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State sues travel companies for pocketing $1 million, stranding customers

Photo Credit: Cliffview Pilot File Photo

YOU READ IT HERE FIRST: State authorities have sued two former travel companies and a brother owner/operator team for accepting more than $1 million from 230 who were left stranded, their rooms unpaid for, in a Ponzi-type scheme.

The customers were in Europe when Bloomfield-based Crown Travel Services Inc., also known as Club ABC Tours, and affiliated company ABC Destinations LLC, abruptly closed their doors on Oct. 1, 2012.

Many had arrived in Rome to learn that lodging and other accomodations that they’d paid hundreds of thousands of dollars for hadn’t been taken care of.

Making it worse, their travel insurance wouldn’t cover the losses.

That left the customers to choose whether to pay out-of-pocket for hotels or book immediate return flights home.

Meanwhile, the defendants were living the high life, state authorities said — paying themselves more than $275,000 each in 2011 alone and buying a Porsche and Audi, among other purchases, state authorities allege.

The victims “managed to save up enough money for the vacations of their dreams, often as a way to celebrate anniversaries or family reunions,” said Eric T. Kanefsky, director of the New Jersey Division of Consumer Affairs.

Meanwhile, he said, the brothers “paid themselves six-figure salaries and purchased expensive cars, all while the company was insolvent, by selling more than $1 million in travel packages they failed to actually book.”

Club ABC Tours was insolvent at least as early as December 2008, and ABC Destinations was insolvent at least as early as June 2012, acting state Attorney General John G. Hoffman said this morning.

The brothers “kept their business afloat by using money from new customers, to pay for trips booked by previous customers,” Hoffman said. “When this scheme inevitably fell apart, hundreds of customers lost more than $1 million.”

Robert S. Paris, 59, of Greenwich, Connecticut, and Thomas H. Paris, 61, of New York City, owned and operated a members-only travel club that sold all-inclusive travel packages including airfare, hotel accommodations, dining and sightseeing tours, and cruises.

ABC Destinations LLC offered similar packages to groups such as chambers of commerce, educational institutions, and churches in New Jersey and elsewhere.

Consumers paid thousands of dollars for travel packages called “Super Tuscany,” “Unbelievable Italy,” “Mysteries of Morocco,” “Untouched Secrets of Costa Rica,” “China and the Yangtze River,” and others.

A state lawsuit filed in Newark by Hoffman’s Division of Law, alleges that the Paris brothers continued to sell the travel packages even though the companies were insolvent and were months behind in paying their bills, including mounting debts to hotel providers.

For years, the Paris brothers “kept the businesses functioning by accepting payment for travel packages that were to occur in the future, but applying those payments to travel packages that had previously been booked, or had already taken place,” the Attorney General’s Office said this morning.

“In other words, when a customer paid for a future travel package, the Paris brothers allegedly applied that customer’s money to an earlier travel package booked for another customer.”

Rather than paying hotels or other vendors within a standard billing cycle of 30 days, at times the Paris brothers “did not remit payments until 120 to 180 days after a customer’s stay,” a statement issued this morning says. “As the companies grew further in debt, this business model inevitably failed.”

The Paris brothers and their companies accepted payments from customers at least as late as September 24, 2012, for travel packages that were to occur as late as October 2013.  However, Club ABC Tours and ABC Destinations LLC both closed on October 1, 2012, allegedly without applying payments from hundreds of customers to the travel packages they were purchasing.

State officials accused the defendants of several violations of New Jersey’s Consumer Fraud Act and Advertising Regulations.

They are asking an Essex County Superior Court judge to “order disgorgement of all funds and property acquired through violation of the law, refund of any monies paid for memberships effective after the companies closed on October 1, 2012, consumer restitution, and civil penalties, among other relief.”

The Division of Consumer Affairs has identified 230 customers who are owed a total of $1,033,245.39.  Any purported victims who have not yet contacted the Division can call 800-242-5846 (toll-free within New Jersey) or 973-504-6200, or by visiting www.NJConsumerAffairs.gov.

Investigators Murat Botas and Oscar Mejia of the Division of Consumer Affairs’ Office of Consumer Protection conducted this investigation.  Deputy Attorney General Lorraine K. Rak, Chief of the Consumer Fraud Prosecution Section within the Division of Law, is representing the State, Hoffman said.

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