Courts will decide if TravelMax is `paradigm shift' -- or just the shaft
Business First of Louisville - by Terry Boyd
TravelMax International Inc.'s promotional materials claim the company is a "paradigm shift" away from conventional travel agencies to networks of "referring agents" that direct business to a national travel discounter.
Investigators in Kentucky's attorney general's office say the California-based TravelMax is not a shift -- just the shaft. They claim it's a pyramid scheme and that its only real product is the pitch that "sales associates" can make money by recruiting others into the company.
Ultimately, the courts will decide whether TravelMax is the next big entry in multi-level marketing, a legitimate field in which companies such as Michigan-based Amway Corp. sell products through networks of independent agents.
Until then, TravelMax executives will have to add "Offer void in Kentucky" to Section 10 of their brochure.
That section states "as long as you comply with TravelMax International's policies and procedures, you can confidently operate in any state."
Police arrested eight TravelMax agents here Oct. 6 after a Jefferson County Grand Jury indicted them on charges of promoting a pyramid scheme.
Those arrested were William T. Johnson, Emma Johnson, Daniel Callan, Virginia Callan, Arthur Kestler, Patrick D. Murphy, Diane Crutcher, Leon Duke and Kenneth Don McCoy. All are from Louisville except McCoy, whose address is listed as Shelby County, Ky., in court records.
Murphy and William Johnson are charged separately with failure to register TravelMax as a business. All were released after posting a $50,000 cash bond.
The eight also face civil charges stemming from three TravelMax promotional seminars -- two in August, one in September.
According to the attorney general's suit, the seminars touted a system in which investors pay a fee to become representatives of a company that pays them to induce others to join -- a violation, the suit charges, of the state's pyramid sales statute.
Pre-trial hearings are scheduled Nov. 22 for the civil charges and Dec. 6 for the criminal case.
At the time of the arrests, a Louisville judge issued a restraining order halting TravelMax's activity in the state.
Repeated calls to TravelMax's main office in Newport Beach, Calif., were answered by sales agents, who placed the calls on hold and never returned to the line.
Joe Whittle,TravelMax's Louisville attorney, declined to discuss the specifics of the case, citing the pending litigation. But he said company executives believe their Louisville operation does not violate Kentucky laws.
Of those arrested, all either declined to discuss details of their TravelMax activities or did not return telephone calls before Business First's deadline.
William Johnson agreed to comment briefly on the case, saying, "I don't understand why (the arrests) happened." The state attorney general "just has a different opinion than we do" about the legitimacy of TravelMax, he added.
Court documents include lengthy taped transcripts from the recruitment meetings, made by investigators for the attorney general's office. The transcripts indicate that all eight of those indicted took part in TravelMax presentations.
Bill and Emma Johnson, Kestler, McCoy and Duke were quoted in the records as telling potential recruits that each could make $6,750 a week by paying $1,523 for three "business centers," at $495 each, plus $38 in fees and taxes, then recruiting four people under each center to do the same.
Prospects were promised stock in the publicly traded TravelMax, as well as commissions earned by referring customers for travel services, travel discounts and other bonuses, according to court records.
"It was apparent to me that the focus of the program, as explained by the presenters, was on the sales of business centers," stated Kathy Parrish, an investigator for the Louisville office of the attorney general's Division of Consumer Protection.
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