More Trouble For YTB's Board of Directors

2008 did not seem to be the best year for YTB's Board of Directors. Bob Dickinson was in, and then out. Burt Saunders was in, and then out so he could "consult" with YTB. John Simmons was just plain out.

This Board has a record of approving all sorts of shady inside deals. YTB bought a plane from a Board member, their land is secured by notes from a bank formerly owned by a Board member (that was seized by the Feds last year), and the actual land they own was purchased form a Board member.  Then there is the whole deal with Beryl Martin being owned by Lloyd "Coach" Tomer, Scott Tomer and J. Kim Sorensen. You remember that company, the privately held one that built a $6 million dollar styrofoam statue for YTB--the publicly traded company (YTBLA).

It seems missteps are all over the place and 2009 does not look to be any different. Apparently the land company owned by two of their Board members is being foreclosed upon. Yes, it seems that Clay Winfield and Tim Kaiser (who have mysteriously dropped out of contact) are in a bit of trouble. I wonder if any of the YTB properties are affected?

But if this is the type of leadership and direction that YTB attracts to their Board of Directors, one has to wonder about the company as a whole. I have not counted but I have to guess that 90% of anything YTB touches ends up in some sort of controversy. Pink sheets, Dickinson, statue, earnings, Olympics., California's Attorney General, Class Action lawsuits. When will it end?

Now that Lisa Madigan, Attorney General of Illinois is done with the Rod Blagojevich scandal, maybe she can turn her attention this. Remember YTB claims to have upwards of 112,000 paying RTAs and over 300,000 Reps. Now they have just added a new MLM to their line with Aisle 19! Lisa Madigan--are you listening?

See You In September

Revisiting Ted Lindauer And His Threatened Suit

Ted Lindauer and his warnings have been a topic of interest this week as well. Many people have asked me about the letter to the Board of YTB.

Read the documents from Ted Lindauer and make your own decision if YTB had been warned to clean up their act or not. Remember, this is a man who was loved by YTB and when the issues were brought to light, he mysteriously fell from grace. When he went public with his accusations and threatened a lawsuit, all of a sudden he disappeared again. For a period, he had a statement on his website that he and Coach spoke and worked things out. There was no detail to clarify that statement, but now all that is there is a copy of his resume.

Calls to YTB at the time indicated that he did not work for the company any longer, yet many Reps have indicated that he does indeed still work for the company. Please look at this post and you can see and hear it from someone that apparently (in his mind) knows!

My guess: Ted got a big check and a thick agreement to never talk about YTB again.

The letter that appeared on his site and the subsequent letter to the Board of Directors of YTB can be found here.

BBB Documents Many Complaints Against YTB

According to the BBB, the number of complaints against YTB has soared in the past year.

The woes of the YTB travel operation widened Thursday when the Better Business Bureau went on record with complaints it says it has received about the company in at least 31 states. "We've been monitoring the company for a little while. In 2008, the complaints really exploded," said Scott C. Thomas, a trade practice consultant with the Better Business Bureau of Eastern Missouri and Southern Illinois.

The BBB complaints are certainly not unfamiliar to YTB. I have a letter dated May 14, 2007 that addresses to the BBB essentially the same issues the Attorney General alleges. What is interesting about this letter is that it is entitled:

BBB LTR St Louis-Director Version.pdf

That begs the question--what was the "version" sent to the BBB in response to their inquiry? Perhaps this version was a little different to give the illusion that all is well in Wood River?

I am not sure we will know, because it was penned by Thayer (Ted) Lindauer who was their attorney at the time. If you are interested in the backstory of Ted, he was fired, contacted YTB and explained what was coming down the pike and how they were operating illegally and threatened a lawsuit on behalf of shareholders. Very quickly he was silenced. You can draw your own conclusions. We posted about Ted here and here. I also have copies of Ted's letters to YTB and their Board.

NOTE: Per request, the BBB letter can be found here. For me to upload it to my server, I need to have single word names and the change of the file name to BBB was mine

The Actual Suit

If you are interested in reviewing the actual suit which was filed in The Superior Court of the State of California, I have made it available for download.

It is a PDF file and it appears that in addition to the four named individuals they will be pursuing up to 100 other individuals to be named at a later date. I have been told by a local attorney, that the phrase "Does 1-100" typically does not indicate a specific number, but rather that there will be additional people enjoined in the suit.

It appears that at this time, this is only a civil matter.

An IATAN Rehash--Let Me Get This Straight

Late yesterday afternoon, I got my daily dose of travel news from Travel Trade where they discussed the failure of YTB's appeal for the return of their IATA number. When I began to really think about this, I have to laugh.

Back in October of 2007, IATAN was THE credential to have according to YTB. It was all over their recruiting material and everyone was looking to have the IATAN card for the free and discounted travel.

November rolls around and YTB gets tossed to the curb by IATAN and Royal Caribbean. The response from YTB is "we don't need no Royal Caribbean or no stinking IATAN."

January 2008 enters the picture and it seems that the provisional license to sell travel in Canada is predicated on having an IATA endorsement. Well all of a sudden, "maybe we do need that stinking IATAN". But that does not seem possible because Scott Tomer ran his mouth off saying that IATAN tossed them because YTB was a competitor of IATAN. So they bought a travel agency. But it seems that they were unaware that the IATA numbers are not necessarily transferable.

February 2008 finds YTB hiring a big gun travel lawyer Al Anolik to plead their case for reinstatement to the Travel Agency Commissioner. Wow, YTB must be beginning to understand that IATAN is kind of a big deal.

Late March and early April, YTB is convinced that if they maybe buy a travel company in the US, like say Hickory Travel Systems, the Travel Agency Commissioner will HAVE to see it their way and give them back their number.

And here we are to April 16th. A no go. It ain't happening. The Commissioner completely held up the original ruling.

So, what was the response from YTB? Well, let me quote Al Anolik:

The decision is actually a victory for YTB. We are using the code and can use it because we got it from ARC. IATA cannot control a YTB in the US that is fully accredited by ARC. We quit using the IATA symbol a long time ago. We are are going to continue business as usual and as for flashing the IATA card. we won't have any IATA symbol on our cards. IATA cannot interfere with our relationship with ARC and if they did, they wil have an antitrust suit.

Wow, so it seems like YTB is back to the "we don't need no stinking IATAN" again! And it seems that Mr. Anolik may have drank the kool aid in the YTB cafeteria because only YTB logic can somehow say that losing a legal challenge is exactly what they wanted. I wonder if that is the tactic they would use if the FTC, SEC, or the IRS came after them?

So what is it guys? Is IATA something you want or not? Seems like you wanted it for recruiting. Seems like you wanted it enough to hire an expensive attorney to go get it for you. Seems like you wanted it enough to buy an agency in Toronto. Seems like you wanted it enough to open negotiations to purchase Hickory. But your attorney says that the denial of the IATA number is really the victory you all sought in the first place.

Wow, that is almost as clear as the compensation plan!

Act First, Think Later--A Tale Of Olympic Proportions!

Remember back in November when all the world was abuzz about fabulous Olympic Packages and a commission of 25%? Remember when I pointed out that none had been sold early on? Remember when I pointed out that later still none had been sold?

Well there is a good reason. Apparently YTB has partnered with an agency that had no right or authorization to sell tickets to the Olympics.

As I suspected, but only had confirmed from the IOC last week, tickets purchased by Shanghai Spring Tours must remain for sale to residents of China--not tourists. You see, 75% of the tickets are allocated for the Chinese!

Even Sorenson agreed when he told Travel Weekly last month that, "YTB is no longer marketing Olympic tours with tickets to the games in Beijing."

But the story gets more interesting as all the RTAs and Reps were saying that they were still offering the trips, but just calling the Olympic tickets "special events". As is typical, the YTBers had all sorts of stories about this. It was a copyright issue. They had such a response that they had to pull back and do the sales by lottery. And I even heard that they were completely sold out.

Well, I spoke with a man named Joe Jarvies who is the International Coordinator and Liaison to YTB, for Spring & Mandarin Tours a few weeks ago and he shed some additional insight. Apparently, Shanghai purchased $3 million dollars worth of Olympic Tickets for this program. Yet as China's "largest tour operator" they did not know that they were not for sale to non Chinese? And no one at YTB looked into this either? I wonder who will ultimately eat the $3 million? Joe indicated to me that their "workaround" was to not sell the tickets and to offer them as a "gift" for visiting China--so all the YTB clients could be given a "gift" when they landed. Yeah, I can see consumers flocking to that special deal!

When I spoke with the IOC, I was told that in order to use the term Olympic in any marketing or sales promotion, you needed to get approval from the IOC. This is mandated by the Ted Stevens Olympic and Amateur Sports Act. The IOC said they had not given Shanghai or YTB permission to use the logo or name and had issues a Cease and Desist letter. In addition, they have apparently turned over the improprieties on behalf of Shanghai Spring to the "proper" authorities in Beijing.

Not sure what that all means, but in a nutshell, YTB partnered with a company that had no right to sell Olympic packages. Someone is holding the bag on $3 million dollars. And once again, an exclusive program by YTB is disproved. I just wonder if any RTAs or their family purchased these trips and how they are handling the refunds!

What Are People Looking For?

When someone wants information on a topic these days, they usually utilize the Internet and a search engine. Google is a popular one. Yahoo is another one used by many as well.

While many people have subscribed to this blog and many more are just bookmarking it and checking back, we do get a ton of traffic from the search engines. Last week, I was watching the search terms used to find this blog and I thought it was interesting.

For the most part, they are negative terms. People are actually looking for specific bad things, like "is this a pyramid scheme". They are not looking for "is MLM a great opportunity". Both search terms likely would have eventually brought you here, but the list below shows the search terms people used to get here--so there is no influence of the blog. At least at this point.

Take a look at some of the top phrases entered into search engines last week:

• FTC YTB
• Dr. Bob Seligman
• Is Mike The Travel Guy RTA a pyramid scheme
• Ted Lindauer
• Travel MLM
• Fired YTB Lawyer
• CLIA and YTB
• MLM cult
• Opinion about MLM
• YTB and TICO standards

Wow, Seligman is apparently still trying to be verified. People are still very curious about Ted Lindauer and his firing and I suppose his subsequent reconciliation. But a lot of people are wondering if MLM is a pyramid scheme or a cult.

How does this happen? I am unaware of any traditional business model in any industry that garners those terms in their searches. "Is GE a cult?" got one return on Google. YTB got 4,630. "Is the IBM salesperson a pyramid scheme?" got one. YTB got 6,780. "Fired American Express Lawyer" got no responses. YTB got 1.

Very interesting. It seems that it is not only the folks on here that are questioning the validity of MLM in travel. It seems to me that there might be more of a pervasive attitude out there as well. I have said it before, but if I were involved with a travel MLM and had to spend most of my time and effort defending the shady business practices, I would move on. Well, maybe I would put some pressure on management to do something first--one would think that if they were truly vested and interested in the business they would welcome the opportunity to "legitimize".

Protected With A Blanket E&O Policy? Think Again!

The other day, I sent an email to Mark Pestronk regarding a blanket E&O Insurance policy and the protection or coverage it offers to an RTA. This is self explanatory.

February 22, 2008
Hi Mark--

Someone asked me a question and I had no clue and thought you might know.

A client books a trip with an RTA or Independent Contractor and something goes horribly wrong and they sue the "agency". Where does the liability fall? I know YTB says they have a blanket E&O policy for their 140K agents. I am sure their website disclaims liability. I am sure they would say the RTA is an independent business and disclaim liability. So, where does the liability ball fall? Does it make a difference if the transaction is completed by the client online by themselves? Or does liability shift if the RTA sells and processes it by themselves. It just seems to be such a grey area and one that is untested to date.

Any thoughts?

Hope all is well.

John

and the reply....

February 27, 2008
John:

It is not a gray area, really.

Liability for negligence or breach of contract falls only on the IC, not on the host. As a practical matter, the host will get sued anyway, as the consumer and his attorney cannot tell the difference.

Insurance does not affect my answer one way or the other. If the host's insurance covers the IC, it does not follow that the host has liability to the consumer.

Finally, the website disclaimer tends to deter suits against the party or parties named in the disclaimer. Again, it does not affect liability for negligence of breach of contract if something goes horribly wrong.

Mark

Law Offices of Mark Pestronk, P.C.
910 17th Street, N.W.
Suite 800
Washington, D.C. 20006

Phone: (202) 833-1900
Fax: (202) 315-3677

More "Old News" The Final Chapter

After two recent posts, it has been said (ad nauseum) that YTB has resolved the issued in Lindauer's letter. As it pertains to YTB (not their other ventures), there were four major points which were not in compliance with "State and Federal Marketing Laws and Regulations". While one of the issues may have been addressed after the fact, the rest remain unresolved to my knowldge. The following is an excerpt from Ted Lindauer's letter of January 3, 2008 which was sent via UPS Overnight to Scott Tomer and the Board of Directors of YTB International, Inc.

A. Compliance with State and, Federal Marketing Laws and Requlations. (The matters described in this Section A have been learned from the public websites of the various YTB International, Inc. subsidiaries in use on December 15, 2007).

1. YTB Reps are required to purchase CRTA Training in order to participate in multilevel commissions in several sales programs including, but not limited to, commissions on the sale of travel, commissions in the Car Referral Program and commissions on the purchase of travel by members and affiliates of non-profit RTAs. These required purchases in each instance violate the civil and criminal provisions of multiple states' antipyramid laws and lottery laws, constitute deceptive trade practices under Section 5 of the Federal Trade Commission Act, violate the U. S. Postal Service Lottery regulations and constitute the unlawful offer and sale of unregistered investment securities under state and federal securities laws.

Travelpro has provided a document that says the Reps are not required to pay for the travel agent training to receive the payment in this program. That is true, but the document was produced after receipt of this letter. The problem may indeed be resolved, but it was solved out of reaction. Travelpro has also said it was resolved before this blog posted about the Lindauer letter in mid January. That has no bearing.

2. The description of the Car Referral Program is such as to require that the participating RTAs and YTB Travel Network of Illinois, Inc. register as automobile salespersons and/or automobile dealers in various states. No such registrations have been made.

The documentation provided by Travelpro and anyone else simply does not address this. I do know for a fact that in Maryland and in Pennsylvania, one must have an individual license to sell cars. Has YTB acquired the proper licenses for their 140,000 RTAs that are offering cars for sale on their sites?

3. The Two Fly Free program offered to the public by RTAs of YTB Travel Network of Illinois, Inc. constitutes the offer and sale of Travel Club Memberships and/or Club Memberships and/or Discount Buying Service Organization Memberships requiring the obtaining of licenses and the posting of surety bonds in various states prior to their offer and sale. These licenses have not been obtained to date in all of the states which require such licenses.

This program is still being heavily promoted on all RTA sites. Have the required bonds and licenses been acquired for the 140,000 RTAs that are promoting this product?

4. The disclosures provided in connection with the promotion of the RTA medical/dental/prescription program are insufficient and result in YTB Travel Network of Illinois, Inc being an unlicensed insurance provider (PPO) in various states. In addition, any direct or indirect monetary benefit received by a YTB company or anyone affiliated therewith in connection with the purchase of these plans by RTAs must be adequately disclosed. Further, California law prohibits the offer and sale of the prescription plan until the plan provider has registered with the appropriate state agency.

I am not sure how many RTAs have opted to purchase this insurance, but I wonder if the issues have been resolved. Have the disclosures been corrected? Have the disclosures been made? Has YTB applied, been approved and complied with the California regulations?

YTB may have addressed one of these four issues and everyone on the YTB front seems content with that. AS Mark Ewing has asked, why is there not even some minimal questioning. If you are serious about your business, Your Travel Biz, why are you not concerned?

More "Old News" Part 2

Well, it is Saturday and I suspect that the RTAs and Reps are continuing to contradict themselves about Ted Lindauer. All of them have the inside track at YTB. Some insist he is working at YTB, others have spotted him in Memphis getting off a plane with Coach for a Founder's Tour event, others have seen him working in his office at the Red Carpet Day, and others say he is not working there. The guy seems to be the Elvis of YTB. But I have sent Ted an email (so far unanswered) and I did make two calls to YTB headquarters yesterday asking for him only to be directed to a generic voicemail one time, and being told that he does not work there any longer. So, maybe the folks that saw him at the various events saw an apparition, or maybe he was just picking up some personal stuff. The reality is that he is no longer employed there, no matter the insinuation on his site.

In the meantime as the YTBers were debating the status of Ted, Mark Ewing posted an outstanding comment on yesterday's blog entry. I think it is important to bring this out of the comment section and offer his opinion for everyone to see--YTB folks, suppliers, interested parties, traditional travel agents, and even any regulators that may be reading.

Blind faith and ignorance are just that: Blind and ignorant. And... Ignorance is not bliss.

The fact is, that this information came from one of YTB's own legal staff. A major insider.

It can be assumed that his legal understanding of YTB is far greater than the people on this blog.

It can also be assumed that he would not have posted the demand for resolutions letter without a lot of thought.

Regardless of his intentions, my intentions... or anyone else's intentions.... the letter states clearly that YTB is in violation of civil and criminal laws.

The direct quote is "These required purchases in each instance violate the civil and criminal provisions of multiple states' anti-pyramid laws and lottery laws, constitute deceptive trade practices under Section 5 of the Federal Trade Commission Act, violate the U.S. Postal Service Lottery regulations and constitute the unlawful offer and sale of unregistered investment securities under state and federal securities laws."

Regardless of your personal beliefs, this is a very serious statement.

Remember, this is coming from an MLM attorney, who was direct council for YTB, who states that he is a very close friend to Coach Tomer, and is a shareholder in YTB International, Inc.. This is not some misguided RTA, or someone that is out to get YTB. The letter is addressed directly to the board of directors, with an immediate demand for resolution.

What everyone here needs to be concerned with, is what has happened to these issues. Why did Mr.. Lindauer post this message to the general public. Why did he take it down so fast, without clarification on the demand for resolutions? Why hasn't YTB given the proper S.E.C. required public notice of these resolutions? What is really going on here?!

Just because Ted took down his letter, does not mean that the problems just went away. GET REAL FOLKS! If anything, this raises a MAJOR RED FLAG with YTB, YTB Leadership, and YTB's legality. WHAT IS GOING ON HERE?!

As an RTA, a YTB rep, an outsider, an insider.... You should be demanding to know what is happening with the resolutions disclosed in this document!

The fact is, that this effects current and past RTA's a lot more than it effects non ytb'ers.

Before you spend a lot of time and energy trying to put a positive spin on this.... or trying to argue this issue away.... Stop and ask yourself who and why you are trying to protect here? Aren't YOU more important than YTB?!

As an RTA, aren't you worried about yourself, and your investment in your business?

Who comes first? You....or YTB?! If you are going to represent YTB, don't you have a right and an obligation to make sure that YTB is operating legally? Your pride and loyalty in YTB should be backed by a legal business. You should be demanding that YTB takes every measure and precaution to insure that it is legal!

You shouldn't have to be trying to put a positive spin on this.

You shouldn't have to be arguing this.

That is not part of your job description. It is unfair of YTB to put this burden on you.

You paid your money on the premise that you were buying a legal business. You deserve answers.

So, for all of you RTA's on this blog, you can continue to blindly defend and protect your company.... but that is not going to change anything. It is not going to protect you from the issues that have been disclosed. Ignorance is not bliss. And covering up a crime is in itself a crime.

The fact is, that each and every you should all be angry and upset with this information. You should be demanding clarification on all these issues, as you have invested your time, money, and energy into this business. You have a right to know the facts! Make them answer to these issues...not you. You shouldn't have to feel that you need to make it right. THEY SHOULD MAKE IT RIGHT!

You, as RTA's are ignorant and stupid if you turn a blind eye to this.

It should really piss you off that this issue has just been swept under the rug. You should demand that YTB's board of directors should account for each and every issue brought forth in this demand for resolution letter. THIS IS VERY SERIOUS. Your businesses are on the line here!

This is not about RTA's vs.. Traditional Travel Agents. This is about YTB's legality.

You should demand that YTB fixes all of these issues. to insure that your business is going to be strong in the future. Doesn't that make sense? (Unfortunately, logic may be to much to ask for here on this blog.)

I really question the ethics of someone that continues to promote and sell a business after information like this has surfaced concerning the legality of the business.

If I were in YTB (which I am not) I would make damn sure that these issues were corrected to the satisfaction of the law, before I would involve anyone else in the business. I would be worried about my risk of being sued, or worst, charged with a crime. I would be concerned for the well being of others...and my own well being.

Remember, ignorance is not bliss.

WARNING: As an RTA, you might want to seek out legal council before you continue to promote and sell YTB. You may want to find out the legal implications selling a business with the disclosed issues. You need to find out what are your legal responsibilities here. Can you be held personally accountable and responsible for these issues when you sell this to someone else? Can you personally be sued or charged with a crime? Are you putting your future, and your family's future in harms way?

Like I said, like it or not, this is very serious.

More "Old News"

I know this is "old news" so please save the bandwidth and just don't say it! As many know, YTB's attorney was fired and he posted a very disturbing letter on his website. Less than two weeks later, the letter was removed and it seemed that he had made amends with YTB. But the whole thing does not sit right with me. Ted Lindauer and I exchanged emails and in one he said, "Hello John. A great blog." So I wonder what has changed?

A licensed attorney does not make those types of allegations if they were false--calling YTB's bluff in a sense. I just do not see how YTB could have corrected them all in a matter of weeks--particularly when they were dealing with several programs that YTB is currently promoting. Well, I am not the only one that noticed. Mark Ewing has posted this commentary on YouTube and I feel that Mark makes some very strong points. The biggest one is that every Rep and RTA ought to be asking questions of the leaders--not blindly following them. And the ironic thing is that Mark is IN network marketing so there is not really an agenda there.