Sunday, August 12, 2007

Update on YTB Travel and The Ricketts

Previous Alert Was a Little Rickety
YTB Travel & The Ricketts Respond

August 12th, 2007After my July 14th Alert (#84) regarding the Florida AG's investigation of top YTB Travel distributors Rick & Brenda Ricketts I received letters from the attorney's for both the Ricketts and YTB Travel. My main concern regarding YTB Travel, which I described in the Alert, was that they appeared to be in business more to sell the business opportunity than to sell travel which, based on a mountain of legal precedent, might be indicative of a pyramid scheme. Multilevel commissions are supposed to me paid on a product or service that can be realistically sold to someone who just wants the product or service, and isn't purchasing it just to participate in the business opportunity

YTB's attorney, Ted Lindauer, responded, "Your article misunderstands the YTB business model. The network marketing 'product' is the Referring Travel Agent license, a business opportunity." Not only does it appear that I understand the YTB business model perfectly, their attorney just confirmed it.

Mr. Lindauer also asserted that, "The Reps who sell the RTA licenses do not have to buy it nor do they gain any commission advantage by buying it... Where the Rep position with MLM commissions is truly free there can be no illegal pyramid present." I see. So if I resurrected the "Airplane Game" (the classic pyramid scheme from the 70s and 80s involving $1,500 cash payments and cash rewards based solely on the recruitment of others) and made the $1,500 cash investment optional, it would no longer be an illegal pyramid? Or, might there be other aspects to consider than this single, overly simplistic factor?

Apparently the Florida AG seems to think so. Here is the text of the notice concerning the Ricketts investigation:

"Possible unfair and deceptive business practices in the sale of internet travel website opportunities or in the recruitment and operation of multi-level marketing systems promoting business opportunities and recruiting sellers of travel. Possible violations of Florida Deceptive and Unfair Trade Practices Act... prohibiting operating, participating in, or soliciting on behalf of a chain letter or pyramid sales scheme."

Mr. Lindauer claims that "YTB had extensive meetings with the Florida AG's office about the inference of YTB being an illegal pyramid and in November of 2006 the Florida AG informed YTB that there was no longer an investigation of YTB as a possible illegal pyramid...". However, a spokesperson for the Florida AG's office I contacted claims "The attorneys involved in the investigation of Rick & Brenda Ricketts did not conduct a meeting (with YTB Travel) in November". Furthermore, the above notice still exists on the Florida AG's web site, exactly as worded. To my knowledge, the Ricketts did not sell or promote any other travel related MLM business besides YTB Travel. Having said this, my Florida AG contact did state that their investigation currently has not extended beyond the Ricketts themselves.

Here is an open offer to YTB travel: There are several attorneys whom I greatly respect and whose practice focuses on the MLM industry. Hire any one of them to review the two aspects discussed above. If they concur with Mr. Lindauer I will pay their legal fees. If they agree that paying MLM commissions on the sale of a business opportunity is legally problematic, and making the fee for said opportunity optional does not exempt it from legal attack under anti-pyramiding laws, YTB pays their legal fees - and it will be the best investment in your business you have ever made. It's a no-lose proposition for YTB travel.

As far as YTB Travel the "business opportunity", I stand by my comments.

As for the Ricketts, I do need to eat some crow, with a slice of humble pie for dessert.

In the opening paragraph of Alert #84 I stated: "The Attorney General's office of Florida has taken legal action that would suggest they believe YTB Travel is an illegal pyramid. Oddly, though, they have chosen to file this charge against one of their leading distributorships rather than the company itself." Although technically correct in a generic, layman's sense, which is how I meant it, this was very clumsily worded.

First, "legal action" and "charge" are legal terms that imply a formal action has occurred subsequent to an investigation. It has not, and I should have known better than to use this language. The Florida AG's interest in the Ricketts is still in an investigative stage and no formal "legal action" has been taken, nor is there any certainty that one will (the Ricketts and their legal counsel are working to resolve the issue). While I would disagree with the Ricketts's attorney that they have "not been accused of anything" (someone had to accuse them of something), I should clarify that the Florida AG's office has not accused them of anything. As the notice I linked to in Alert #84 (and herein) clearly states, "The existence of an investigation does not constitute proof of any violation of law."

Secondly, while I did not specifically state that the Ricketts had been previously investigated by the FL AG's office (I suggested there was a relationship to the termination of their Excel Telecom distributorship and the FL AG's office investigation of Excel), I wish to clarify that the Florida AG's office had not specifically investigated the Ricketts in this matter.

Finally, while I made no comment at all related to the veracity of the charges against the Ricketts by Excel, or any subsequent event beyond their termination (as it was not germane to the point), it should be noted that the Ricketts did prevail in their subsequent arbitration action against Excel.

Two clarifications in 17 years, and only one deserved (this one). Still inexcusable. It won't happen again.

Len Clements

MarketWave, Inc.

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