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Bigsmart.com Agrees to Pay $5 Million in Restitution

Bigsmart.com, based in Mesa, AZ, has been in business for only 14 months. It's been a busy time for the company, which claims to be a multi-level marketing company which sells "internet malls."

In May of 2000, the State of Maine reached a settlement with Bigsmart.com and its CEO, Richard V. Slaback, on charges that Bigsmart was an illegal pyramid scheme. The company paid $50,000 in fines, and had to issue a refund to any Maine member who requested it. At the same time, Bigsmart settled with Maine's largest retailer, Freeport-based LL Bean, on charges that Bigsmart used Bean's famous name, without authorization, in order to recruit Maine residents into its scheme. That little escapade cost Bigsmart another $20,000 in damages.

In June of 2000, Pittsburgh television station WTAE aired an expose of distributor Ed Lamont's deceptive and misleading recruiting tactics, modeled after the methods he learned as a member of Equinox International (shut down by the FTC in April, 2000). Lamont's distributorship was subsequently terminated by Bigsmart. Slaback made several statements to reporters which were less than truthful, evidenced by strongly conflicting statements aired in the same segment.

In July, as part of an attempt to silence the growing wave of criticism on the internet, owner Harry Tahiliani filed suit in Arizona against one of the company's most vocal critics. This followed several months of legal action and threats which caused message boards, forums, and other internet-based areas for discussion of Bigsmart to be shut down. Lloyd J. Boone is a Canadian, whom Tahiliani accused of defamation, libel, inflicting emotional distress, and invading Tahiliani's privacy. The suit was dismissed, although Bigsmart's lawyer continued to threaten Boone with legal action, according to the defendant.

On September 18, 2000, Forbes Magazine published an article about Bigsmart called "Con.com." Forbes pointed out that, while Bigsmart had restructured its joining policies (and expenses), in order to qualify for the "big incomes," a member would have to buy from Bigsmart's own online mall, at grossly inflated prices. The article quoted:

A Ricoh MFC-8600 multifunction home-office-machine that costs $679 at BigSmart sells for $453 at Provantage.com. BigSmart offers a 12-inch Black & Decker hedge trimmer for $88. Amazon.com sells a 16-inch version for $37.

Bigsmart was also having heavy sailing in international waters. After opening with a big splash in England, for example, the company was deluged by demands from retailers whose names were apparently being used without permission on Bigsmart's website that they be removed, and notices to the British public that these legitimate local business did not have any agreements or relationship with Bigsmart.

Richard Slaback, then CEO of Bigsmart, was described in the Forbes article as "a smooth talker fond of religious references." He has a long history with questionable multi-level marketing companies. Destiny Telecomm, in which he was a high producer, was heavily fined by the State of California for paying commissions for recruiting. He was also affiliated briefly with KM.net, the subject of an investigation by the State of Michigan beginning in March, 2000. Slaback has resigned from Bigsmart, citing "health challenges." His resignation letter, sent to all Bigsmart members, said in part:

Individuals with their own agendas to destroy Bigsmart.com, my family, and me. . . created a campaign to cause ongoing legal challenges with attorneys general. It has always been our intention to be in compliance with all regulatory agencies. We have expended substantial time and money in an effort to do so.

Because of this ongoing attack, and the effect is has had on my wife, Emily, and me, I am resigning from the position of President and CEO of Bigsmart.com due to health challenges.

On September 21, 2000, Texas filed suit against Bigsmart.com, accusing it of being an illegal pyramid scheme. Wisconsin also began an investigation.

In October, 2000, a notice of a possible class-action suit against Bigsmart began circulating.

The FTC followed, filing suit on November 22, 2000, in US District Court in Phoenix, AZ. Now, Texas and the Federal Trade Commission have reached agreements with Bigsmart.

According to the terms of the FTC consent decree, Bigsmart will return approximately $5 million to consumers. Additionally, Bigsmart.com LLC and owners Mark and Harry Tahiliani must post a half-million dollar bond before engaging in any future multi-level marketing activity.The defendants are also prohibilited from engaging in any illegal pyramid schemes.

According to the FTC press release,

Although Bigsmart claimed that members would make substantial amounts of money, the scheme was structured in such way that to realize continued financial gains, would depend on ". . . the continued, successive recruitment of other participants," not on retail sales of products and services to the public.

The company's income claims were false; the company's promotional materials provided the means for members to deceive others, and the company was an illegal pyramid scheme, the FTC claimed.

The company, and Mark and Harry Tahiliani, agreed to the settlement.

Consumers who received payment as a result of the Maine lawsuit are not eligible for settlement under the FTC consent decree. Consumers who believe they may qualify to receive consumer redress should call 202-326-3294.

Copyright March, 2001, MLMSurvivor.com. Used by permission.

This page last updated on 10/11/2004