OpTree

In the wake of the announcement that third quarter profits have plummeted for online travel site, YTB, comes the announcement that the company has decided to mix some things up in their management team.

The company announced this week that they have promoted J. Kim Sorensen to Vice Chairman and Andrew Cauthen to President. 

Sorenson, who was previously president of YTB International, will remain President and Chief Executive of the company’s subsidiary, YTB Travel Network. 

Cauthen joined YTB since 2004 as the company’s Chief Operating Officer and then moved up to serve as President of YourTravelBiz in 2006. Cauthen was then named COO of YTB International in January 2008.

YTB has been hit pretty hard these last few months, not only have their profits plummetted almost 90% percent, but they’re being investigated for illegal practices in two different states, they’ve had to lay people off and just yesterday came word that they had to sell an office building and their learjet.  Hopefully these reassignments will shake things up a bit and get the company going in the right direction. 

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The Professional Association of Travel Hosts (PATH) has just formally released a statement with regards to recent legal action taken against YTB.  PATH applauded the recent legal action taken against the online travel company by the State of California. The California Attorney General claims that YTB is operating a “gigantic pyramid scheme” that has defrauded thousands of people.

A Host travel agency is one that sells travel plans, programs, trips, etc. much like YTB, but through legitimate means. A legitimate Host agency will not profit from the recruitment of new agents and only makes money by selling travel plans and trips.

Andi Mysza, president of PATH, believes that the lawsuit is in the best interest of legitimate travel professionals. “This is good news for the hosting industry and I only hope that other states and the federal government will follow suit,” he said. “YTB and other card mills have been preying on unsuspecting consumers for too long. For those who really want to develop a travel business and actively sell travel, PATH provides agents with a means of locating reputable, legitimate host agencies which are not involved with multilevel marketing.”

PATH has over 18 member companies and is dedicated to upholding the ethical standards of travel professionals. In fact, PATH members are not permitted to be in any way part of a network marketing, or multilevel marketing program. All PATH members primary source of income is from the sale of travel. PATH says that it is often hard to tell a legitimate host agency from a bad one, and that they are striving to clean up the industry.

No new news in the past couple days about the YTB lawsuit, although people seem to be coming out of the woodwork speaking out against the travel company.

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As we told you a week ago, YTB Travel is being sued by the California Attorney General claiming that the online travel company is operating a pyramid scheme. Now, YTB has more problems on its hand. Two former agents have filed a $100 million dollar class action suit, and the Better Business Bureau has released reports claiming the have received numerous complaints against the company and has a rating of “unsatisfactory”.

The new suit that has been filed in federal court in Illinois makes similar claims to that of the California suit. The suit claims that YTB ran an illegal pyramid scheme and defrauded “agents” out of thousands of dollars. The class action suit was filed both on behalf of as many as 1,000 people who were former YTB members.

The Better Business Bureau also released many complaints it had received about the company. The BBB says that they have received complaints about the company in at least 31 states.

The lawsuit, brought about by the plaintiffs, two former YTB agents, Faye Morris of St. Louis and Kwame Thompson of Atlanta was filed Friday in federal court in Illinois and seeks $100 million in damages on behalf of the named plaintiffs along with 1,000 other former members.

The defendants named in the suit were the same as in the California suit; YTB International Inc., YourTravelBiz.Com, YTB Travel Network Inc., YTB Travel Network of Illinois and its technology unit Rezconnect Technologies.

Along with the company itself, several officers of YTB were also named including founder J. Lloyd Tomer.

Executive Officer Scott Toner, released a brief statement addressing the accusations saying that they were “unaware” of any unresolved BBB complaints. He added, “we are proud of our business model and how our operations are conducted in an ethical and transparent way. We also are wholly confident that our business model will withstand scrutiny, and look forward to setting the record straight in court.”

Class action suits are easy to file against publicly traded company so expect to see more of them.  Unfortunately, a lot of people will try and jump on this bandwagon and make it frustrating for YTB - especially if it is not guilty of the charges alleged.

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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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