This is news and commentary about YTB Travel published with permission from Len Clements:

In the last MarketWave Alert (#98) I reported that the Attorney General of California has filed suit against YTB Travel and is attempting to close the company down for being an illegal pyramid scheme. Now, according to the St. Louis Post-Dispatch, an investigation into YTB Travel has been underway for "a while" in Illinois as well.

Read the article here: http://tinyurl.com/YTBarticle

According to the article, a spokeswoman for the Illinois Attorney General said, "We have an open investigation", and that they are "...in the process of contacting the California attorney general's office about their findings."

Rumors have been spreading that Missouri has also began an investigation of YTB Travel (mostly likely due to their mention in the above article). I have confirmed that, at least as of today, no investigation is underway by the Missouri AG's office.             

Commentary:

AG investigations are like a malignant tumor to an MLM company. If you catch them early, and resolve them quickly, the company can live a full and happy life with no long term effects. But let them go for too long and it not only becomes harder to control the first one, but the investigative tumor metastasizes. It can spread, and spread fast. The YTB Tumor appears to be spreading. What's worse, it's spread to YTB's heart (California is more like a lung - you can live without one, but you sure don't want to). YTB is home based in Wood River, Illinois. You really don't want to get hit by your own attorney general.

Did YTB catch it early enough? Well, according to a recent SEC filing:

"The complaint was filed after 18 months of dialogue, initiated by the company with the attorney general to discuss the implementation of the new California law's potential effect on the company's business model. Throughout these discussions, which broadened over time, the company has consistently cooperated with the state's information requests and provided detailed evidence in face-to-face meetings explaining how and why the company's business model is in full compliance with the California law."

The filing further states that the parties recently came to a "standstill" and that the AG action was a result of the standstill.

The entire filing can be read here: http://tinyurl.com/SECfiling

Once again, the company's disclosure strategy is baffling (see "Franchise Announcement" section of Alert #98). To my knowledge, SEC rules required that they only disclose the presence of the tumor, but not that it was first detected 18 months ago. With this disclosure, and by the further commentary that "the company has consistently cooperated with the state's information requests and provided detailed evidence in face-to-face meetings explaining how and why the company's business model is in full compliance with the California law", and yet YTB was still sued for being a "gigantic pyramid scheme" does not bode well for the company's chances of negotiating their way out of this. It would have been better had California just recently discovered YTB, and acted quickly before hearing the company's defense.

This revelation also doesn't jive well with the oft-quoted statement from a YTB corporate member who said, "We have not had sufficient time to fully review the complaint filed by the California attorney general's office and, as a matter of policy, do not comment on pending litigation. However, we can tell you that YTB believes the allegations we've heard are without merit and we will vigorously defend ourselves in court." First, the body of the complaint is seven pages. It's also, I would assume, pretty much based on the same concerns that YTB has been discussing with California for eighteen months.

But here's what concerns me most. This legal tumor is firmly embedded within YTB's compensation plan, where the large majority of money is made, by both the company and distributors, not by booking travel, but by enrolling other travel bookers. Basically, the company makes a substantial profit from, and pays the majority of commissions on, the sale of the website the travel is booked through, not from the actual sale of travel. And yes, based on much legal precedent, this is something to be avoided. More details about the reason for the CA action is in Alert #98. So, no, YTB's legality is not being challenged just because most people fail at it, or those who do make money are mostly those who've worked at it the longest, although those are all points being made by CA as well. It's because they pay people to recruit other people. However, that's not the way the media, or the anti-MLMers, or the myriad travel bloggers, are spinning this. They are all saying, Look how the AG of California is claiming this is a pyramid scheme because most people fail at it! Or, simply because YTB is a multilevel marketing company! Although the acronym "MLM" is never mentioned in this live news report, note the title of the graphic that appears a little past the one minute mark:

http://www.wbaltv.com/video/17137637/index.html

And this is not rare. In fact, there have been numerous media reports on this YTB action all over the country, mostly in print, and virtually all of them are citing the more reader comprehendible "most fail to make money" point (rather than explaining pay plan legal theory), and are referring to YTB as a "multilevel marketing scheme", or as the "Multilevel marketing company that is accused of being an illegal pyramid". Not one that I've seen so far has bothered to learn enough about the subject they are reporting on to know that a company is either a legitimate multilevel marketing operation, or else it's an illegal pyramid scheme. If YTB is an illegal pyramid - and the courts will eventually decide this - then it was not a multilevel marketing operation. It was simply disguised as one!

So once again folks, don't feel good about your competitor getting bashed, even if you're in another travel deal. Every time a high profile MLM company gets attacked like this we all suffer a guilt by association.                                                

Double Your Income with Network Marketing

Check out the new book by MLM Blog founder, Ty Tribble, published by the largest business book publisher in the world...coming May 1st.

Click Here To Pre-order The Book On Amazon.com Now

Powered by CTA Plugin