Commission, States File Complaints Against Companies Nationwide for Travel-related Fraud
The Federal Trade Commission today announced that for the third time in four years it has completed a law enforcement sweep of the United States travel industry. The FTC has been working together with state authorities to uncover fraud and deception that are costing consumers hundreds of thousands of dollars each year and often ruining what are supposed to be relaxing and enjoyable vacations. Today's announcement of "Operation Travel Unravel" caps investigations by the FTC and 19 state law enforcement agencies, resulting in 85 actions for alleged violations ranging from failure to disclose the actual cost of travel packages to misleading consumers by telling them they have won a free trip and failing to tell travelers that in purchasing a package they will be required to attend one -- and possibly more -- timeshare presentations.
The FTC complaints resulting from this sweep come one year after the Commission brought similar complaints in "Operation Trip Trap" and three years after those brought in "Operation Trip Up." The Commission cases announced today were filed by the FTC's Southeast Region and Midwest Region (with the Commonwealth of Virginia a co-complainant) and the Commission's Division of Marketing Practices.
The Commission today also announced the settlement of one other travel fraud case brought as part of "Operation Trip Trap." In this matter, the FTC approved a stipulated final order settling a court action brought last year against American International Travel Services, Inc. (AITS) and its owners.
"This is the third travel fraud law enforcement sweep the Commission has coordinated since 1997, illustrating the FTC's continued commitment to working with the states to take action against these bad actors," said Jodie Bernstein, Director of the Commission's Bureau of Consumer Protection. "We're working diligently to ensure that consumers' plans for enjoyable travel do not unravel, and we appreciate the help we have gotten nationwide in focusing attention on the continuing problem of travel-related fraud and misrepresentation."
Through "Operation Travel Unravel," the FTC has filed three complaints in federal District Court seeking to permanently enjoin the alleged law violations and award consumer redress. The complaints were brought against Leisure Time Marketing, Inc./Discovery Rental, Inc. of Cocoa Beach, Florida; Med Resorts International, Inc. of Clearwater, Florida; and Epic Resorts, Inc. of King of Prussia, Pennsylvania. In each case, the Commission is seeking an temporary restraining order with asset freeze and appointment of a receiver to ensure that no additional consumers are defrauded while the permanent injunctions are being sought. The Commonwealth of Virginia is a co-complainant with the FTC in the Med Resorts matter, and is filing additional state-related charges.
"OPERATION TRAVEL UNRAVEL" LAW ENFORCEMENT:
The FTC filed its actions in "Operation Travel Unravel" against:
- Leisure Time Marketing, Inc./Discovery Rental, Inc.; Marlin Swanson; Britt Shenkman; Edward Sebastian; and Fereidoun "Fred" Khalilian (collectively "DRI"). According to the Commission's complaint, DRI violated the FTC Act by misrepresenting that they would provide free round-trip airline tickets to Hawaii or Mexico to consumers purchasing their vacation package, by misrepresenting the total cost of the vacation travel package offered, and by failing to disclose material restrictions on the use of the package, such as requiring attendance at timeshare sales presentations. DRI primarily generated leads by sending unsolicited faxes to consumers and receiving return calls. The use of such unsolicited faxes has been increasing as a means of conducting travel fraud. DRI also faces allegations of violating the FTC's Telemarketing Sales Rule (TSR) for failing to disclose material costs and restrictions on their travel packages and the supposedly "free" airline tickets. In addition, they allegedly violated the TSR by failing to disclose their refund policies.
- Med Resorts International, Inc.; World Connections, Inc.; Mediterranean Resorts, Inc.; Destinations Unlimited of Delaware, Inc.; Bay Financial Services, Inc.; V-Pac, Inc.; J. George Claveau; and Marianne Borden-Meyers (collectively "Med Resorts"). According to the joint complaint filed by the Commission and Virginia, Med Resorts violated the FTC Act and Virginia law by misrepresenting that consumers purchasing their long-term vacation travel memberships could travel worldwide any time they liked, the total cost of the vacation travel membership, and that members could obtain discount airfares.
In addition, Med Resorts allegedly violated the Commission's Holder in Due Course Rule by not including required disclosure language in consumers' membership contracts, then reselling those contracts to third-party finance companies.
- Epic Resorts, LLC; Epic Travel; Thomas Flatley; and Scott Egelkamp (collectively "Epic Resorts"). According to the Commission's complaint, Epic Resorts violated the FTC Act by misrepresenting that consumers had won or were specially selected to receive a vacation, misrepresenting the total cost of the package and failing to disclose material conditions and restrictions on the use of the vacation package. In addition, the company sent out unsolicited faxes and "cold-called" consumers based on leads obtained at public events where consumers registered to win a vacation. Accordingly, the complaint cites violations of the TSR, because in these solicitations Epic Resorts failed to disclose material costs and restrictions concerning the vacation packages. Finally, the company is charged with additional TSR violations for not abiding by the Rule's "Do Not Call" provision. This is the first time the Commission has alleged a violation of the "Do Not Call" provision of the Rule.
The Commission vote to authorize the filing of the three complaints was 5-0. The Discovery Rental and Epic Resorts complaints were filed in the U.S. District Court for the Middle District of Florida, in Orlando, on August 14, 2000. The Med Resorts complaint was filed in the U.S. District Court for the Northern District of Illinois in Chicago, on August 9, 2000. The FTC's Midwest Region would like to thank the Pinellas County, Florida Department of Consumer Protection for their significant assistance in bringing the Med Resorts complaint. A table listing all of the federal and state actions in "Operation Travel Unravel" is also available.
In addition, the Commission today announced a stipulated final order settling a complaint against the following:
- American International Travel Services, Inc. (AITS); Silver Lake Resort, Ltd. (SLR); Alfred H. Jugo; A.J. Stanton, Jr.; and Lawrence S. Gilbert for violating the FTC Act and the TSR by misrepresenting that consumers had either won or been specially selected to receive a vacation package, misrepresenting the contents of the package and their cancellation policy, and failing to disclose that consumers were expected - or would be pressured - to view timeshare property. Under the terms of the settlement, the defendants will pay the Commission $1 million in consumer redress (in addition to the $1.4 million already refunded or charged back), will be enjoined from future violations of the FTC Act and TSR, and will be required to post a $200,000 performance bond before engaging in the business of telemarketing travel-related products or services in the future.
The Commission vote to approve the stipulated final order settling the court case against AITS was 5-0. The settlement will be filed in the U.S. District Court for the Southern District of Florida, Miami.
"OPERATION TRAVEL UNRAVEL" CONSUMER EDUCATION
The "Operation Travel Unravel" consumer education program includes a variety of materials, including several recently revised FTC products. The first, "Facts for Consumers: Telemarketing Travel Fraud" contains information on how telemarketers obtain consumers' names and the techniques they employ to convince people to purchase their products. It also explains how consumers can protect themselves from travel-related telemarketing scams. The second product, a Consumer Alert titled "Avoid a School Break Bust," is designed to help students and their parents identify and avoid travel scams when planning vacations. It includes a variety of tips regarding the companies that market these trips, as well as useful contact information on organizations such as the American Society of Travel Agents' Consumer Affairs Department and the Department of Transportation's Public Charter Licensing Division. Finally, it describes how individuals can file a complaint with the FTC if they feel their school break has been a "bust."
In addition, a Consumer Alert and two Facts for Consumers publications remain available to the public. They are: "Traveler's Advisory: Get What You Pay For," "Timeshare Resales," and "Timeshare Tips," respectively.
Tips provided in the Commission's consumer education material include:
- Be wary of "great deals" and low-priced offers. Few legitimate businesses can afford to give away products and services of real value or substantially undercut other companies' prices;
- Don't be pressured into buying. A good offer today will be a good offer tomorrow. Legitimate businesses don't expect you to make snap decisions;
- Ask detailed questions. Find out exactly what the price covers and what it doesn't. Be sure to ask about additional charges, as well;
- If you do decide to buy, get all information about the trip in writing. Once you receive the written information, make sure it reflects what you were told over the phone and the terms you agreed to;
- Don't give your credit card number or bank information over the phone unless you know the company with whom you are working;
- Be aware that when you place your business card or name into a drawing for a free vacation, you may be added to a telemarketing call-out list;
- Know that your personal information also can be collected via the Internet when you are visiting travel-related sites seeking deals on trips or airfare;
- Don't send money by messenger or overnight mail. Some "scam artists" may ask you to send them money immediately. If you pay with cash or check, as opposed to using a credit card, you lose your right to dispute any potential fraudulent charges under the Fair Credit Billing Act; and
- When in doubt, say "no." If you have any doubts about the trustworthiness of a company, trust your instincts. It's less risky to turn down the offer and hang up the phone.
All consumer education pieces can be found on the FTC's Web site and from the FTC's Consumer Response Center (see address below).
NOTE: The Commission files a complaint when it has "reason to believe" that the law has or is being violated, and it appears to the Commission that a proceeding is in the public interest. A complaint is not a finding or ruling that the defendants have actually violated the law. The cases will be decided by the courts in which they were filed.
NOTE: Stipulated final judgments are for settlement purposes only and do not constitute an admission by the defendants of a law violation. Consent judgments have the force of law when signed by the judge.
Copies of the Commission's complaints and related documents are available from the FTC's Web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580; 877-FTC-HELP (877-382-4357); TDD for the hearing impaired 1-866-653-4261. Consumers with concerns about travel-related fraud or any other potentially fraudulent business practices may also report them to the FTC. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.
Andrea L. Foster, Director
FTC Southeast Region, or
Valerie Verduce or Barbara Bolton (Discovery Rental, AITS)
C. Steven Baker, Director
FTC Midwest Region, or
Russell W. Damtoft (Med Resorts)
Bureau of Consumer Protection (Epic)
(FTC File Nos.: Discovery Rental, Inc. - 002-3259; Med Resorts - 002-3206; Epic Resorts - 002-3157; AITS - X990074. Civil Action Nos.: Discovery Rental - 6:00-CV-1057-ORL-19B; Med Resorts - 00C-4893; Epic Resorts - 6:00-CV-1051-ORL-19C.)
Attachments (List of Enforcement Cases)
Facts for Consumers
Telemarketing Travel Fraud
FTC Consumer Alert!
Travel Tips: How to Gear Up for a Great Trip
Office of Public Affairs