Calif. AG says no YTB settlement, yet

Legal News Line Apr. 7, 2009, 5:19pm

Jerry Brown (D)

SACRAMENTO, Calif. (Legal Newsline)-Contrary to an e-mail sent to its sales force, the California Attorney General's Office said it has not reached an agreement with

The Midwest-based Internet travel company claimed it has reached a settlement with the California Attorney General's office that would allow it to stay in business, according to a report in the St. Louis Post-Dispatch on Tuesday. The company's stock prices rose with the report of the settlement.

But Scott Gerber, director of communications for the California attorney general's office said the announcement was premature.

"Attorney General Brown sued YTB last year to block it from operating its illegal pyramid scheme," Gerber said. "There is no final agreement at this point, and the attorney general would not enter into any settlement that did not change how YTB markets and operates its business in California so that consumers are protected."

According to the Post-Dispatch, YTB sent a e-mail to is sales force last night saying the company had reached a "tentative settlement agreement" with Attorney General Jerry Brown, who sued the company for $25 million.

When he filed the suit, Brown said the company was operating a "gigantic pyramid scheme," which the company and many members of its sales force strong denied.

At the time of the announcement, Brown said the lawsuit seeks to "shut-down the company's unlawful operation before more people are exploited by the scam."

Details of the settlement have not been disclosed. A hearing for the case is scheduled for next Tuesday in Los Angeles.

The lawsuit created a storm for the company, announced just before the company's annual meeting with its sales force, all independent contractors. In the weeks and months that followed, according to the report, the company lost tens of thousands from its sales force.

Brown sued because the company held recruitment seminars in California. Established travel agents filled Web site hailing the move and seeking to explain how YTB's sales force lacked credentials of travel agents.

YTB's company records claim more than 200,000 members who paid between $500 and $1,000 to set up their own online travel agency, according to the California Attorney General's office.

"In 2007, only 38 percent of the company's members made any travel commissions," stated a press release issued by Brown's office. "For the minority of members who made any travel commission in 2007, the median income was $39.00--less than one month's cost to keep the Website. There are at least 139,000 of the company's travel Websites, all virtually identical, on the Internet."

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