WASHINGTON, Aug. 23, 2000 --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 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
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.
"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
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
- 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
All consumer education pieces can be found on the FTC's Web site and from the FTC's
Consumer Response Center (see address below).
FTC Files Charges in Travel Schemes...