the news media about many companies that also utilize the
multi-level marketing model and about the model itself. 1

1
The Federal Trade Commission's website (http://business.ftc.gov/documents/inv08-bottom-line-about-
multi-level-marketing-plans) offers warnings and guidelines that closely parallel the questions and
warnings that were raised by Isaacs. The FTC site states:" Not all multilevel marketing plans are legitimate.
Some are pyramid schemes. It’s best not to get involved in plans where the money you make is based

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Amicus Curiae Robert L. FitzPatrick

As an expert in the analysis of multi-level marketing companies, I conclude that the

issues raised and published by Isaacs are factual, worthy and legitimate. They correspond
to the issues and questions raised by my own analysis of this company.

The issues that were questioned are fundamental to the multi-level marketing business
model employed by FHTM and affect every consumer touched by the company and its
promoters. They are therefore far larger than any private dispute that FHTM claims are
the motive for Isaacs.

These very same issues are the subject of federal and state laws against pyramid schemes
and deceptive trade practices. They are commonly raised in the news media, and on many
websites, blogs, in various books, radio talk shows, and national news programs and in
feature magazine articles in connection with all multi-level marketing companies.

To seek to suppress these questions by Isaacs is a suppression of free speech. To argue

that raising these questions inhibits trade or are only motivated by a desire to harm the
company is to argue that this controversial business model cannot be questioned or
discussed in a public forum.

Specifics About FHTM

Pyramid Scheme Alert has received consumer questions and complaints about the
business practices of FHTM. Consumer losses were reported in connection with promises
of high income. Additionally, Robert FitzPatrick has been consulted by the Securities
Commission of the state of Montana about this company, which prosecuted it for
essentially the same business practices addressed by Isaacs. These charges were also
raised in a prosecution brought by the state of North Dakota and are now the subject of
investigations of FHTM by several other state Attorneys General.

Several major newspapers, including the daily newspaper of Wilmington, NC and the
national paper, USA Today, have also consulted FitzPatrick and published quotes of his
evaluation of FHTM, addressing the same facts and assessments that Isaacs raised. The
Wilmington, NC article reported that the North Carolina Attorney General has opened an
investigation of FHTM. 2 An in-depth inquiry, also raising the same issues as Isaacs did,
was made by the NBC-affiliate news department in Charlotte, NC, in which I was
consulted. A San Antonio, Texas television news story, May 18, 2010, entitled “Shady
network marketing company comes to San Antonio area” reported on the entry of FHTM
with consumer warnings about FHTM’s income claims. 3

primarily on the number of distributors you recruit and your sales to them, rather than on your sales to
people outside the plan who intend to use the products.”
2
“Fortune, or misfortune? State looking into possible pyramid scheme, State Attorney General
investigating consumer complaints against Fortune Hi-Tech Marketing” by Brian Freskos,
Brian.Freskos@StarNewsOnline.com, Published: Saturday, December 4, 2010 at 3:30 a.m.
3
http://www.kens5.com/home/Shady-network-marketing-company-comes-to-San-Antonio-area-
94208419.html by Joe Conger / KENS 5 Posted on May 18, 2010 at 10:00 PM

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Amicus Curiae Robert L. FitzPatrick

Several key practices and policies of this company raise immediate questions regarding
the operation of a disguised pyramid scheme.

1. Unfounded, Extraordinary Claims Related to it Products and Sales

FHTM claims to be the distributor of consumer services and offers distributorships to

consumers to resell their goods and services. These distributorships are offered without
requirement of knowledge or any experience in the very technical and complex field and
the art of sales.

FHTM’s products or types of products are available from many sales channels. The
multitude of channels limits the power of any one channel or part of a channel in
promoting the goods. Yet, the premise of FHTM’s sales is that it could powerfully
promote these types of goods and therefore it offered a valuable income opportunity for
distributors. These claims made to non-professional consumers are unsupported by any
experience in the field of distribution channels or the realities of the marketplace.

The claims therefore raise immediate questions from my analysis that FHTM is
employing a questionable incentive to convince consumers that they can earn large
incomes in a field in which they have no expertise or experience. FTHM claims to offer
“the best opportunity in direct selling.” 4 The incentive is the commission or bonuses
based upon enrolling still other investor/distributors in an endless chain. Such an
arrangement is inherently deceptive, since only a small number could ever benefit from
such a plan. Any beneficiary would require large numbers of investors who could not be
beneficiaries. To enroll many consumers in an "income opportunity" program that, by
design, can only benefit a small number requires calculated and sophisticated deception.

2. Income Disclosure is incomplete and incomprehensible,

I examined the income statistics published by FHTM, 5 which the company states on its
website “are for all Fortune Hi-Tech Marketing, Inc. (FHTM) Independent
Representatives who qualified to receive commissions and bonuses during the 12-month
reporting period of January 23, 2009 through January 20, 2010. Average monthly
payment is based only on months that Representatives received payment.”

I conclude that this disclosure is confusing and misleading to consumers, making the
warnings that Isaacs published all the more valuable and useful to the public. FHTM
published data based only on the month's that the person received any money but
excluded the months they earned nothing. The "annualized" figure (monthly average X
12) is, therefore, fictional, and cannot be supported by data. It cannot be a true monthly
average. The data omits and misleads the pubic regarding the actual average incomes, in
my judgment.

4
http://www.fhtm.net/about.aspx
5
http://www.fhtmuniversity.com/documents/IDSSeptember2010.pdf

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Amicus Curiae Robert L. FitzPatrick

Adding to the confusion a consumer would likely experience from FHTM’s disclosure is
FHTM disclaimer “During the reporting period 71.85% of all active Independent
Representatives earned at least one commission or bonus payment.”

This means that the “percentages” offered regarding income averages are skewed by
omitting the data on 28.15% consumers who earned zero. The percentages of consumers
in each level of the sales hierarchy turn out in reality to be percentages only of those that
earned something, which is only 71.85%.

When these statistical distortions and omissions are added back into the calculations, as I
did in assisting the news media investigations, the following facts are revealed:
In a sample of 10,000 FHTM salespersons:
Distributors – 28.15% of the 10,000 earned zero.
“Manager: Level: 39% received $93 per month (only on the months they got a check)
Regional Sales Manager Level: 29% received $256 per month (only on the months
they got a check)
Exec. Sales Mgr. Level: 3.41% received $2,627 (only on the months they got a check)
National Sales Manager: 0.27% $19,856 on average (only on the months they got a
check)
Presidential Ambassador: 0.05% received $103,416 on average (only on the months
they got a check)

In summary, 68% earned $93 or less a month and 96% earned $256 or less ($64 a week).
Out of 10,000, the data shows, 9,600 gained less than $65 a week based on the FHTM’s
skewed "monthly" numbers in which payments were received, not true data showing
actual averages that include months in which no payments were received. These averages
are skewed due to the selective inclusion only of months in which payments were
receive. They are further skewed by omitting all related costs. Regarding costs which
must be deducted, FHTM charges an upfront and monthly fees totaling well over $1,000
per year or more.

As to how many earned anything near a real and sustainable income, which FHTM has
advertised to the public as potentially available to all, the data shows that out of 10,000
only 32 people would achieve that

CONCLUSION

Robert FitzPatrick urges the Court to reject FHTM’s claim. The investigation, questions
and warnings presented by Isaacs are valid and useful public service and an important
exercise of free speech. They are confirmed by recent governmental actions against this
company and by questions and facts raised and revealed in various news media reports.
They are supported by my own analysis of this company's business model, practices,
payment policies and promotions.

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Amicus Curiae Robert L. FitzPatrick

Dated December 20, 2010

Respectfully submitted,

___________________________________
Robert L. FitzPatrick, President
PYRAMID SCHEME ALERT
http://www.pyramidschemealert.org
2808 Park Road.
Charlotte, NC 28209
704-334-2047
RFitzPatrick@PyramidSchemeAlert.org

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