Another class action suit claims YTB, Your Travel Biz, is an illegal pyramid

by louabbott on June 17, 2010

Just another example of why it is so important for network marketers to know some of the legal issues that make a company open to lawsuits and/or regulatory scrutiny.

See the bold (by me) statement in the article below.  In YTB’s case, and we only know it because they are a public company, the biggest part of their revenues were from selling the businesses and business tools to other new reps – 75% in this case.  Any company doing similiarly is making themselves a target.  Watch for that huge red flag before investing your time or money into a network marketing company.

A group of multi-state plaintiffs filed a putative class action lawsuit against YTB International and its officers, charging the company is operating an illegal pyramid scheme.

The plaintiffs, who are from Illinois, Missouri, Georgia and Utah, allege that Wood River-based YTB offers no direct selling opportunity, only a never-ending chance to recruit others into the program.

Attorney Christian G. Montroy of Montroy Law Offices in East St. Louis and Jay L. Kanzler Jr. and Brian J. Massimino of Witzel, Kanzler, Dimmit, Kenney and Kanler on St. Louis will be representing the putative class.

In their complaint filed June 10 in Madison County Circuit Court, the plaintiffs claim that the YTB program — based upon selling cheap online travel agencies to recruits, then allowing the new recruits to retrieve others to do the same thing while requiring them to maintain certain levels of monthly services — is a fraud.

YTB has raked in hundreds of millions of dollars in revenue through the use of independent marketing representatives, who are the salespeople charged with recruiting others to buy the online travel agencies, the plaintiffs say. In fact, about 75 percent of the $162 million YTB earned in 2008 was derived from the independent marketing representatives, yet a majority of the representatives — about 80 percent — failed to earn a profit, according to the complaint.

Those people independent marketing representatives recruit to buy the online travel agencies are referred to as referring travel agents. To buy the online travel agencies, the referring travel agents are required to pay $450 up front, then to pay $50 each month to own and operate their online travel agency, the suit states.

YTB represents to its referring travel agents that the sale of online travel agencies is a business opportunity allowing them to become travel agents, the complaint says. However, plaintiffs claim they could not act as true travel agents — they weren’t allowed to sell travel packages, process payments for travel customers, issue travel tickets or other documents to customers or receive travel commissions. Instead, they acted as agents of travel agents, only referring travel customers to YTB.

“In their role as RTAs, Plaintiffs and their proposed class sold neither products nor services,” the suit states.

…In their nine-count complaint, the plaintiffs are seeking actual and punitive damages of more than $900,000, plus an order prohibiting the defendants from continuing in their conduct and other relief the court deems just.

See the full article by Kelly Holleran at MadisonRecord.com

Also, see Related Post below.

Be Sociable, Share!

{ 3 comments… read them below or add one }

James Kinney June 17, 2010 at 4:47 pm Thumb up 1 Thumb down 0

Lou,
Many years ago I noticed that the vast majority of the utility and travel companies were oriented to the recruitment of othere, and in most cases a person would have to have thousands of members enrolled just to cover their maintainance fee.
I made it a rule to never join a company untill I had fully examined the cost of joining and then viewing the total compensation plan and just how earnings are compiled.
If a person cannot recover the opperating cost with only 20 or so members, on the first two levels,then it is most likely a company that is not Part-Time Friendly.

Reply

Kevin Mastaw June 17, 2010 at 12:32 pm Thumb up 1 Thumb down 0

Thanks for the information about YTB, Lou. And your comments regarding the situation are right on. If the bulk of a companies revenue isn’t coming from the sale of products and services to customers outside of the organization, it’s a collapse just waiting to happen.

Regards,
Kevin

Reply

Alan Eames June 17, 2010 at 11:05 am Thumb up 1 Thumb down 0

Hi Lou,

The sad fact is that if more people understood your methods of selecting a company to work with, YTB would never have gotten as big as it did.

Thanks for being there,

Alan

Reply

Leave a Comment

Thoughtful and constructive comments that benefit network marketing professionals and the industry will be accepted and published after review.
We will not publish rude or insulting comments, plugs for your company or product, or generally non-helpful or self-promoting content.


Previous post:

Next post: