How IHI works
According to the Securities and Exchange Commission, here is how International Heritage Inc. has operated in most states:
IHI signs up an independent sales representative, who pays $250 to operate a "business center." That fee is described as a "down payment" on $500 in IHI products.
The representative recruits other salespeople.
The representative gets commissions from those recruits, who try to sign up still more fee-paying salespeople.
Each representative can operate up to seven business centers, each with its own recruits, by paying IHI a total of $1,750.
The representatives also pay IHI $100 for a sales kit.
What worries the SEC: At some point, the market is saturated, new sales representatives cannot be recruited, and the recruits in the last wave lose their money.
Note: In North Carolina, the Attorney General's Office forced IHI last June to modify its methods, making it difficult for the company to do much business in the state.