It's All In The Crowd You Hang Out With

Well, the image above is looking for criminals, and it seems we have found a doozie in Wood River!

Glenn and Starla Green were awarded the President's Award at the August 2008 YTB Convention in St. Louis. They are Level 2 Directors with YTB and Kim Sorensen, the apparent good judge of character that he is, awarded them the prestigous President's Award.

Fast forward to this week, YTB is promoting and encouraging attendance at the Millionaires Mindset Conference on February 21st in Dallas. If you want more details on this conference, you can visit their site, Millionaire Mindset Conference.

On the surface, this appears to be just another scheme organized by fellow Directors Dave and Marlis Funk to grab $10 a piece from unsuspecting RTAs. (Or maybe it is to pay for the fuel in their rolling YTBmobile.) I am not sure of the intent, but one thing is for sure with YTB. If you scratch the surface a little bit, you will always find the dirt.

Well, it seems that Glenn Green has plenty of it. Back in December of 2006, the Houston Press News did an expose on this Millionaire Mindset Conference. Glenn Green does not come into play until the bottom of page 4 when he threatens the reporter several times. One of the threats was to not investigate him. Well, as any good reporter would do, he investigated. And here's what he found:

Except the ten-year sentence for theft in 1990, according to Harris County Court records. Green was released after one year. According to an affidavit by a Texas Department of Public Safety officer, the theft worked like this: Green gave an accomplice an American Express card in Green's ex-wife's name. The accomplice charged multiple purchases of $49.99 at a Chevron station, when "in fact, no merchandise had been bought." The accomplice then gave the cash to Green. During April and May 1990, the charges exceeded $20,000.

At the time Green was popped for that crime, he was on probation for forgery for two earlier charges out of Brazos County, according to Texas Department of Criminal Justice spokeswoman Michelle Lyons. He was sentenced to ten years for those, which he served concurrently with the Harris County sentencing.

Also falling short of the Glenn Green Investigative Worthiness Standard was the ten years deferred adjudication in 1993 for fraudulent transfer of a motor vehicle. According to the investigating officer's notes, part of the case record in Harris County Court, Green bought and sold over a dozen cars, promising to pay off the leases, when he had no authorization from the lenders.

All but one of the 20 associated charges were dropped. He was also ordered to pay $31,233 in restitution

Harris County court records also show that the Houston Livestock Show and Rodeo sued Green and his wife, Starla, in 2002. The suit was for nonpayment of $107,000 Glenn and Starla bid on a champion steer and a grand champion barrow pig named Cowboy in the 1999 Rodeo auction.

"I know that the money spent here goes for a great cause," Green is quoted as saying in the Rodeo's press release.

Then Starla chimes in about the 17-year-old Brownfield Future Farmer of America who spent four hours a day after school tending to Cowboy: "[He's] very deserving. We were prepared to do what it took."

Everything, that is, except actually pay what they bid. A Harris County judge ordered the Greens to pay the full amount, plus legal fees.

Rodeo Vice President Leroy Shafer says the Greens never paid the money -- the largest debt of any one entity in the show's history. He says it was the first time in the Rodeo's history that a grand champion was involved in a bad purchase, and the first bad purchase of two champions in one year. (The highest bidder's money goes to whoever shows the animal, any charities the bidder earmarked money for, and the Rodeo's scholarship fund. Shafer says the Rodeo was able to pay the $25,000 promised to Cowboy's exhibitor, as well as the approximately $1,000 Green had earmarked for the Houston Women's Shelter.)

Green now works for a multilevel-marketing travel package company called Your Travel Biz.

Wow, Coach and Kim really take that Yale to Jail thing seriously. Penn State to State Penn. First there was Chris Paraldi, then Phil Piccolo and now this. This man has it all. I mean what more could YTB want in a Director. Someone whom they promote and encourage others to emulate. I wonder if all of the non-profit associations YTB is supposedly managing are aware that one of their directors stiffed a non-profit for over $100,000? Maybe in the interest of being transparent, they will add this to their "Facts" About YTB website!

Just to recap, here is the rap sheet on Glenn Green:

• Theft
• Forgery
• Fraudulent Transfer of Motor Vehicles
• Breach of Contract with a Non-Profit where he failed to pay then $107,000

NOTE: To all the Directors and Coach's Corner Members (and esteemed guests) currently in Wood River for the "Best Director's Meeting Ever"--watch your wallets!

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?

Meet Mr. Ponzi

There was an article on the AP wire today that I thought was very interesting, and eerily similar to a cause near and dear to this blog. As many know, Bernard Madoff has been arrested and accused of running the world's largest Ponzi scheme. The experts that were interviewed for this AP article were quick to point out some commonalities of the con men who run the schemes.

• They seem trustworthy because of their charm, their command of finance and the unshakable confidence that they portray
• A Ponzi scheme, or pyramid scheme, is a scam in which people are persuaded to invest in a fraudulent operation that promises unusually high returns.
• People who run Ponzis generally fall into two categories: hucksters like Ponzi who plan to cheat investors and get out quickly, often fleeing the country, and people who start a legitimate investment venture but lose money, then try desperately to cover it up and dig themselves into a deeper and deeper hole.
• "Looking successful is the key because everyone's first question is going to be, `If this is such a great deal, then why are you wearing a cheap suit?'" said Eric Sussman, a former federal prosecutor from Chicago who helped on about a dozen Ponzi cases. "They have to have all the accoutrements of success."
• The Madoff debacle appears to be typical of Ponzi schemes in another way: They are typically orchestrated by people who look to their own churches.
• "Any Ponzi scheme is built on trust. People can't ask too many questions."

Wow, does this sound liek a familiar story? Perhaps the most telling was the opening line.....

They're smart and charming. They have an aura of success about them and exude respectability. Above all, they instill confidence.

Which is, after all, why they are called con men.

Is YTB About To File For Bankruptcy Protection?

I am not willing to bet the farm on this but after receiving two emails from different sources, reading a lot of commentary on different blogs and forums, and taking some time to think it through, I agree that there is a good chance that YTB might consider filing for bankruptcy protection prior to the end of the year. Most likely in the form of a Chapter 7 filing.

It is painfully obvious, even to the casual observer, that they are really struggling with cash flow, as well as legal issues. In the last month, they have:

• Tried to sell the plane three times (at a loss)
  
• Sold off the lion's share of their headquarters land
• Sold off an office building including furnishings (at a loss)
• Reduced the price to join the scheme by 50%
• Offered ridiculous incentives for existing Reps to recruit more people
• Pre-selling 2009 Convention tickets at a discount to raise quick cash
  

In addition, they were unable to have the Class Action suits dismissed as hoped in the December 8, 2009 Status Hearing. And speaking of hearings, there is another one with the Attorney General scheduled for January 5, 2009.

YTB has been in full out reactive mode for some time now. They are desperately trying to prove to the authorities that they are legal. They have added a new booking engine, they are adding more product (potions and lotions) to their RTA sites. All of these moves are desperate attempts to bring the percentage of non-recruiting revenue up to an acceptable level to appease the Attorney General. And no one really has missed that nuance.

Here is how I predict it plays out--YTB has sold a lot of assets and the proceeds from the assets are likely now no longer assets of YTB, Inc.. The economy is tough despite Coach's proclamation that YTB is recessionproof. The Attorney General is looking to "shut down" YTB and the plaintiffs on the Class Action suits are looking for money. Well, YTB all of a sudden "succumbs" to the economy and files a Chapter 7 liquidation bankruptcy. All of the stock is worthless (did anyone notice the large sell offs the past week?). So a trustee comes in to sell the remaining few assets--remember the valuable ones have already been sold. They liquidate what they can to pay off the top tier creditors. The RTAs and Reps are last on the list. The Attorney General realizes that YTB is shut down and is satisfied and may drop the case. The Class Action suits will need to determine if they have the time, will, and money to pursue a judgment against the individuals since the company is no longer an ongoing concern (a concern brought up several times in the 10-Q filing by their own accounting firm). The Attorney General also needs to make the decision to continue to pursue the principles as well as the Reps that will be names as Does 1 to 100..

Meanwhile. YTB management will look like the poor victims of a poor economy. They will profess that they tried everything--selling assets, decreasing the costs, giving those that want to quit free months, all for the "benefit" of the Reps and RTAs. The Reps and RTAs will buy into this story (as they do with any story told from Wood River) and laud them as heroes. The Reps and RTAs will then re-group and some may stay in travel with a legitimate host, others (most) will simply move onto the next get rich quick pyramid scheme they see. And the three musketeers? They already have their hotel reservations for the 2009 Snake Oil Convention in Vegas!

First Class Training Overview

Well, this weekend YTB launched their First Class Training. My personal feeling is that it is a small step in the right direction, but it is a long way from being where it needs to be. But one does have to wonder why a "travel" company has been in existence for 7 years and only now (after $225 million dollars worth of lawsuits have been filed) they begin to consider training.

The training will be completely online and hence no opportunity to ask any questions or interact with the people doing the trainign. The exam is self monitored and you can take it as many times as you like to pass it. Yesterday they offered the training live in several cities prior to it going solely online and following are my notes from the 4 hour session:

• An overview of the new "titles". An "Affiliate" is what is now known as an RTA. These people will refer to their sites and all transactions will be handled online. They will not be permitted to work with clients or vendors. They will earn 60% of the commissions received by YTB.   The new version of the RTA will be allowed to book groups and contact vendors directly. They will become RTAs upon completion of the First Class Training  and exam. They will earn 70% of the commissions received by YTB. Down the road, a future exam will be created allowing the RTAs to drop the "R" and call themselves "Travel Agents".
• An overview of a revamped RTA website. The new "technology" will allow RTAS to place their actual contact number on the website. A cost for this new site was not mentioned, however I suspect it will be an additional monthly cost for an "enhanced" site similar to the Rep site.
• The First Class Training will be taken online, and there is no time limit for completion nor is there any monitoring of the exam.
• The "training", while better, was certainly very light and offers no immediate benefit to the consumer. A YTB director narrates the video sessions and introduces a very few select vendors who overview the product they sell. CLIA's Terry Dale presented a recorded overview of CLIA.
• E&O was glanced over and it was briefly mentioned that the YTB policy only covers transactions booked by clients online. So, if any RTA books direct, they are NOT covered. This was a minor point and not emplasized at all.
• Marc Mancini had a recorded session explaining how geography training was important. It was recommended that RTAs view the classes in YTB's e-Campus for more detailed travel training. It is important to note that Marc did not present ANY geography training or travel traingin in this recording for First Class Training.
  
• A brief overview of select vendors was presented. These were not the earlier vendor presentations but essentially a listing of the vendors that work with and "understand" the YTB business model.
• Group travel was covered for a long time. They did not go over the nuts and bolts, but emphasized the ability to earn greater profits from group bookings and highlighted some of the difference between individual and group bookings. They told everyone where to find the forms in the Back Office. If YTB is going to focus on groups as they have in the past, I think this is a huge lapse in judgement and in depth group travel training needs to be covered. Look at what happens when a RTTA tries to book groups--Baltimore....Houston....Nashville!
• Recruiting was covered, but it was certainly not the focus as it had been in past classes.
• They encouraged people to attend the Funshine Events and the CLIA 360.
• They encouraged RTAs to take advantage of FAMS and ship inspections.
• YTB indicated that they would arrange private YTB only ship inspections.
  

 All in all, it is a small step in the right direction. I am curious as to how the vendors feel now that YTB is encouraging the RTAs to pay the fee for this training and then call the suppliers directly. 

Notably absent from this training was:

• Any mention of how to run a business including liability insurance, local and state licensing, etc.
  
• Client problem resolution
• Industry jargon and lexicon
• Geography (as stated above)
• In depth liability discussion
• Responsibilities of the RTA to clients and vendors and YTB
• Accounting methods
• SOT issues and requirements
  

Now I know that all of this cannot be included in the 4 hours they allot for the training. It is a disservice to the vendors and the consumers to allow RTAs to go out in the world with this minimal training. It is a little more than was offered before, but not much more.  The RTAs are now emboldened to do more and the potential to create more mistakes is huge.

There is no supervision and there was no mention of being able to rely on YTB (other than the recoreded videos) for any help. With a legitimate host, when an agent has a problem, he can speak with the host and their staff , other members of the host, or look to the other many resources that are available to legitimate travel professionals and not YTB. Networking among RTAs is ineffective--you cannot expect a kindergarten class to solve a calculus problem. Contacting YTB headquarters is also ineffective as their management has no background in travel and very few (if any at this point) of their call center people have any background. Without a means of support, the consumers are on their own.

But hey, again, it is a reactive measure based on an Attorney General's lawsuit and a few class action lawsuits. It took the non-travel executives and Board 7 plus years to decide that training on "travel" might be an appropriate thing for a "travel" company.  For me it seems a day late and a dime short!

It also should be noted that the "Award Winning" Candi May or Bob The Travel Guy were not featured in any of the training. "Dr. Seligman" was also not featured!

YTB is Hurting Senator Burt

According to a poll on the Naples Daily News, at the time of this post, Burt Saunder's involvement with YTB will affect the vote of 49% of the respondents.

So, again will Burt Bail? My guess is the potential of a Congressional Pension far outweighs the false promises of a false Coach who produces false claims to false travel agents who attend conventions to see false statues.

Poll: Will the allegations of misconduct against State Sen. Burt Saunders affect your vote in the District 14 U.S. House race on Nov. 4?

Response		Percent	Votes
Yes		49%	137
No		33%	91
Drill, baby, drill!		11%	31
I'm undecided		5%	16
total votes: 275

More Financial Woes For YTB

When it rains it pours. Directors quitting, stock sliding, RTAs fleeing, and an Attorney General that is hell bent on proving his point. And that is only the tip of the iceberg.

Last month, we posted about the only source of funding for YTB being investigated for improper loans and unsound banking practices. Well, it seems that Meridien Bank, whose owners represent 22% of YTB's Board of Directors, also don't like to play by the rules. The bank was closed yesterday morning by the Federal Government and taken into receivership.

Sure times are tough for banks, but Meridien was given ample warning to comply with federal regulations but apparently they were either a little too late, or just did not want to. Thankfully, their depositor's money is safe because the FDIC has taken the reins before the unsound practices could continue.

According to the St. Louis Post Dispatch, in a recent SEC filing, YTB said it can draw "no further amounts under that loan," and that it has no other credit available.

With a market cap that is dwindling each day, no access to credit, $225M in pending lawsuits, not many (if any) sources will be willing to lend any capital. What is next? Will the FDIC begin to foreclose on the new Headquarters?

And how long will the bank's principal's remain on the Board? Will Clay Winfield and Tim Kaiser feel the same heat that Burt Saunders currently is and undoubtedly the same heat that John Simmons did? Well, at least Simmons may get a nice house out of his deal.

Another Board Member Feels The Heat

Burt Saunders, one of the latest additions to the YTB Board of Directors is feeling some heat. As he mounts a campaign for US Congress, the question about his affiliation with an alleged pyramid scheme is becoming an issue.

Now I wonder what Burt will decide. What is the better gamble, becoming one of the Coach's Millionaires (at 48 cents a share)? Or partaking of the cushy pension and benefits of a US Congressman?

The story has created quite a flury of news in the Naples Florida area. You can read about it here, here, here, and here.  But Burt is keeping pretty mum on any of his dealings with YTB. Stay tuned!

Naples is no stranger to YTB. Remember, Rick Ricketts lives in  the area and he was investigated by the Attorney General and agreed to "settle" for $400K--do innocent people settle for nearly a half million dollars?. And we cannot forget the YTB Director and convicted gambling kingpin Chris Paraldi.

Ouch!

On August 3, 2007, Michael Brent sold 16.650 shares of his YTB stock:

3-Aug-07 16,650 YTBLA.OB Sale at $8.48 - $8.48 per share.
(Proceeds of about $141,000)

On October 1, 2008, Michael Brent sold 16, 667 shares of his YTB stock:

1-Oct-08 16,667 YTBLA.OB Sale at $0.60 per share.
(Proceeds of $10,000)

This is the stock of a company that:

• Claims they are poised to take over the travel world
• Is supposedly ranked #26 according to Travel Weekly
• Is facing a $25M lawsuit from the California Attorney General
• Is undergoing an investigation from the Illinois Attorney General
• Has seen a rapid exodus of RTAs and Reps
• Has lost their IATAN accreditation
• Has been "fired" by several vendors
• Has many complaints from the BBB
• Is mired in all sorts of insider deals
• Paid $6M (or maybe it was $8M, or maybe it was $2M) for a foam statue that no one wants
• Encourages deceptive recruiting, or at least looks the other way--Seligman anyone?
• Pays their average RTA slightly more than $100 a year
• Pays their average Rep less than $100 a year
• Collects 74% of their income from recruiting
• Claims they are not a pyramid scheme
  

Hmm..did I forget anything?

10% Owner of YTB To Sell 4 Million Shares Of Stock

Michael Brent, a 10%+ owner of YTB has apparently seen the writing on the wall and is looking to sell up to 4 million shares of YTB.

According to an 8K filed this morning,

On September 30, 2008, Michael Brent and Beth Brent entered into a Rule 10b5-1 Sales Plan ("Sales Plan") to be administered by Gilford Securities, Incorporated. Michael Brent is a ten percent shareholder of YTB International, Inc. (the "Company") and is the Chief Executive Officer of REZconnect Technologies, Inc., a wholly owned subsidiary of the Company. 

During the one year term of the Sales Plan, the Sales Plan provides that Gilford Securities, Incorporated will sell under Rule 144 up to a maximum of four million shares of Class A Common Stock of the Company held by Mr. and Mrs. Brent, subject to the price and volume restrictions stated in the Sales Plan.

Apparently, according to Rule 10b5-1 of the SEC, people that are privy to non public insider information are prohibited from selling stock. This likely will prove to be a problem for Cauthen, Clagg, Scott Tomer, Coach Tomer and Kim Sorensen as they all had sold securities when the California Attorney General Investigation was ongoing and not disclosed.  It may also be a problem for Brent, depending if that information was disclosed to him as well.

But there is a way out when someone is looking to minimize the risk. Essentially, a trustee handles the sales of securities at a predetermined schedule or per a predetermined formula. You can read about the details of the plan here.

According to Canaccord-Adams:

More corporate executives are using 10b5-1 plans to turn their risks into rewards with respect to trading company stock. Rule 10b5-1 plans allow corporate insiders to preclude trading liability and more easily access their personal wealth held in stock.

It seems that Michael Brent (who incidentally has already sold over a million shares in the last year) ,ay be concerned that because of what he knows as an insider, he may be guilty of violating insider trading rules. Essentially, he must feel that selling YTB stock is a personal risk.

What does this say?

More Insight On The Attorney Resignation

In reviewing my notes from Ted Lindauer, it seems that John Simmons' firm was also overseeing the legal department and had appointed Andrea Clagg as director:

In the following months my administrative department received additional personnel, including the appointment of CFO John Clagg’s wife, Andrea, a non-attorney, as the Director of Legal Services. My compliance recommendations continued to be ignored.

In early August, 2007 I learned that John Clagg was giving various compliance directives to his wife. Neither John nor his wife were discussing these matters with me before acting on them. I objected noting to Coach that neither John Clagg nor his wife were qualified to make legal compliance decisions and the decisions they had made were wrong ones. Coach refused to stop the Claggs from making compliance decisions and refused to reverse the erroneous compliance decisions they had made....



After the Convention Coach informed me that local attorney John Simmons was being engaged as overall General Counsel for YTB International, Inc. and its subsidiaries. I met with John Simmons on several occasions in August to review my compliance and other recommendations previously provided to Coach in several memos. On September 7, 2007, John Simmons asked me to temporarily vacate my office at YTB so it could be modified to house two attorneys. That evening I received an email from John Simmons welcoming me to his new legal team.

Several days later, while working at home, I received an email from Thad Leach, a local attorney who is part of the new legal team. Mr. Leach’s email contained one sentence and stated that YTB had decided that it was no longer in need of my services.

I wonder if John Simmons had seen some of the same stuff Lindauer had seen. I wonder if it was a resignation or a termination. After all it seems that YTB does not need ANYONE meddling in their business.

What is interesting is that John Simmons actually owns the River House. According to the St. Louis Post Dispatch, Coach only "owns" it if the YTB stock trades at $2 or more for 90 consecutive days.

And even the local papers are suspicious of this latest development. According to the Alton Telegraph:

Prominent local attorney John Simmons has resigned from the board of YTB, the controversial travel sales firm, but Simmons and the company management are choosing their words carefully.

I am not sure we will hear more on this--attorneys are notoriously tight lipped, but I imagine that this will not be the ;ast "independent" Board member to leave. After all, Bob Dickinson bailed on day one.And as go the RTAs (currently under 120,000 I understand), so go the Board members.  But I am not sure Coach and Scott can effectively say "We don;t need no stinkin' RTAs." After all they are the ones that support the pyramid.