INTRODUCTION
1. The
Plaintiff, State of Maine, brings this action by and through the Attorney
General pursuant to 17 M.R.S.A. § 2305 and 5 M.R.S.A. § 209
to enjoin the Defendants, Jeff Fournier, Richard V. Slaback and Bigsmart.com,
(collectively "Defendants") from operating a pyramid club in the State
of Maine and from engaging in misleading and deceptive practices in
connection with the sale of Internet malls in violation of the Unfair
Trade Practices Act, 5 M.R.S.A. § 207. The State also seeks restitution
for consumers and civil penalties for intentional violations of the
Unfair Trade Practices Act.
PARTIES
2.
Plaintiff, State of Maine, is a sovereign state and brings this action
by and through its Attorney General pursuant to 5 M.R.S.A. §§
191 and 209 and the powers vested in him by common law.
3.
The Defendant, Jeff Fournier, resides at 154 Pleasant Hill Road, Scarborough,
Maine 04074.
4.
The Defendant, Richard V. Slaback, of 3165 South Alma School Road, Suite
29, Chandler, Arizona 05248, is the President and CEO of Bigsmart.com.
5.
Bigsmart.com, LLC is a Nevada limited liability company, incorporated
on December 15, 1999, with a business location at 3305 Spring Mountain
Road, #60, Las Vegas, Nevada 89102. Bigsmart.com does not have a place
of business in Maine and is not registered as a foreign corporation
doing business in Maine with the Maine Secretary of State's office.
JURISDICTION
6.
This Court has jurisdiction over this action pursuant to 4 M.R.S.A.
§ 105 and 5 M.R.S.A. § 209.
STATUTORY BACKGROUND
7.
Pursuant to 17 M.R.S.A. § 2305, the organization of any multi-level
distributorship, or pyramid club is declared to be a lottery and constitutes
an unfair trade practice in violation of 5 M.R.S.A.§207. A lottery
is any plan where fees contributed by new recruits are paid to other
members of the plan who have themselves been required to pay for the
right to receive such sums; and which includes a provision for plan
membership to grow through a chain process whereby members secure new
recruits, thereby advancing up the pyramid structure to a position where
such members in turn receive money from others. A lottery does not include
plans where payments are based exclusively on sales of goods or services
to persons who are not participants in the plan and who are not purchasing
in order to participate in the plan.
8.
Pursuant to 5 M.R.S.A. § 207, unfair and deceptive practices in
trade or commerce are unlawful.
9.
Pursuant to 5 M.R.S.A. § 209, whenever the Attorney General has
reason to believe that any person is using or is about to use any method,
act or practice declared by § 207 to be unlawful, and that proceedings
would be in the public interest, he may bring an action in the name
of the State against such person to restrain by temporary or permanent
injunction the use of such method, act or practice and the Court may
make such other orders or judgments as may be necessary to restore to
any person who has suffered any ascertainable loss by reason of the
use of such unlawful method, act or practice, any money or property
which may have been acquired by means of such method, act or practice.
10.
Pursuant to 13-A M.R.S.A. §§ 1201-1217, foreign corporations
must apply to the Secretary of State for authority to do business in
the State of Maine, and the Attorney General may bring an action to
restrain a foreign corporation from doing business in this State without
authority.
11.
Pursuant to 32 M.R.S.A. §§ 4681-4690, a transient seller of
consumer merchandise means any person who engages in the business of
selling merchandise to consumers by means of personal contact or telephone
contact, whether or not the seller is present in the state at the time
of the contact or the time of the sale, and who does not have, for the
purposes of carrying on such business, any permanent place of business
within the state. Transient sellers of consumer merchandise are required
to register with the Department of Professional and Financial Regulation
and to make a security deposit of $10,000 or of a sum equal to the anticipated
yearly gross revenues in the state, whichever is less, with the Department
of Professional and Financial Regulation for the protection of consumers.
Violations of the Transient Sales Act are violations of the Unfair Trade
Practices Act, 5 M.R.S.A. § 207. See 32 M.R.S.A. § 4688(2).
FACTS
Pyramid Analysis
12.
A multi-level marketing system is a way of distributing products or
services in which an individual earns income not only from his or her
own sales to the public but also from the retail sales made by the persons
the individual recruited to join the system.
13.
Multi-level marketing programs succeed by making money from product
sales, not from fees contributed by new recruits.
14.
A "pyramid" scheme offers the right to receive rewards unrelated to
the sale of products to ultimate users in return for recruiting other
participants into a product sales program. Webster v. Omnitrition, 79
F. 3d 776, 781 (9th Cir 1996).
15.
Under federal law, in distinguishing between a pyramid scheme and a
legitimate multi-level marketing program, the critical issue is whether
rewards paid in connection with recruitment are tied to, or are derived
from, the sales of goods and services to the general public. In re Koscot
Interplanetary Inc., 86 FTC 1106, 1181 (1975) aff'd mem sub nom Turner
v. FTC, 580 F. 2d 701 (D.C. Cir. 1978); Webster v. Omnitrition, 79 F.
3d 776 (9th Cir.1996); U.S. Gold Unlimited. Inc. 177 F. 3d 472 (6th
Cir. 1999).
16.
Maine is one of several states where in order to qualify as a legitimate
multi-level marketing system, the enterprise must show that compensation
to members is based solely or exclusively on sales of products rather
than on recruiting. 17 M.R.S.A § 2305.
17.
In the Bigsmart.com scheme, current participants' earnings are derived
exclusively or primarily from recruitment
Bigsmart.com Background
18.
Bigsmart.com, LLC has an address at 3305 Spring Mountain Road #60, Las
Vegas, Nevada. Richard V. Slaback, an Arizona resident, is the President
and CEO. Jeff Fournier is a resident of Scarborough, Maine who promotes
the sale of Bigsmart malls in Maine at informational meetings held at
hotels and restaurants throughout the state.
19.
Bigsmart.com offers, at the company Internet site www.Bigsmart.com and
through company sponsored promotional meetings conducted by Slaback
and Fournier and held throughout Maine, the opportunity to become a
mall owner for $249.99.
20.
According to Bigsmart.com literature, for $9.95 a consumer can become
an Independent Representative and earn commissions without becoming
a mall owner.
21.
Also according to Bigsmart.com literature, when an Independent Representative
sells a Bigsmart.com mall package, he earns $25 even if he did not purchase
a mall himself.
22.
According to Bigsmart.com literature, Bigsmart.com sells malls to consumers
who pay the required fee to Bigsmart.com and establishes a personal
website duplicating the Bigsmart Internet mall site, incorporating the
participant's selected name in the Internet address (viz. http:/ [selected/name/of
mall].bigsmart.com).
23.
Bigsmart.com's literature does not tie the bonus paid for selling a
mall to retail sales to customers of goods and services through the
Internet mall, and thus Bigsmart.com is providing compensation to participants
in return for inducing other persons to become participants.
24.
Upon information and belief, current participants have made their earnings
primarily or exclusively from bonuses earned from the sale of malls.
Bigsmart.com pays a commission to each member who sponsors or recruits
new members to purchase malls.
25.
Bigsmart.com does not make payments based exclusively on sales of goods
or services.
26.
Bigsmart.com's literature states that in addition to the sale of a full
priced Internet mall to other distributors, mall owners and Independent
Representatives earn commissions for purchases of product made through
their mall site. The commissions are earned allegedly based on preexisting
contracts between Bigsmart.com and various retail sellers or service
providers. Bigsmart.com Customer Service--Frequently Asked Questions.
27.
Defendants have made misrepresentations with respect to the preexisting
contracts with retailers. For example, Bigsmart.com told Maine residents
that it had a contract with L.L. Bean. L.L. Bean denies ever having
such a contract.
28.
Defendants misrepresent the earnings potential of Bigsmart.com and also
misrepresent statistical information at its website and promotional
meetings.
COUNT I
(Violation of the Unfair Trade Practices Act - Unlawful Pyramid)
29.
Plaintiff repeats and realleges the preceding paragraphs of this Complaint.
30.
The Defendants ' practice of selling consumers website malls and paying
them commissions to sell additional website malls to additional consumers
is an unlawful pyramid, in violation of 17 M.R.S.A.§ 2305.
31.
The Defendants' practice constitutes an intentional violation of the
Unfair Trade Practices Act, 5 M.R.S.A. § 207.
COUNT II
(Violation of Unfair Trade Practices Act - Deceptive Conduct)
33.
The Defendants misrepresented to participants in Bigsmart.com the existence
of certain contracts with retail sellers of products, the earnings potential
of Bigsmart.com participants and statistical information.
34.
The Defendants ' conduct as described in this Count, constitutes deceptive
acts or practices and intentional violations of 5 M.R.S.A. § 207.
COUNT III
(Failure to Register as Foreign Corporation Doing Business in Maine)
35.
The Plaintiff repeats and realleges the preceding paragraphs of this
Complaint
36.
The Defendant, Bigsmart.com, is a Nevada limited liability company doing
business in Maine. The Defendant, Bigsmart.com, is not authorized as
a foreign corporation to do business in this State by the Secretary
of State's office.
37.
Bigsmart.com's conduct, as described in this Count, violates 32 M.R.S.A.
§§ 4681-4690.
COUNT IV
(Failure to Register as Transient Seller)
38.
The Defendant, Bigsmart.com, does business in Maine but does not have
permanent place of business in this State, as defined in 32 M.R.S.A.
§ 4681.
39.
Bigsmart.com holds sales seminars in Maine in hotels and restaurants.
40.
Although Bigsmart.com does not have a place of business in Maine, it
has not registered with the Department of Professional and Financial
Regulation as a transient seller, as required by 32 M.R.S.A. §
4682.
41.
The Defendant's conduct, as described in this Count, violates the Unfair
Trade Practices Act, 5 M.R.S.A. § 207, and 32 M.R.S.A. § 4688(2).
RELIEF REQUESTED
Plaintiff
requests the following relief
1.
Declare that the conduct of Jeff Fournier, Rich Slaback and Bigsmart.com,
LLC, as described in this Complaint, violates 17 M.R.S.A. § 2305
and the Maine Unfair Trade Practices Act, 5 M.R.S.A. § 207.
2.
Declare Jeff Fournier, Rich Slaback and Bigsmart.com, LLC have made
misleading and deceptive statements to consumers, in violation of the
Maine Unfair Trade Practices Act, 5 M.R.S.A. § 207.
3.
Declare that Bigsmart.com, LLC is a foreign corporation doing business
in Maine and is not authorized to do so by the Secretary of State's
office, in violation of 13-A M.R.S.A. § 1201.
4.
Declare that Bigsmart.com, LLC is conducting business in Maine without
a permanent place of business and has not registered as a transient
seller with the Department of Professional and Financial Regulation,
in violation of the Transient Sales Act, 32 M.R.S.A. § 4682, and
the Unfair Trade Practices Act, 5 M.R.S.A. § 207.
5.
Pursuant to 5 M.R.S.A. § 209, permanently enjoin Bigsmart.com,
its agents, servants, employees and those persons acting in concert
or participation with Bigsmart.com who receive actual notice of the
injunction from selling Bigsmart.com websites or malls to Maine residents,
or doing business of any kind in this State.
6.
Pursuant to 5 M.R.S.A. § 209, permanently enjoin Defendant Richard
V. Slaback, his agents, servants, employees and those persons acting
in concert or participation with him who receive actual notice of the
injunction from engaging in sales or market of multi-level business
plans and sales of pyramid investments in Maine or engaging in unfair
or deceptive business practices in Maine in violation of 5 M.R.S.A.
§ 207.
7. Pursuant
to 5 M.R.S.A. § 209, permanently enjoin Defendant Jeff Fournier,
his agents, servants, employees and those persons acting in concert
or participation with him who receive actual notice of the injunction
from engaging in sales or market of multi-level business plans and sales
of pyramid investments in Maine or engaging in unfair or deceptive business
practices in Maine in violation of 5 M.R.S.A. § 207.
8.
Order the Defendants to provide notice of the injunction to all Maine
residents who own Bigsmart.com malls.
9.
Order the Defendants to submit to the Department of the Attorney General
and this Court an accounting of all monies that it has received from
Maine residents from January 1, 2000 to the present, including the name
and address of the customer and the amount of each purchase.
10.
Pursuant to 5 M.R.S.A. § 209, order the Defendants to pay restitution
to Maine residents injured by their unlawful practices.
11.
Pursuant to 5 M.R.S.A. § 209, order the Defendants to pay the Department
of the Attorney General a civil penalty of up to $10,000 for each intentional
violation of the Unfair Trade Practices Act.
12.
Pursuant to 5 M.R.S.A. § 209, order the Defendants to pay the Department
of the Attorney General the cost of suit, including its attorney's fees.
13.
Order such other and further relief as may be necessary to remedy the
effects of the Defendants' unfair and deceptive practices.
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Respectfully submitted,
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| Dated:April ,2000 |
___________________________________
Attorney General
___________________________________
LINDA CONTI J. - Maine Bar No. 3638
Assistant Attorney General
6 State House Station
Augusta, Maine 04333-0006
Attorneys for the State of Maine |
