States, FTC Sue 20 Firms Over Alleged Travel Fraud
Warning that consumers are losing billions of dollars a year to travel scams, federal and state authorities said Thursday that they are suing 20 companies nationwide--including two Irvine operations--as part of a crackdown on travel marketing networks and do-it-yourself come-ons.
The Federal Trade Commission, a dozen states and two California counties--Ventura and Napa--filed 36 lawsuits against the companies and their operators, asserting that the businesses are deceiving and misleading consumers.
Promises of low-cost travel and upgraded accommodations either never materialized or, as in one advertised “cruise,” amounted to little more than ferry rides and vermin-infested hotels, the authorities contend.
As part of the coordinated effort, dubbed Operation Trip Up, California’s attorney general Thursday sued Nu-Concepts in Travel Inc. and its Jetaway Travel Corp. ticketing subsidiary. The state alleges that the Irvine multitiered marketing network violates business laws and is operating an illegal “endless chain scheme.”
It follows a similar action by the state and the FTC against another Irvine travel marketer, World Class Network. That company has been put under receivership, and former operators are battling in court to get it back.
“Travel fraud comes in many more packages than it used to, and it can turn a much-anticipated dream vacation into a frustrating and expensive nightmare,” Eileen Harrington, an FTC consumer protection official, told travel agents in Los Angeles on Thursday at a national conference on travel fraud.
“The scams we see range from the run-of-the-mill vacation certificate telemarketers and time-share resellers,” she said, “to emerging variations of travel fraud involving flights pitched to immigrants and a new type of scam called the travel agent ‘credential mill.’ ”
Outside the Westin Bonaventure Hotel where Harrington spoke, about 50 protesters carried placards and picket signs complaining about the actions of the FTC and the American Society of Travel Agents, the primary industry group that has pushed for a crackdown.
The protesters, members of various travel networks whose livelihoods depend on the sales of travel products and bookings, charged that the FTC and ASTA were more interested in protecting the turf of traditional travel agents than in rooting out scam artists.
“This is about the old line trying to keep new people out of the industry,” Ben Cane of Newport Beach said. “They are scared to death of the competition.”
ASTA’s president, Michael Spinelli, scoffed at such assertions. “We’re talking about a total misrepresentation of the product,” he said, calling card mills “a breach of integrity in our industry.”
Already seized and shut down is World Class Network. The company falsely promised to provide travel discounts, upgrades in accommodations and six-figure incomes to customers who bought its travel training kits to become at-home travel agents, the FTC and the state allege.
World Class was more interested in selling business opportunities in the form of its products than in booking travel, the authorities say.
Executives at World Class have denied the allegations. They said the drastic action cost 180 employees their jobs and ruined the businesses of 25,000 active at-home travel agents who were booking $6 million a month in travel plans.
In Thursday’s action, the state accuses Nu-Concepts of operating an endless chain scheme, where people buy an opportunity to make money by bringing others into the network.
“Nu-Concepts promises to make you an instant travel agent and gives you this little card which will give you wonderful travel industry discounts,” said Susan Henrichsen, a deputy state attorney general. “It takes a lot more than that to be a travel agent. We want to stop the misrepresentation.”
Nu-Concepts executives declined to comment.
According to reports last spring, Nu-Concepts had $25 million in sales for 1995 and expected to do $60 million in business last year.
In May, ASTA sued Nu-Concepts to halt it from using the society’s logo on its travel agent identification cards. At the time, Ronald Cummings, the company’s marketing director, denied the allegations and asserted that the trade group was really trying to thwart his company’s expansion.
The state’s lawsuit also seeks a freeze on the assets of Cummings; James Massoli, Nu-Concepts’ president; Michelle Inman, Nu-Concepts’ chief financial officer; and Vijay Nair, Jetaway’s president.
The FTC lawsuits allege a variety of misdeeds.
* Your Travels and Tours Inc. in Cambridge, Mass., was accused of advertising low-cost international airline tickets to immigrants for $1,100 to $1,700 up front, and then failing to deliver the tickets or refunds. The FBI arrested owners Abul Khayer and his wife, Umme Salma Momtaz Alam, on a warrant Thursday.
* Gold Crown Express Inc. or Worldwide Vacation Services Inc., a constantly moving operation that used other names as well, was accused of charging $200 to $4,000 on false promises to resell vacation time-shares. Owner William Ernest Taft was jailed in Slidell, La., on related fraud and deception charges.
* Design Travel of Santa Rosa and its owner, Roger S. Dolgin of San Francisco, were accused of misleading customers into buying $1,500 Florida cruise vacations at $398 to $598. The company ended up charging more, and worse, the “cruise” turned out to be a ferry ride and the hotels were vermin infested, the FTC charges. The California attorney general’s office filed a similar lawsuit against Dolgin and Design Travel.
Dolgin could not be reached for comment.
The FTC brought actions against five of what it called the biggest operators. The agency said those five cases alone are costing consumers $43 million a year.
Travel fraud in general is costing consumers $12 billion a year, the agency said, citing a July 1995 White House report.
The investigations and coordination of the cases was a huge undertaking, the FTC said. Of the three dozen lawsuits filed, 16 were filed against defendants who were being sued by other states as well.
The Ventura and Napa cases, for instance, were filed by local district attorneys against two Florida companies that sold vacation packages, certificates and prize drawings. Connecticut also sued one of the companies, and five states filed separate lawsuits against the other.
The other states filing lawsuits were: Florida, Illinois, Massachusetts, Michigan, New York, North Carolina, Ohio, Vermont, Washington and Wisconsin.
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
Steering Clear of Fraud
How you can avoid travel scams:
* Be extremely skeptical about postcard and phone solicitations offering outrageous discounts or telling you that you’ve been selected to receive a fabulous vacation.
* Never provide a credit card number unless you initiate the transaction and are confident about the company with which you are doing business.
* Insist on complete details, in writing, about any trip before payment. These details should include the total price, cancellation and change penalties, and specific information on all components of the package.
* Be wary of calling telephone numbers with a 900 prefix in response to a travel solicitation. Charges for any 900 phone calls are billed to you and are a favorite scam of illicit operators.
* Walk away from high-pressure sales presentations that don’t allow you time to evaluate or that require you to disclose your income.
* Be suspicious of companies requiring you to wait at least 60 days to take your trip. Such companies may be moving state to state to avoid prosecution or be seeking to avoid the time limit imposed by credit card companies for disputed claims.
* Check to see if the travel agent you are dealing with is registered with the California attorney general’s office. Registered agents are required to make certain disclosures and meet state requirements for handling customers’ funds.
Source: American Society of Travel Agents
Researched by JANICE L. JONES/Los Angeles Times
