Three operators of an Internet-based business opportunity that promised easy income for investors in an Internet shopping mall network have agreed to settle Federal Trade Commission charges that their scheme was an illegal pyramid operation. The settlement permanently bars two of the promoters, Darrin Epps and Edward Lamont, from participating in multi-level marketing schemes. A third defendant, Richard Slaback, is barred from participation in multi-level marketing schemes for seven years. All of the defendants are barred from making false or misleading claims in selling any business venture or from assisting others to make false claims. Slaback will pay consumer redress in the amount of $38,000. In March 2001, Bigsmart.Com L.L.C. principals, Mark and Harry Tahiliani, agreed to provide up to $5 million in consumer redress and post a $500,000 performance bond to settle FTC charges in this case.
Bigsmart is based in Mesa, Arizona. Darrin Epps, and his company Netforce Seminars, recruited participants in the pyramid scheme from their offices in Austin and San Antonio, Texas. Edward Lamont recruited from offices in Pittsburgh, Pennsylvania. Epps and Lamont were also previously high-level distributors in Equinox International Corporation, another multi-level marketer sued by the Commission in August 1999. The third defendant, Richard Slaback, also recruited participants in the Bigsmart scheme and served as the figurehead "president" of the company for approximately eight months.
According to the FTC complaint detailing the charges, Bigsmart marketed Internet theme "malls" that it claimed would enable investors to earn substantial income from commissions on products purchased through the Internet. The malls were a collection of links to retail sites maintained by independent third-party merchants, such as MarthaStewart.com, and to a "Superstore" maintained by Bigsmart, itself. Traffic was directed to the malls through the personalized Bigsmart "welcome pages" that members bought access to for a $10 application fee and a $99.95 "hosting" fee. Although Bigsmart claimed that members would make substantial amounts of money, the scheme was structured in such a way that realizing 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 FTC charged that the claims that consumers who invested in Bigsmart would make substantial income were false; that promotional materials that made the false and misleading claims provided the means and instrumentalities for others to deceive consumers; and that Bigsmart was actually a pyramid scheme. Each of these practices were violations of the FTC Act.
The settlements permanently ban all three defendants from participating in any pyramid scheme. Slaback also is barred from participating in any multi-level marketing enterprise for seven years. Because of the egregiousness of their recruiting practices in this case and their prior involvement with unlawful multi-level marketers, however, the orders bar Epps and Lamont from participating in any multi-level marketing enterprise for life. The settlements also bar the defendants from making or assisting others to make misrepresentations about earnings or income in conjunction with any business they are engaged in. In addition, the settlements require the defendants to monitor employees or agents to assure compliance with the terms of the settlements. The settlements also contain record keeping requirements to allow the FTC to monitor compliance with the orders.
Consumers who participated in Bigsmart and believe they may qualify to receive consumer redress should call 202-326-3294.
The Commission vote to approve the settlements was 5-0. The orders were filed in U.S. District Court for the District of Arizona. This case was brought with the invaluable assistance of the Offices of the Attorney General of Texas and the Wisconsin Department of Agriculture, Trade, & Consumer Protection, Division of Trade & Consumer Protection.
NOTE: A Stipulated Final Judgment and Order is for settlement purposes only and does not constitute an admission by the defendant of a law violation. Consent judgments have the force of law when signed by the judge.
Copies of the Stipulated Final Judgments and Orders are available from the FTC's web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop and avoid them. To file a complaint, or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357). The FTC enters Internet, telemarketing and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies worldwide.
(FTC File No. 002 3365)
(Civil Action No. 00 226 PHX RCB)