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FTC Closes O.C. Travel Firm Amid Complaints

Trade: Federal court order freezes assets of World Class Network, alleged to have used deceptive sales tactics.

March 05, 1997|JAMES S. GRANELLI and MARLA DICKERSON | TIMES STAFF WRITERS

IRVINE — The Federal Trade Commission, armed with a federal court order, has shut down a fast-growing Orange County travel company on complaints that it used deceptive tactics to sell training kits to would-be travel agents.

Without notice, the FTC closed World Class Network in Irvine and its World Class Travel affiliate in Calabasas on Monday and Tuesday, freezing the assets of its owners, putting 180 employees out of work and halting countless travel plans for some 25,000 mostly part-time agents nationwide.

But more than 200 agent-customers, from a minister in Bakersfield to a grocery store clerk in Riverside, rallied Tuesday in front of World Class Network's corporate offices in Irvine and vowed to fight the government for return of the company.

Lawyers for the company, however, failed late Tuesday to get U.S. District Judge Alicemarie Stotler in Santa Ana to lift or modify her order. They argued that the livelihoods of thousands were endangered and that FTC action crushes a three-day annual conference that starts Thursday in San Francisco.

"The conference is a critical part of the company's support," said Brenda Taylor, a Fountain Valley mother of two whose only job was booking travel and training other agents.

The company denied the FTC allegations.

World Class Network is part of a fast-growing do-it-yourself movement that is sweeping the travel industry and changing the way tickets, cruises and hotel rooms are sold.

Scores of new companies nationwide are now offering consumers the chance to earn extra money and receive industry perks by becoming independent, at-home travel sales representatives, often referred to in the industry as "outside" travel agents.

But many in the industry have been pressing for a crackdown on certain operations that provide little more than laminated travel agent identification cards along with exaggerated claims about discounts and perks that come with the cards.

The FTC, in a two-count civil complaint, accused World Class Network and its affiliate of failing to deliver on promises that customers--called distributors--could receive discounts and upgrades on their own travel accommodations.

The federal agency also alleged that the company had falsely promised that distributors could run their own in-house travel agencies.

"They promised: 'You buy our kit and you can operate your own at-home travel business,' " said FTC spokeswoman Bonnie Jansen. "But the training was inadequate to allow purchasers to operate a functioning business. Few, if any, consumers have achieved a level of earnings even approaching those promised by the defendants."

The FTC is seeking to close the operation permanently and wants court orders rescinding its contracts, refunding money paid and returning "unlawfully obtained profits."

Those who rallied in support of the company derided the FTC's actions, accusing it of overreacting and jeopardizing the livelihoods of many people.

"Everything the company has promised has come true," said Rick Dorr, minister at the Pentecostal Church of God in Bakersfield.

Stater Bros. grocery clerk John Tucker of Riverside, rocking his 2-year-old son at the rally, said that the company "delivered on its promises--plus" and that the results "exceeded my expectations."

Employees said that FTC agents marched into corporate headquarters Monday, ordered them to stop working, herded them into one area and then sent them home and changed the locks.

Scott R. Warren, a lawyer for the company, called the FTC allegations "ridiculous." He said the action was based on 18 complaints, some of which were filed with the agency more than a year ago.

The FTC, which obtained the order Friday and released court papers on its action Tuesday, said that it took the extreme action to protect consumers and secure assets for possible refunds.

"We believed the defendants might take the money and run," Jansen said. "We want to try to preserve assets wherever possible."

*

In little more than two years, World Class Network built itself into a national powerhouse by booking $5 million worth of travel business a month, said distributor Kevin Blackburn of Oakland. Last week, Warren said, the company was processing $600,000 worth of business a day.

The order freezes the assets of the company and its owners and operators, Daniel R. and Denise L. Dimacale, Robert C.K. Lee, Howard K. Cooper and Jerome L. Goldberg.

The Dimacales own World Class Network, Lee is the chief financial officer and Cooper was hired only seven months ago as president. Goldberg and World Class Network each own half of World Class Travel, which handles ticketing.

In an interview last year, Daniel Dimacale said the company patterned itself after the Amway marketing network, selling products and bringing in other distributors to sell them.

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