Judge to Modify Sanctions Against O.C. Travel Firm

A federal judge said Monday that she will modify her order shutting down an Orange County travel company that’s been accused of deceiving customers, and freezing the assets of the company’s owners.

But U.S. District Judge Alicemarie H. Stotler, who said she would make a ruling by this morning, did not indicate whether she would allow the company, World Class Network in Irvine, to reopen pending a trial on the issues.

Stotler’s action comes in a first-of-its-kind lawsuit filed by the Federal Trade Commission, which accuses World Class of using deceptive tactics to sell training kits to would-be travel agents.

Regardless of her decision, the company and its operators still face a freeze on their assets under a separate state court ruling.

Orange County Superior Court Judge Michael Brenner issued a similar order last week in a lawsuit brought by the state attorney general’s office. The state charges that World Class was nothing more than an illegal “endless chain scheme” that relied on the sale of travel kits, not travel bookings.

In federal court Monday, as more than 150 supporters filled the courtroom and the corridor and waited in the sweltering heat outside, attorneys for the firm pleaded with the judge to allow it to resume operations.

“Delay is death,” said lawyer Scott W. Wellman. “There won’t be a trial in this case. Within two weeks, this company dies” unless it is allowed to operate.

Stotler’s initial order 10 days ago shut down World Class temporarily, put about 180 people out of work and halted travel plans and sales of travel kits. There are about 25,000 mostly part-time agents who are active nationwide.

Wellman and co-counsel Scott R. Warren challenged information in a report by a court-appointed receiver as based on “unsubstantiated fact and innuendo.” They said the receiver had arrived at conclusions without checking all corporate records and had refused to meet with the operators.

The receiver, Norbert J. Nowicki, acknowledged that there was much yet to do to get reliable figures, but he put the blame on owners Daniel and Denise Dimacale and executives Robert C.K. Lee and Howard K. Cooper, all of whom are defendants.

“Had they assisted us, we could have got to things quickly,” Nowicki said in court.

Among the discrepancies was how much World Class distributors earned. Nowicki said the company made more than $14 million on sales of travel tutorial kits and other products but only $800,000 in commissions on travel bookings last year.

But Wellman asserted that the company booked $6 million a month in travel, earning commissions of $180,000 a month.

Even so, both the state and the federal cases allege numerous instances of unkept promises--from discounts and travel upgrades to training and support--as reasons for seeking such drastic measures as a government takeover and asset freezes.

Lawyers for the FTC and the state said Monday that their cases against World Class are the first that go after multitiered marketing schemes that promise more than they can deliver.

Both legal actions against World Class Network are test cases to ferret out illegitimate operators who do little more than sell customers kits and provide them with travel identification cards on false promises of travel discounts and upgrades.

Fast-growing World Class Network is part of the popular do-it-yourself movement that is sweeping the travel industry and changing the way tickets, cruises and hotel rooms are booked.

But the industry has regarded such so-called card mills as a bane, luring customers with false promises and disrupting the business of legitimate travel agents.

The FTC has said it is investigating a number of card mills.