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YTB International settles California attorney general lawsuit

eTN Staff Writer  May 14, 2009

YTB International, Inc., a provider of Internet-based travel booking services for travel agencies and home-based independent representatives in the United States, Puerto Rico, Bermuda, the Bahamas, the US Virgin Islands, and Canada, announced today that the Superior Court of the State of California has approved and signed the stipulated judgment effective today of the action filed in August 2008 against the company and certain of its executive officers.

YTB CEO Scott Tomer commented, "We believe the agreement with the State of California improves our business model and that as a result, YTB will emerge a better company. This agreement will help to further secure the future for our valued sales force."

The settlement calls for certain modifications to YTB's marketing plan that the company is in the process of implementing. Mr. Tomer concluded, "The improvements we will be making are compatible with the upcoming franchise model, while maintaining the commission and override structure for our reps."

According to the complaint filed by California Attorney General Edmund G. Brown, Jr.:

“…While defendants purport to be in the business of selling travel, their real business is the operation of a pyramid scheme that relies on the sale of essentially worthless websites they refer to as “online travel agencies.” For the opportunity to own and operate an online travel agency, consumers pay defendants over US$1,000 per year.

“…in 2007, consumers paid over US$103 million to defendants for websites, but made only US$13 million in travel commissions in a business defendants advertised as the “easiest way to make money” and earn “serious income” without any selling. Of the more than 200,000 consumers who purchased or maintained defendants’ websites during 2007, 62 percent failed to earn a single travel commission — not even on their own personal travel. The typical participant made no money on the sale of travel. Furthermore, the typical annual travel commission earned was less than the cost of just one month for a consumer to maintain his or her website. Even among those California residents who participated in defendants’ program for at least one year from April 1, 2006 to March 31, 2007, and who paid defendants at least US$1,000, 45 percent did not sell any travel and 61 percent made less income on the sale of travel than the cost of one month’s use of their website.

“While the vast majority of consumers made nothing selling travel, defendants generated 73 percent of their net revenue of over US$141 million dollars from the sale of websites and monthly fees. Another 10 percent was generated through the sale to consumers of training and marketing materials. Only 14.5 percent of defendants’ net revenue were generated from the sale of travel. In short, defendants sell an illegal pyramid scheme that uses the minor, incidental sale of travel as a front for their scheme.” settles California attorney general lawsuit
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