WOOD RIVER, Ill. (Legal Newsline)-August was not a good month for an Internet-based travel business that critics, including two state attorneys general, say is nothing more than a glorified pyramid scheme.
The troubles that began with a lawsuit filed by California Attorney General Jerry Brown have led to more legal problems and now, layoffs for the controversial travel company, YTB International Inc.
The home office of YourTravelBiz.com announced on Wednesday it would lay off 17 employees at its Wood River, Ill. Headquarters.
This follows the lawsuit filed by Brown in early August, which was quickly followed just four days later by a class action lawsuit filed by former YTB agents that basically echoed the same allegations of Brown's suit.
California's lawsuit against the company drew scrutiny from professionals throughout the travel industry. Many licensed travel agents hailed the move, claiming the YTB fueled its rapid growth with false claims and unrealized profits.
"YourTravelBiz.com operates a gigantic pyramid scheme that is immensely profitable to a few individuals on top and a complete rip-off for most everyone else," Brown said at the time he filed his suit. "(This) lawsuit seeks to shut down the company's unlawful operation before more people are exploited by the scam."
Brown said the company held recruiting seminars in major California cities to recruit members. Marketing techniques showed members of the business driving luxury cars and living extravagant lifestyles.
YourTravelBiz.com'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 attorney general's office.
"In 2007, only 38 percent of the company's members made any travel commissions," Brown's office said in a statement. "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."
YourTravelBiz.com's Chief Executive Officer Scott Tomer has said he will aggressively fight the California lawsuit. But since the lawsuit, more than 160 complaints have been filed against YTB with the Better Business Bureau and Illinois Attorney General Lisa Madigan.
Madigan has teamed with Brown, a fellow Democrat, to investigate YTB.
YTB stressed the latest layoffs by stressing it represented less than 5 percent of the company's total workforce, and is "a part of a reorganization to reduce operating expenses and curtail expenses," Tony Green, assistant to Tomer wrote in an email to press agencies.
"This move places the company in an even better position to realize is goals and effectively manage its growth," he wrote.