NEWARK, NJ (August 15, 2013) — Acting Attorney General John J. Hoffman and the New Jersey Division of Consumer Affairs have filed suit against two former Bloomfield-based travel companies and the brothers who owned and operated them. The defendants allegedly accepted payments totaling $1,033,245.39 from 230 customers, then failed to deliver the overseas travel arrangements that the customers had paid for in advance.
Some customers found themselves literally stranded in Europe when Crown Travel Services Inc., also known as Club ABC Tours, and affiliated company ABC Destinations LLC, abruptly ceased operations on October 1, 2012. It was only after the customers arrived at hotels in Rome that they learned the defendants had failed to pay for the lodging and other accommodations for which they had pre-paid hundreds or thousands of dollars. The customers then found that the travel insurance they had paid for would not cover the losses. As a result, those stranded customers had to choose whether to pay out-of-pocket for hotels – or book immediate flights back home.
“The two brothers who owned and operated these travel companies allegedly kept their business afloat by using money from new customers, to pay for trips booked by previous customers. When this scheme inevitably fell apart, hundreds of customers lost more than $1 million,” Acting Attorney General Hoffman said. “These victims deserve protection. The State will use its full authority in an effort to recover the money they lost.”
The brothers, Robert S. Paris, 59, of Greenwich, Connecticut, and Thomas H. Paris, 61, of New York City, are the sole owners and operators of both travel companies. Club ABC Tours was 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.
The State’s lawsuit, filed in Essex County Superior Court by the Attorney General’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.
The State alleges that, for years, the Paris brothers allegedly 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. 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. The State further alleges that, 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. As the companies grew further in debt, this business model inevitably failed.
The State alleges that the defendants committed multiple violations of New Jersey’s Consumer Fraud Act and Advertising Regulations. The State asks the Court 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. Under the Consumer Fraud Act, a first violation is subject to a civil penalty of up to $10,000; subsequent violations are subject to civil penalties of up to $20,000. Each deceptive practice or advertisement is considered a separate violation of the Consumer Fraud Act.
“The victims in this case are consumers who managed to save up enough money for the vacations of their dreams, often as a way to celebrate anniversaries or family reunions,” Eric T. Kanefsky, Director of the New Jersey Division of Consumer Affairs, said. “Meanwhile, the defendants allegedly 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. They left some customers literally stranded overseas, without the amenities for which they had paid thousands of dollars. This is unconscionable, and we are seeking to hold them accountable.”
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.
An extensive investigation by the Division of Consumer Affairs revealed that both companies were insolvent, with debts far in excess of their assets and increasing each year, for a significant amount of time before they closed. Based upon the information received, Club ABC Tours was insolvent at least as early as December 2008, and ABC Destinations was insolvent at least as early as June 2012.
The Paris brothers, meanwhile, allegedly continued to pay themselves substantial salaries from Club ABC Tours and substantial monetary disbursements from ABC Destinations. In 2011 alone, Club ABC Tours paid Robert Paris $275,000, and paid Thomas Paris $225,000. In that same year, both brothers received a total distribution of $335,000 from ABC Destinations, LLC. In addition, Club ABC Tours purchased a Porsche and an Audi for Robert Paris in 2011 and 2012. The State thus alleges that, at least in 2011, any profit realized by Club ABC Tours and ABC Destinations was completely offset by the compensation paid to Robert and Thomas Paris.
The State’s investigation revealed that the financial situation at Club ABC Tours and ABC Destinations was not sustainable.
On September 25, 2012, Club ABC Tours defaulted on its obligations to the Airline Reporting Corporation (ARC), through which the defendants paid for airfare purchased as part of a travel package. On October 1, 2012, the defendants forwarded a brief message to consumers stating that Club ABC Tours had ceased operations. The message made no mention about the possibility of obtaining refunds.
To date, the defendants have not provided refunds to any consumers who paid by check.
The Division of Consumer Affairs has identified 230 customers who are owed a total of $1,033,245.39. Any consumers who have not yet contacted the Division are urged to do so by calling 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 in this action.