Well, to be honest, I thought the financial aspect of the settlement would have been higher, however, upon review, it seems that YTB has essentially been put out of business in their top producing state. Not quite the slam dunk Coach thought. And I am not sure I see too much egg on Jerry Brown's face. Anyway you look at it, this is a loser for YTB.
The $1 million dollar fine and penalty is payable in 4 equal payments with the last being due on December 30, 2009. With declining TSO enrollment, a missing $500K from a bum real estate deal, a $1.3 million dollar increase in a credit card escrow account, and only $1.8 million of cash and equivalents, it will be difficult to pull off.
Speaking with Scott Gerber of the Attorney General's office, he indicated that this was a very restrictive settlement and California has every intention of making sure it is honored. It is important to note that the settlement not only covers YTB but their independent contractors as well. When asked about the wanton remarks by the Reps and RTAs on Craigslist and other sites, Gerber said, "If there is one instance, there is probably no action. But if we see a pattern or multiple instances, we will return to the court and seek a contempt order and ask for more stringent enforcement." So, it seems that YTB had better begin recruiting mutes if they stand a chance of compliance.
The terms of the settlement essentially are putting YTB out of the California market. From here on, YTB must
- Register as a franchise and offer the franchise at no cost to existing TSOs
- TSOs shall not be required to be a Rep
- TSOs shall not be allowed to promote the Rep opportunity unless they are a Rep as well
- YTB will not be allowed to discuss the Rep opportunity and the TSO opportunity in the same meeting or marketing materials
- Reps cannot be incented to become a TSO
- YTB is no longer allowed to charge Reps for anything--training, entrance to meetings, etc.
- Reps are not allowed to demonstrate on their site (if they have one); but must use a new demo site only.
- The Bill of Rights has been tossed and the compensation plan rewritten.
- YTB is not allowed to make any changes to uplines or downlines
- YTB must disclose on their sites (12 point font) and at all meetings
- The number of TSOs who have not received any compensation in the last quarter and year
- The median compensation of TSOs for the last quarter and year
- Typical costs incurred to be a TSO including sites, presentations, marketing materials, events, etc.
- The number and percentage of TSOs that dropped in the last quarter and year
- Similar disclosures are required for Reps
- They cannot state that a TSO can apply for travel credentials until they are reinstated by IATAN
- YTB cannot advertise or promote travel discounts
- YTB cannot state or imply that a TSO may make tax deductions; but must say there may be deductions available and to consult an accountant.
- YTB cannot state that their rates are comparable to any online booking source unless they disclose that they are not necessarily the same or cheaper as those sources.
- YTB must give the AG unfettered access to their books and marketing info
- YTB must give the AG unfettered access to any and all meetings, opportunity events, etc.
- YTB must report quarterly, a littany of information regaring the TSOs and Reps in terms of numbers enrolled, dropped, and monies earned.
- YTB must provide quarterly, copies of all marketing materials and agreements between TSOs, Reps and YTB
- The AG can disclose or not disclose his presence at any meeting to YTB and YTB is not allowed to disclose his presence under any circumstances.
- Oh, and $1 million in fines and penalties
Since YTB has already shown that they are unable to control the message of their Reps in the field, I wonder how they will handle this. The Attorney General will still need the eyes and ears of California residents and legitimate travel professionals to help them monitor the compliance (or non) of this order. To be honest, the only way I see YTB being able to control the California Reps and Directors is to terminate them and cease business in California--and after all, isn;t that what Jerry Brown wanted all along?
It is funny, I recall so many of the YTB faithful saying that California was going to be thrown out. That YTB was going to show Jerry Brown they are right. Well, if this is how YTB shows people they are right, let me get in line, I can use a million bucks. And to the folks that thought we did not know anything, I guess you were incorrect. Where was the settlement posted first? I bet that the majority of YTB doesn't even know about it from their own company! There will be more commentary in the days to come including some from a MLM expert on what the future may hold!
Any guesses on how much longer till Lisa Madigan send out a memo?
PS-No blog post tomorrow, this will have to do.