Feds Spring Trip Trap

WASHINGTON, Aug. 3, 1999 -- The Federal Trade Commission and 21 other agencies opened a major offensive against travel-related fraud today, charging 25 companies with misleading consumers about vacation packages. 

The Commission said the  25 companies misled consumers about the vacation packages they were selling, overstated the amenities included, told travelers they had won trips when in fact they had not, hid extra charges in "all-inclusive" packages, or charged consumers for products and services they never received.

As a result, the agency said, many people saw their "dream vacation" turn into a nightmare that wound up costing them hundreds of dollars more than they expected, or included a timeshare tour that most people had not been told about when they booked their trip.

The announcement was the kick-off of "Operation Trip Trap," a joint law enforcement and consumer education effort.

The FTC filed five complaints in federal District Courts asking the courts to permanently enjoin the alleged law violations and to award consumer redress. In three of the cases, against American International Travel Services; Air-Land-Sea Reservations, Inc.; and Resort World, Inc., the Commission is seeking an ex-parte temporary restraining order with asset freeze, appointment of a receiver, and immediate access to the business premises, pending a hearing for a preliminary injunction.

In the other two cases, against Cervenick-Anderson Travel and All Around Travel Club, the Commission is seeking a preliminary injunction, pending resolution of the complaints.

"Hundreds of unwary consumers got caught in this odious trip trap," said Jodie Bernstein, Director of the FTC's Bureau of Consumer Protection. "These cases demonstrate the Commission's continuing commitment to helping consumers get what they pay for." Travel-related complaints received by the FTC have climbed into the top ten list in the past year, she said.

According to the FTC complaints, the companies involved in "Operation Trip Trap" have bilked consumers out of thousands of dollars per month by promising "free" trips or discounted travel deals. In many instances, the defendants received the customers' names either through "drawings" at public places such as state fairs or restaurants, over the Internet or through other means (including direct mail solicitations), then telemarketers would give them a high-pressure sales pitch over the phone.

While promising "dream vacations," however, they often failed to disclose material facts about the vacation packages or tours they were selling, including total costs, refund policies, dates the consumers could travel, specific destinations, or type of accommodations offered. In addition, they overstated the special benefits provided and, in some cases, did not make it clear that the consumer was required to spend part of his or her vacation hearing a lengthy sales pitch for timeshare accommodations.

Finally, some telemarketers told the consumer that he or she had won--or had been specially selected--for a trip, while failing to disclose the real costs involved; or "baited and switched" the consumer into spending additional money for "upgraded" hotel or other accommodations.

Some of the companies also failed to inform the consumer regarding their "no refund" policy, or misrepresented this policy over the phone.

The FTC filed its actions in "Operation Trip Trap" against:

• American International Travel Services, Inc. (AITS), a Florida corporation also doing business as Magic World Tour & Travel; Silver Lake Resort, Ltd.; Alfred H. Jugo, A.J. Stanton and Lawrence S. Gilbert. According to the FTC's complaint, the defendants violated the Federal Trade Commission Act and the Telemarketing Sales Rule (TSR) by misrepresenting the nature of the vacation packages offered and failing to disclose restrictions and conditions on the packages, including those requiring consumers to attend one--and sometimes two--sales pitch seminars for a timeshare purchase during their trip.

In addition, the defendants allegedly failed to disclose their refund policies and material aspects of a prize promotion by leading consumers to believe they had won a prize.

• First Impressions, Inc., d/b/a Air-Land-Sea Reservations, Inc.; Air-Land-Sea Travel, Inc.; Vacations Are Us, Inc.; Vacation World, Inc, John Bundy, and Lloyd Ray McDade. In its complaint, the Commission alleged that the defendants misrepresented the nature of the vacation packages offered and did not disclose the restrictions on those packages, including the requirement that consumers attend one or more timeshare sales pitches. In addition, Air-Land-Sea is alleged to have assisted and facilitated other fraudulent telemarketing operations by providing verification and fulfillment services. The state of Wisconsin is a co-plaintiff in this action.

• All Around Travel Club, Inc.; Michael Mansueto, Douglas Baetz, Glenn Gallant and Century Financial Group, Inc. In this case, the complaint alleges that the defendants failed to deliver travel club membership packages that consumers were promised and billed for. In addition, the defendants are alleged to have violated the FTC Act by billing consumers for charges that were never authorized.

• ASQ, Inc.; d/b/a Resort World, Inc.; and Frank A. Abatangelo, Jr. The complaint against these defendants alleges that they violated the FTC Act by failing to disclose the total costs of the packages sold and misrepresenting the value and availability of the accommodations offered to consumers.

• Cervenik-Anderson Travel, Inc. (CATI); d/b/a Student Tours, College Tours, and Mexico Tours; and Andy Anderson. The complaint alleges that the defendants violated the FTC Act by misrepresenting the nature of spring break and post-graduation vacations to college students and their parents. The defendants allegedly misled the purchasers regarding the quality of the accommodations offered, along with the cost or value of various benefits and activities they arranged on behalf of the students.

In addition to the complaints above filed by the FTC, Operation Trip Trap involves the announcement of 47 state actions against 25 companies and two restitution orders filed on behalf of the Department of Transportation, in conjunction with previous state actions.

Resort Sales Group, Inc., et al

In another travel-related case, the Commission today announced that a Federal court in Charlotte, NC, had entered final judgments and orders for consumer redress against the four individual defendants associated with Resort Sales Group Inc., et. al (RSG), No. 97-CIV-382 (MU). The individual defendants are: Willie Biles, Margaret Alexander, Seth Miller, and Stephen Brewer.

In this case, RSG and its principals promised consumers low-priced luxury vacations, but the packages provided contained either undisclosed costs or sub-par accommodations (including vermin-infested rooms). Through the use of telemarketing "boiler rooms" (operating under the names "Design Travel" and "Cruise Link by Design"), thousands of consumers-both across the United States and abroad-lost millions of dollars between August 1995 and February 1997. In July 1997, the Commission (along with the state of North Carolina) filed a federal court action against RSG, three subsidiaries and the company's four principals (identified above).

The resulting final judgments and orders ban each of the defendants from marketing and/or assisting others in marketing travel-related products or services, and also ban each person from operating any credit card or debit card sales or check debiting services unless the customer signs personally. Further, the orders require each defendant to post a $500,000 bond prior to engaging in, or assisting others in, any telemarketing operations, and also contain monitoring provisions to ensure compliance with these requirements. Finally, each defendant is contributing to a consumer redress fund of approximately $142,000.

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