On Thursday, Politico reported that James Miles, the Trump administration's choice to run the federally-backed Open Technology Fund, was involved in a pair of multilevel marketing schemes, including one that was shut down after a government investigation.
"The Federal Trade Commission shut one of them down, calling it 'an allegedly illegal pyramid scheme.' A 2010 government legal filing describes Miles as a 'participant' in that company, Fortune Hi-Tech Marketing, which he acknowledged was a 'pyramid' — but insisted was legal," reported Daniel Lippman. "Miles publicly vouched for the second company, Excel Communications, while he was a top South Carolina official and his wife was being paid by the firm. But today he denies he ever had any formal involvement with either company."
"Miles and his wife were never accused of wrongdoing, and he said in a statement that the two companies’ legal woes began after her involvement with them had ceased," said the report. "In fact, his wife was affiliated with the company in the 1990s during years when a number of state attorneys general investigated it."
Multilevel marketing companies work by encouraging salesmen to recruit more people into the company, offering rewards and a percentage of sales based on recruitment. While some of these businesses operate legitimately, there is overlap between this business model and illegal "pyramid schemes," in which the product being sold is just a front to scam money up the chain from new recruits.
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