OpTree

As we reported last week, the California Attorney General has filed a $25m lawsuit case against YourTravelBusiness.com and its affiliates YTB et al. There have been numerous emails and websites which have been trying to detail what is the  real meaning behind the suit and what is really going on at YTB.

Attorney General Brown charges the company, its affiliates, and the company’s founders J. Lloyd Tomer, J. Scott Tomer, J. Kim Sorensen and Andrew Cauthen with operating an “endless chain scheme,” an unlawful pyramid in which a person pays money for the chance to receive money by recruiting new members to join the pyramid. Brown also charges the company with unfair business practices and false advertising practices including:

* Deceptive claims that members can earn millions of dollars with the company
* Operating without filing legally mandated documents with the attorney general and the Department of Corporations
* Selling an illegal travel discount program

Under California’s unfair business practices statue, the company is liable for $2,500 per violation of law. Attorney General Brown is suing YourTravelBiz.com to get a court order that:

* Bars the company from making false or misleading statements
* Assesses a civil penalty of at least $15,000,000 and at least $10,000,000 in restitution for Californians who were ripped off by the company.

The lawsuit against YourTravelBiz.com, filed in Los Angeles Superior Court, also names affiliates which include YTB Travel Network, Inc., YTB Travel Network of Illinois, Inc., as well as the company’s founders J. Lloyd Tomer, J. Scott Tomer, J. Kim Sorensen and Andrew Cauthen. For a copy of the lawsuit click here.

It may not be a coincidence that we reported that YTB may be considering adopting a Franchise model which could shift away from the MLM model.  This one is far from over.

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Repost: St. Louis Business Journal - by Kelsey Volkmann

Ana Temple wanted to make some extra cash to supplement her income as a finance and human resources director for an architectural firm.

So when a family friend told her about YourTravelBiz.com and how she could set up her own online travel agency, she jumped at the chance in April.

She paid nearly $500 to set up a Web site through Wood River, Ill.-based YTB International. The company told her she’d make 60 percent commission off every trip she booked.

But then she got her paycheck: $3 per airline ticket.

That’s when the company told her travel agents make 60 percent of what YTB makes, she said.

“I feel so deceived,” said Temple, a Copiague, N.Y., resident. “They told us people could retire off this and take free trips. It’s all a bunch of bull.”

On Monday, the California attorney general sued YTB, calling it a “gigantic pyramid scheme” that swindled an estimated $103 million out of as many as 200,000 people nationwide in 2007 alone. The majority of members make most of their money from recruiting new members, not from selling travel, so only a few see the promised profits, Attorney General Jerry Brown Jr. said.

More than 90 people over the past three years have complained about YourTravelBiz.com to the Better Business Bureau of eastern Missouri and southern Illinois.

YTB denies any wrongdoing.

Several YTB agents vigorously defended YTB at the company’s national convention in St. Louis this week, saying they had made money and received discounts on personal travel.

“That’s because they got thousands of suckers underneath them and they’re making money off us,” said Temple, 38.

When she tried to cancel, YTB refused, saying it was past the five-day cancellation period. But Temple said she didn’t receive her packet informing her of the cancellation policy until after the five- day period expired.

YTB denied this and she was still required to read the online terms and conditions before paying.

“They gave us so much false information,” she said. “Total, total lies.”

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YourTravelBiz.com,- a subsidiary of YTB travel, has been sued by California Atty. Gen. Jerry Brown for $25 million in fines and restitution. Brown claims that the company is operating an illegal pyramid scheme, and has defrauded thousands out of money.

YourTravelBiz is an online travel company that uses independent distributors to sell its travel products through their own websites and travel agencies. There are two ways to make money through the company, commissions from travel sales and fees for recruiting others to participate in the business.

Brown claims that the business is “immensely profitable to a few individuals on top and a complete rip-off for most everyone else.” “Today’s lawsuit seeks to shut down the company’s unlawful operation before more people are exploited by the scam.”

Calls to YourTravelBiz.com have not been returned. The company has seen huge profits over the last few years. In 2007 they reported revenue of $141.3 million which is a 177% percent increase from the previous year.

In the suit, the L.A. Superior Court claims YourTravelBiz enticed thousands to pay large fees in excess of $1,000 with the promises that not only would they would become millionaires, but they would gain access to travel deals and bargains accessible only to professional travel agents. The suit goes on to claim that in 2007, consumers paid over $103 million to the Defendants for websites and in fees, but made only $13 million in travel commissions. An estimated 62% percent of YourTravelBiz participants did not earn a single dime in travel sales commissions in 2007.

This latest news cant be helping the company’s languishing stock. (OTCBB: YTBLA) which in the last year has seen its shares go from $7 to as low as $0.60 and now hovering at around $1.30. These types of swings are not positive for any company and even less to one that is being accused of fraud.

This is the first lawsuit filed against YTB or its subsidiaries, although there have been rumblings over the last two years from many unhappy former participants in the YTB program. We will give you updates on the case as it moves forward.

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YTB released a statement last week saying that they are contemplating replacing their current model with a franchise operating system.

YTB recently hired iFranchise, a Chicago based consultation firm, to assist them in looking into making a possible switch. YTB feels that by changing their business model to a franchise model they will be better able to expand into additional markets by providing more training and developing a new proprietary e-commerce system.

No word yet on any of the potential details of the plan, including price, product offering and conversion plan, all of which are still under consideration. The company says that the switch could take place as soon as 2009. If the franchise model is adopted, it will be managed by the company’s marketing arm, YourTravelBiz.com.

The company did not discuss whether or not they will completely do away with their at home distributors or how the switch will affect those who are currently working as YTB independent sales agents.

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