Illinois wants to shut down YTB
Written on May 17, 2009
If the just-settled lawsuit in California was meant to make YTB International change its ways, the suit filed Thursday by the state of Illinois just might force it out of business.
Illinois Attorney General Lisa Madigan is asking a court to shut down the Wood River-based online travel company, charging that it broke state fraud laws by peddling travel sales websites that generated little income.
The charges are similar to those filed by California Attorney General Gerry Brown in August, which were settled in an agreement released Thursday requiring YTB to pay $1 million in fines and substantially change its business model in California. But Madigan’s suit, filed hours after the California deal was announced, goes further. It seeks a permanent ban on any multilevel marketing activities by YTB and the company’s executives, and includes fines that would dwarf the California settlement.
YTB has grown fast in recent years by selling travel sales websites for $495 and $50 a month to people who then sell plane tickets, cruises and hotel rooms to friends and neighbors. At one point last year YTB had nearly 140,000 such agents, and it raked in $162 million in revenue in 2008.
But Brown, Madigan and the company’s critics charge that YTB is more interested in selling the websites than selling travel, that most of the money winds up in the hands of a few, and that the company amounts to an illegal pyramid scheme cheap payday loans.
Madigan charges that YTB made fraudulent claims about income potential, training programs and perks of the job, and that it "primarily emphasizes and pays commission on the recruitment of others into the marketing plan, rather than the sale of product to the ultimate user."
YTB did not respond to messages seeking comment Friday. It issued a short statement Thursday about the California deal, which it said … would help YTB "emerge a better company." That deal changes the company’s marketing effort and requires it to apply for more heavily regulated franchising approval in California.
Madigan’s office said it was launching an investigation of YTB shortly after the California suit was filed in August. As for the timing of this suit, spokeswoman Natalie Bauer said it was filed when the investigation warranted.
No hearing date has yet been set on the case, which is in Champaign County.
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