California
Sues YTB For
Engaging in Pyramid
Scheme
A day
before 20,000
members of YTB (YourTravelBiz.com)
were about to
convene for the
company’s annual
meeting in St.
Louis, California
Attorney General
Edmund G. Brown Jr.
announced a lawsuit
against the company.
The lawsuit, which
seeks $25 million in
fines and
restitution, charges
YTB with operating a
“gigantic pyramid
scheme” that
recruited tens of
thousands of members
with deceptive
claims that members
could earn huge sums
of money through its
online travel
agencies. read more
“YourTravelBiz.com
operates a gigantic
pyramid scheme that
is immensely
profitable to a few
individuals on top
and a complete
rip-off for most
everyone else,”
Brown said. “Today’s
lawsuit seeks to
shut down the
company’s unlawful
operation before
more people are
exploited by the
scam.” The attorney
general’s office
issued a statement
that said
YourTravelBiz.com
and its affiliates
operate an illegal
pyramid scheme that
only benefits
members if and when
they find enough new
members to join the
scam. Once enrolled,
the attorney
general’s office
said, members who
join the pyramid
scheme earn
compensation for
each new person they
enlist, regardless
of whether they sell
any travel. The
company lures new
members by offering
huge income
opportunities
through online
travel agencies yet
the typical person
actually makes
nothing selling
travel.
The attorney
general’s office
said that, according
to company records,
there were over
200,000 YTB members
in 2007 that
typically paid more
than $1,000 per year
-- $449.95 to set up
an “online travel
agency” with a
monthly fee of
$49.95. In 2007,
only 38 percent of
the company’s
members made any
travel commissions,
according the
attorney general’s
office. For the
minority of members
who made any travel
commission in 2007,
the median income
was $39 -- less than
one month’s cost to
keep the YTB
website. There are
at least 139,000 of
the company’s travel
websites, all
virtually identical,
on the Internet.
YourTravelBiz.com’s
extensive marketing
materials include
videos of people
driving Porsches and
other luxury cars,
holding $10,000
checks, and claiming
to be raking in
millions of dollars
in profits. The
company advertises
through its website
and at conventions,
workshops and
nationwide sales
meetings, many of
which have been held
in California
locations such as
Los Angeles,
Sacramento, San
Francisco and San
Diego.
The California
attorney general’s
office charged YTB,
its affiliates, and
the company’s
founders, J. Lloyd
Tomer, J. Scott
Tomer, J. Kim
Sorensen and Andrew
Cauthen, with
operating an
“endless chain
scheme,” an unlawful
pyramid in which a
person pays money
for the chance to
receive money by
recruiting new
members to join the
pyramid. The
attorney general
also charged the
company with unfair
business practices
and false
advertising
practices, including
deceptive claims
that members can
earn millions of
dollars with the
company, operating
without filing
legally mandated
documents with the
attorney general and
the Department of
Corporations, and
selling an illegal
travel discount
program
Under California’s
unfair business
practices statue,
the company is
liable for $2,500
per violation of
law. Attorney
General Brown is
suing
YourTravelBiz.com to
get a court order
that bars the
company from making
false or misleading
statements and
assesses a civil
penalty of at least
$15 million and at
least $10 million in
restitution for
Californians who
were allegedly
ripped off by the
company. The
California attorney
general said
consumers who
believe they have
been affected by the
alleged pyramid
scheme should send a
written complaint
with copies of any
supporting
documentation to:
Office of the
Attorney General,
Public Inquiry Unit,
P.O. Box 944255,
Sacramento, Calif.
94244-2550.
