On August 4, 2008, a civil action was filed against three subsidiaries of YTB International, Inc. (the "Company") and certain executive officers of the Company in the Superior Court of California, County of Los Angeles, by the California Attorney General. The complaint alleges that the defendants violated California's unfair competition and advertising laws. The Company believes it has operated in full compliance with California law and intends to vigorously defend the case.
The complaint was filed after eighteen (18) months of dialogue, initiated by the Company with the Attorney General to discuss the implementation of a new California law's potential effect on the Company's business model. Throughout these discussions, which broadened over time, the Company has consistently cooperated with the state's information requests and provided detailed evidence in face-to-face meetings explaining how and why the Company's business model is in full compliance with California law. The parties recently came to a standstill and the August 4, 2008 complaint is a result of this standstill. The Company believes it has meritorious defenses to the claims, intends to advocate its position aggressively, and believes it will ultimately prevail in the case.
Scott Tomer, CEO of the Company, stated "we are disappointed that the state has decided to take this action. We firmly believe that the facts in this matter support our position and our legal counsel has advised us that our position is strong. The Company will vigorously defend this matter and we look forward to having the courts decide the merits of our case".
Kind of fluffy. They don't mention the other charges levied against them.
ReplyDeleteIt must have been heartbreaking to Scott and Coach to not be able to convince the AG to join them in 18 months. Usually they have recruiting down to a few hours!
But it does seem they knew this was coming, but I also think that the State is in a stronger position to know their laws.
Remember, the head of YTB's legal department (according to the old lawyer) is not an attorney at all but the wife of one of the comnpany offficers.
And speaking of the old lawyer--I wonder if he had somethgin gtot do with this!@
John,
ReplyDeleteI must admit your 3 blog posts actually is a nice piece of reporting in a timely fashion presenting all sides.
Josh
I'd say if YTB has been hashing this out with the AGs office for 18 months....the AG must have strong evidence that YTB has not played by the CA rules.
ReplyDeleteTruth is by the language from Scott, I would guess during 18 months "negotiation" that the CA AG didn't like something...and basically told YTB well screw you I am going forward with the whole thing. Based on the fact of 18 months negotiation, I would say that it isn't necessary likely that this move will just cause other states to "follow suit" (pun not intended)
ReplyDeleteI am glad that YTB responded immediately, of course they had to.
With that said, heading into the convention with announcements likely, the stock looks like a great buy, IMO
DO I need to go recall this post now?
ReplyDeletehttp://notravelmlms.blogspot.com/2008/04/attorney-general-michael-b-mukasey.html
She must have misheard what the AG was doing!
stock is down 61% - not a good sign
ReplyDeleteI bet the stock takes a similar hit tomorrow as the news settles in and then continues it's slide throughout the week since YTB is essentially unable to offer too much of a respionse with the convention. People will be spooked without a statement and continue to sell off.
ReplyDeleteIt is at $1.19 today after a 30% drop. I bet you see another 30% drop tomorrow bringing it down to about 85 cnets. then two days of 15% drops to finish the week at around 60 cents
Eventually those in the short gain will stop buying into YTB. Thats why we see such a huge volume movement. I have heard over and over from the zombies on how YTB stock will climb through the roof. But everytime it inches up it tanks. Eventually the movers will move onto something else. The selloff has begun once again.
ReplyDeleteFor being at the table with YTB for 18 months, I am amazed that the language that the AG uses in the press release and in the actual suit is so incredibly strong and harsh. AG Brown obviously is holding nothing back, and attacks on point after point after point. The AG even talks about all the reps going to the convention to learn how to recruit more "victims" into the "scam". The negotiations or "talks" obviously did not produce any results. They obviously DO NOT have the AG's approval. I would say that the gap between the parties is as wide as the Grand Canyon at this point.
ReplyDeleteAnd I agree with the statement made above: if anyone knows the laws of California, it would be the Attorney General's office. I would not put my money on the wife of a YTB executive. I would hope that YTB has real legal council at this point. They would be good to hire a business lawyer that specializes in California law, from California.
If I remember right, Mr. Lindauer's letter to YTB seems to have addressed some of the issues that are stated in the suit. I am sure that he feels vindicated to a certain degree by today's news. It did not sound like YTB treated Mr. Lindauer or his work with much respect. It would be interesting to hear his comments on the suit. I'm sure that he has some mixed feelings. But it has to feel good to be able to say "I warned you, but you didn't listen!"
The YTB response is rather weak on substance... So what about 18 months if it didn't accomplish anything. Obviously,YTB is not going to say anything other than "we feel we have a strong case". That is almost mandatory at this point. That is really the only response.
And I disagree with the comment that because of the 18 months, that other states will not join in. Like I said, the language and charges are harsh. There is not one "kind of" or "maybe" in the whole suit. The AG didn't even beat around the bush with legalese... the press release is in "street language".
Other states might sit back and watch... but you better believe that they are watching...closely!
These lawsuits take time. It is not going to be over with any time soon. Which puts a real damper on recruiting. It is hard to bring someone into a network marketing company with this kind of "elephant" on your back. And when people start to loose their income due to the lack of recruiting... people will walk. That is a "given". And it is clear that the AG does not want YTB to survive. To quote the press release: "Today's lawsuit seeks to shut down the company's unlawful operation before more people are exploited by the scam."
Believe it or not, I truly feel for the people out there that put their heart and sole into this business, trying to reach their dreams. There will be many "victims".
"The complaint was filed after eighteen (18) months of dialogue, initiated by the Company with the Attorney General to discuss the implementation of a new California law's potential effect on the Company's business model."
ReplyDeleteI wonder why this possible pending action was never disclosed in any of the YTB 10-K filings? I thought that material news like this was supposed to be made public.
Good point Steve. I don't know enough about SEC regs to comment, but on the surface I tend to agree with you.
ReplyDeleteYTB has always tried to operate outside the law. When organizations like ASTA accused them of running a card mill, the ignored them. When RCI and others dropped them, they didn't care. When IATAN dropped them, and they lost the appeal their attorney said that it was a good thing. So this suit doesn't surprise me at all. YTB has completely ignored and shown absolutely no respect for this industry whatsoever. I just hope that more states will follow suit.
ReplyDeleteI was outraged at the fact that many RTA's on the news last night said that they were not "victims" of YTB but victims of the AG. What a load. YTB has left so many victims in its wake that it is impossible to count them all. I should know I am one of them. My "sponsor" actually told me that my YTB store was a "gift". She paid for it on her American Express Corp. Account of which she comitted fraud by opening an AE card on her corp. account in my name, without my consent, and put the YTB subscribtion on it. When I refused the gift, she then tried to pawn off the dollars she had spent on the "gift" to me. (Some, gift!) I reported her to American Express and all charges were reversed to her name. This action shows that desperate people will do anything. It turns out that she did this to many people, attenpting to spend $50,000 to get the $1M bonus. YTB is a scam and the people who are associated with it are scummy as well. The AG in CA is right on target and these people need to do some time and their underlings need a reality check!
ReplyDeleteFYI: The AG was negotiating with YTB for 18 months on a fact finding mission....AND the fact is YTB is a pyramid!!! Other states have already followed suit including the FL AG who filed a similar suit 3 months ago. YTB is going down.