Press Release
November 7, 2001
In an action that could result in as much as $5 million being returned to defrauded consumers, the Federal Trade
Commission Monday announced a settlement with Med Resorts International, Inc. of Clearwater, Florida, five related
companies, and their principals. The settlement resolves charges that the defendants had engaged in a series of
deceptive practices in selling vacation travel club memberships. In addition to the approximately $5 million in
consumer redress, members of defendants' travel club also were able to cancel an additional $22 million in contractual
payment obligations pursuant to a court order in the litigation.
The Commission's complaint against the companies, filed jointly with the Commonwealth of Virginia, stemmed from
2000's "Operation Travel Unravel," which included investigations by the FTC and 19 state law enforcement
agencies of deceptive practices in the travel industry. The sweep produced 85 law enforcement actions under federal
and state law, challenging such practices as the failure to disclose the actual cost of travel packages, misleading
consumers by telling them they had won a free trip, and failing to tell travelers that by purchasing a package,
they would be required to attend multiple timeshare presentations.
"In settling this final 'Travel Unravel' case, the Commission has received strong monetary and injunctive
relief against the defendants for their alleged misrepresentations," said Howard Beales, Director of the FTC's
Bureau of Consumer Protection. "American consumers work hard and look forward to well-deserved vacations.
In this case and the others in this sweep, the FTC is making plain that it is committed to ensuring that consumers
are protected from companies that promise April in Paris but deliver significantly less." Beales also thanked
the staff of the Virginia Attorney General's Office for its assistance in bringing the case and resolving the allegations.
According to the joint complaint, defendants Med Resorts International, Inc.; World Connections, Inc.; Mediterranean
Resorts, Inc.; Destinations Unlimited of Delaware, Inc.; Bay Financial Services, Inc.; V-Pac, Inc.; J. George Claveau;
and Marianne Borden-Myers (collectively, Med Resorts) violated the FTC Act and Virginia law by misrepresenting
the benefits they could provide to consumers who purchased their multi-year travel club memberships. The defendants
sold these memberships to consumers at sales centers in metropolitan Atlanta, Chicago, Philadelphia, and Washington,
D.C. The joint complaint specifically charged the defendants with misrepresenting: 1) that consumers purchasing
their long-term vacation travel club memberships could travel worldwide whenever and wherever the consumers chose;
2) the total cost of the vacation travel memberships; and 3) that members could obtain discount airfares. In addition,
the complaint charged that Med Resorts also had violated the Commission's Holder in Due Course Rule by not including
required disclosure language in consumers' membership contracts, and then reselling those contracts to third-party
finance companies.
In the course of the litigation and pursuant to a court order, substantially all of Med Resorts' assets were sold
to an unrelated company, American Vacation Resorts, Inc. (AVR), which then assumed the obligation to provide former
Med Resorts members with vacations under their membership contracts. In connection with the asset sale, the members
of Med Resorts' vacation club were given the opportunity to cancel their membership contracts and any contractual
payment obligations they may have owed, or to continue their memberships with the new company. Many consumers opted
to cancel their contracts, resulting in over $22 million of canceled payment obligations.
Terms of the Stipulated Final Order
Under the terms of the stipulated final order settling the charges in the joint complaint, each of the defendants
will be enjoined from violating the FTC Act and the Holder in Due Course Rule. In addition, above and beyond the
financial redress detailed below, Med Resorts' owner J. George Claveau will be required to post a $1 million performance
bond before engaging in the marketing or sale of travel-related products or services in the future. Other injunctive
terms will prevent the defendants from selling or otherwise disclosing their customer list and will require the
defendants to comply with certain reporting requirements to assist the FTC in monitoring the defendants' compliance.
In addition to the $22 million in canceled payment obligations, the settlement also will result in redress to consumers
of between $3.5 million and $5 million. Med Resorts will contribute $3 million to the redress fund within seven
days after the order is entered by the court, and potentially more after its remaining assets are liquidated and
various creditor claims are resolved. Claveau also will contribute approximately $500,000 from his personal assets
to the redress fund. Finally, AVR will contribute to the redress fund an agreed-upon percentage of revenues from
former Med Resorts members who decided to continue their memberships with the new company. The formula for distributing
the redress funds to consumers will be determined by the FTC in conjunction with the Virginia Attorney General's
Office. Consumers need not take any action at this time to be eligible to receive a distribution from the redress
fund. The FTC and the Virginia Attorney General's Office will contact consumers directly regarding redress.
The stipulated final order also requires the court-appointed receiver for Med Resorts to correct consumers' credit
reports by notifying credit reporting agencies that any reported payment delinquency to Med Resorts was not accurate
given the circumstances of this case and that any negative information relating to consumers' non-payment of any
membership obligations should be permanently removed from the consumers' files. The receiver also is required to
monitor AVR's ongoing activities for a period of 18 months to ensure that former Med Resorts members receive the
benefits they are due.
The Commission vote to file the proposed stipulated final judgment was 5-0. The stipulated final judgment was filed
in the U.S. District Court for the Northern District of Illinois on November 1, 2001. The judgment requires the
court's final approval and is not binding until signed by the judge.
SOURCE: Federal Trade Commission