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June 15, 2010

YTB is 'Illegal Pyramid Scheme,' claims new class action

Kelly Holleran
Madison County, IL - Copyright 2010

A group of multi-state plaintiffs filed a putative class action lawsuit against YTB International and its officers, charging the company is operating an illegal pyramid scheme.

The plaintiffs, who are from Illinois, Missouri, Georgia and Utah, allege that Wood River-based YTB offers no direct selling opportunity, only a never-ending chance to recruit others into the program.

Attorney Christian G. Montroy of Montroy Law Offices in East St. Louis and Jay L. Kanzler Jr. and Brian J. Massimino of Witzel, Kanzler, Dimmit, Kenney and Kanler on St. Louis will be representing the putative class.

In their complaint filed June 10 in Madison County Circuit Court, the plaintiffs claim that the YTB program -- based upon selling cheap online travel agencies to recruits, then allowing the new recruits to retrieve others to do the same thing while requiring them to maintain certain levels of monthly services -- is a fraud.

YTB has raked in hundreds of millions of dollars in revenue through the use of independent marketing representatives, who are the salespeople charged with recruiting others to buy the online travel agencies, the plaintiffs say. In fact, about 75 percent of the $162 million YTB earned in 2008 was derived from the independent marketing representatives, yet a majority of the representatives -- about 80 percent -- failed to earn a profit, according to the complaint.

Those people independent marketing representatives recruit to buy the online travel agencies are referred to as referring travel agents. To buy the online travel agencies, the referring travel agents are required to pay $450 up front, then to pay $50 each month to own and operate their online travel agency, the suit states.

YTB represents to its referring travel agents that the sale of online travel agencies is a business opportunity allowing them to become travel agents, the complaint says. However, plaintiffs claim they could not act as true travel agents -- they weren't allowed to sell travel packages, process payments for travel customers, issue travel tickets or other documents to customers or receive travel commissions. Instead, they acted as agents of travel agents, only referring travel customers to YTB.

"In their role as RTAs, Plaintiffs and their proposed class sold neither products nor services," the suit states.

YTB promised that referring travel agents could earn as much as 60 percent of the travel commissions YTB collected from travel vendors for the customers the referring travel agents referred. In addition, YTB paid the plaintiffs for their roles as independent marketing representatives -- referring people who purchased online travel agencies. The plaintiffs served as both referring travel agents and independent marketing representatives.

In their capacity as independent marketing representatives, the plaintiffs could receive a refund of the $450 they paid to start the program if they recruited three people to buy online travel agencies. If the plaintiffs recruited six people, they could be reimbursed for their monthly RTA fee for every month the online travel agency remained active, the complaint says.

Not only YTB was involved in the illegal pyramid scheme, the plaintiffs claim. For example, defendant J. Kim Sorenson, who is president of Indiana Corporation CCMP, provided YTB with marketing materials and a 130-foot replica of the Statue of Liberty for YTB's 2008 annual convention in St. Louis. Defendants Meridian Land -- owned by defendants Clay Winfield and Dr. Timothy Kaiser -- provided YTB with office space to perform their operations. The plaintiffs claim such defendants are also liable because they knowingly took part in activities that advanced the pyramid scheme.

Lead plaintiffs include Illinois residents John Stull, Randall Quick and LaShonda Stiff; Missouri residents Faye Morrison, Jeff and Polly Hartman, JPH Development and Courtney Speed; Georgia residents Kwame Thompson, Jorge Gonzalez and Nikky Shotwell; and Utah resident Grace Perry.

In their nine-count complaint, the plaintiffs are seeking actual and punitive damages of more than $900,000, plus an order prohibiting the defendants from continuing in their conduct and other relief the court deems just.

Madison County Circuit Court case number: 10-L-608.