Creditors Sue BigStore.com for $3.5 Million
TheBigStore.com appears to be facing some giant-sized financial troubles.
The Santa Ana online retailer, which has ties to Internet high-flier Chinadotcom Corp. as well as several Orange County Internet companies, is being sued for $3.28 million by Ingram Micro Inc.
The online retailer faces another $480,000 or so in claims in separate lawsuits filed this month by other suppliers and creditors.
The developments come about four months after Chinadotcom’s HongKong.com division wasn’t able to complete a $100 million investment in TheBigStore’s Asian venture, TheBigStore Asia. According to one of the lawsuits, BigStore officials were hoping for a $30 million infusion last month from an outfit called Red Dolphin Enterprises. Whether the deal closed is unclear.
The lawsuits accuse BigStore officials of everything from bouncing checks worth hundreds of thousands of dollars to staving off collection efforts with deliberately botched payments.
TheBigStore’s Web site still is up and running, but phone calls and e-mails to the company went unanswered. BigStore Attorney Joanna Kim, from the Los Angeles law firm Akin, Gump, Strauss, Hauer & Feld LLP, declined comment. The company employs between 20 and 50 people, all of them in Santa Ana.
Ingram Micro is BigStore’s largest creditor and is suing for products it said were delivered to BigStore customers but never paid for by the online retailer.
A spokeswoman for the Santa Ana-based computer products distributor said it has stopped supplying products to TheBigStore.com.
Ingram Book Co. and Ingram Fulfillment,both part of Nashville-based Ingram Industries Inc., whose executives are the majority owners of Ingram Micro,are asking for an additional $165,784 in claims.
Digicad Corp., an Irvine computer services company, is demanding $166,170 for equipment it said it delivered to BigStore. Computer Configuration Services Inc., a Santa Ana company that provides similar services, is demanding $155,077.
Other companies that have taken legal action against BigStore include Kilroy Realty Corp. and Pacific Finance Services. BigStore is the defendant in another lawsuit (see story, page 3), but that complaint is not a demand for overdue payment.
The other companies suing BigStore declined to comment on the suits.
According to the Ingram Micro claim, BigStore officials promised payment as soon as they closed on a $30 million round of financing in May, a deal that by all appearances fell through or never occurred.
In late May, the company allegedly wrote a check to Ingram for more than $200,000, which was returned marked insufficient funds. In a credit agreement cited in the lawsuit, BigStore.com Chief Executive Robert McNulty, founder of AltaVista Co.’s Shopping.com, personally guaranteed $1.6 million of his company’s debt.
McNulty, a hard-driving entrepreneur who made a name for himself opening warehouse stores, left Shopping.com during a 1998 investigation into the company by the Securities and Exchange Commission for alleged stock manipulation. McNulty denied any guilt and wasn’t mentioned in the case’s outcome. A broker from Irvine-based Waldron & Co., the underwriter of Shopping.com’s initial public offering, was fined in the case.
In 1995, McNulty did settle separate SEC charges stemming from money transfers among his retail companies. He did so without admitting guilt or wrongdoing and was ordered to divest $70,000 in proceeds.
Meanwhile, Digicad officials accuse BigStore of writing a check dated June 27 for $14,291 but deliberately omitting two required signatures. They also claim BigStore won’t allow them to repossess the computers they sold to the company and that BigStore is renting the equipment to TheBigHub.com, a closely tied company headquartered in San Antonio.
Venture Catalyst Inc. spokesman Jon Lake, who handles TheBigHub.com’s investor relations, said his company and BigStore are “affiliated” but not formally related.
According to securities filings by BigHub, the two companies have the same chief technology officer, David Burrows, and BigHub subleases unspecified “property” from BigStore. BigHub also licenses BigStore’s e-commerce technology and in turn sub-licenses it to other companies for a 25% cut. Each company is displayed prominently on the others’ Web sites.
BigHub announced a $6 million private placement in March.
Both companies are also affiliated with TheBigBallot.com, a Newport Beach firm that conducts online polling used to help market consumer products. BigBallot is not named in any of the lawsuits.
BigStore, meanwhile, lists its corporate parent as Global e Companies Inc. of Santa Ana, which operates from the same 1700 E. Carnegie Ave. facility as BigStore.com. The two companies have common officers, directors and employees.
On the BigStore Web site, Global e Companies lists eight subsidiary or affiliate companies, including BigBallot, TheBigRx, an online drug store partly owned by Newport Beach-based Biomerica Inc., and BigFNI, an online credit and insurance seller based in Laguna Niguel. The companies link to each other and feature similar Web page layouts and logos.
Hong Kong-based Chinadotcom, which owns about 7% of BigStore, announced in March that its HongKong.com subsidiary would buy a 51% stake in BigStore’s Asian venture. It backed out of the deal less than a month later, however, after securities officials in Hong Kong denied a waiver that would have allowed HongKong.com to issue new shares to make the purchase.
In the past six months, Internet retailers have gone from Wall Street darlings to investor pariahs as analysts and financiers have grown dubious of the sector’s long-term prospects. Aliso Viejo Internet retailer Buy.com Inc. has seen its stock plunge in the past few months. So has industry leader Amazon.com Inc. n
