FTC Halts Vacation Scam; "Dream Vacations" Were a Nightmare, Agency Charges

Companies that used celebrities, including Robin Leach, to tout luxury vacations in tropical settings, have been charged by the Federal Trade Commission with operating a scam in violation of federal law. According to the FTC, Commonwealth Marketing Group, Inc., Great Escape Vacations & Tours and their principals, deceptively marketed and sold vacation packages throughout the United States, in Canada and abroad.

Consumers were promised "resort accommodations" and a "luxury cruise" for a small "promotional" fee. Those consumers who took the trip found it was not the "world class" vacation they were led to expect. Other consumers, faced with restrictions and extra costs, cancelled their plans and lost their initial payment of as much as $600, according to the FTC.

At the request of the FTC, a U.S. District Court has frozen the assets of Commonwealth, Great Escape, Frederick F. Zeigler, III and Robert E. Kane, appointed a receiver to oversee their businesses, and temporarily halted the deceptive business practices, pending trial.

"These are major players in the vacation certificate industry, but their 'dream vacations' were a nightmare," said Jodie Bernstein, Director of the FTC’s Bureau of Consumer Protection. "Thousands of consumers who thought they had 'qualified' for a discount vacation paid hundreds of dollars to collect. But they didn’t get what they paid for. What were advertised as 'luxury cruises' were actually ferry boat rides. The 'world-class hotels’ weren’t. Instead of sailing into the sunset, consumers were taken for a ride."

"Consumer complaints about travel consistently rank among the top five categories in an FTC-Attorney General complaint system, and annual losses to travel-related fraud are estimated to exceed $12 billion," Bernstein said. "The FTC crackdown on travel scammers should send a message to the con artists who run them. Consumers can protect themselves by buying vacation travel only from businesses they know and getting the details of any refund policy in writing before they pay."

According to the FTC's complaint filed in federal court, the defendants operated their scam through a network of telemarketing boiler rooms. The FTC alleged that the Hopwood, Pennsylvania-based businesses used third-party telemarketers to target consumers who were urged at local fairs and trade shows to "register" for a dream vacation. Many consumers "registered" thinking they were entering a drawing to win a vacation. The names of those who "registered" were passed to telemarketing boiler rooms where telemarketers called the consumers and led them to believe they had won a vacation. Other victims were sent mail solicitations saying they could receive a "fantasy cruise holiday" vacation, including a "luxury cruise," by calling an 800 telephone number.

Once the telemarketers got the consumers on the line, they described an exciting vacation in Florida including a "luxury cruise" to the Bahamas, which the consumer could "register for" at the cost of $598 or less, the FTC alleges. The telemarketers urged the consumers to provide credit card information immediately to "register," with lines such as, "This is a limited promotion based on availability." After the telemarketers got the credit card information, they turned the consumer over to a "verification" department where the credit information was verified and the consumer learned that there would be additional charges of hundreds of dollars for "port reservation processing fees" and that the vacation package was "non-refundable." According to the FTC, the initial fee of as much as $598 went to the defendants and their telemarketers, and the "port reservation processing fees" paid for the accommodations and "cruise."

When consumers received the defendants’ vacation package and learned that the "luxury cruise" was actually a five to six hour ferry ride to the Bahamas and back; that they would have to pay more to take the vacation they thought they had already paid for; and that they did not win a thing, many tried to cancel the vacation. Consumers who called were told the companies had a "no refund" policy, but the companies own reservation vouchers contained provisions allowing returns for a specified number of days. However, consumers who tried to return their vacation packages by mail received the packages back -- often two times or more -- according to the FTC.

The agency alleged that Commonwealth, Great Escape, Zeigler and Kane violated the FTC Act by misrepresenting that:

• consumers who pay the amount identified in the initial solicitation or sales call receive a vacation;
• consumers could cancel their vacation and receive a refund; and,
• consumers were getting "luxury" vacations worth much more than they were paying for them.

In addition, the FTC charged the defendants violated provisions of the FTC’s Telemarketing Sales Rule (TSR) by:

• failing to disclose in advance of payment, the total cost to purchase, receive and use the vacation, and the refund, cancellation or exchange policy;
• assisting third-party telemarketers -- by doing such things as processing credit card charges and approving scripts -- who were violating the law.
• assisting third party telemarketers who violated the TSR by misrepresenting that consumers had won the vacation, misrepresenting that the vacation package was worth more than consumers were paying, and failing to disclose, promptly and conspicuously, that they were calling to sell something;

The FTC has asked the court to permanently bar the defendants from violating the FTC Act and the TSR and to provide redress for victims of the scam.

The Commission vote to file the complaint was 5-0.

The complaint was filed in U.S. District Court for the Western District of Pennsylvania in Pittsburgh under seal. The seal was lifted today.

NOTE: The Commission authorizes the filing of a complaint when it has "reason to believe" that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendant actually has violated the law. The case will be decided by the court.

Copies of the complaint and a consumer alert, "Travel Tips: How to Gear Up for a Great Trip," are available from the FTC’s web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-FTC-HELP (202-382- 4357); TDD for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.

(FTC File No. 982 3049)
(Civil Action No. CV:98-918)