Did you know that there are now professional mooches timeshare tour guests who are actually teaching others how to game the system for profit? That some are so sophisticated they are able not only to get a total refund for all their fly-buy expenses but, by waiting 30 days or so, will sometimes apply for and receive a second pay-out for the same fly-buy?

Read all about it in this week’s Scoop du Jour: Is it Cat and Mouse or Mouse and Cat?

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This is not directly timeshare related, but it’s both interesting and important enough that I thought you might like to know about it. At the very least you’ll learn what a “copyright troll” is.

The headline says, “Courts quash copyright trolls; recognize IP address is not a person”.

The article starts out like this:

The U.S. Supreme Court may consider corporations to be people, but three federal judges in three states have ruled that an IP address is not a person, throwing into question charges against hundreds of thousands in the U.S. accused of copyright violations, child porn, hacking and other online crimes.

It goes further to say, “An IP address is not a specific person and may not even be a particular state.”

A Florida state judge issued a similar ruling two weeks ago, confirming that an IP address is not a person. Together the two rulings potentially invalidate hundreds of thousands of convictions and undermine settlements many complain were the result of bullying, not solid evidence and effective litigation.

AND:

After a decade of the most ridiculous, abusive, indiscriminately punitive attempt to punish random Internet users for the financial disappointments of the entertainment industry, it would be a relief to have courts slam the door on abuses almost universally panned, even by other copyright owners.

I really think you should read that article. It may be more important than you think.

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In Starwood Property Trust’s first quarter 2012 financial report the company mentioned a couple of senior loans they had purchased, as follows:

  • In March: Acquired for a discounted purchase price of $115.7 million, a $125.0 million participation in a senior loan secured by all the material assets of a worldwide operator of hotels, resorts and timeshare properties. The acquisition was financed with an $81.0 million increase in a financing facility previously provided by the seller.
  • In April: The Company acquired $75.6 million of CMBS at a discounted price of $70.7 million, where the obligors are certain special purpose entities that were formed to hold substantially all of the assets of a worldwide operator of hotels, resorts and timeshare properties. The acquisition was financed using a $49.3 million increase in a financing facility previously provided by the seller.

Who do you suppose that “worldwide operator” is?

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In memory of Donna Summer, who passed away May 17 at the age of 63 after a battle with lung cancer. According to various sources, the five-time Grammy winner was working on a new album at the time of her death.

The music of Donna Summer helped to define the sound of the 70’s disco scene, as her songs were DJ staples around the globe. She was the first artist to have three consecutive double albums reach number 1 on the US charts. She was once a backup singer for Three Dog Night who then propelled to stardom with the help of super producer Giorgio Moroder with hits such as Bad Girls and Dim All the Lights.

I choose to remember her with the big hit “She Works Hard for the Money”. RIP, Donna.

Send in your own playlist and if I can find a good version on YouTube I’ll post it for you! What would you like to hear?

Email: gatekeeper@insidethegate.com

Eastern USA: May 19, 2012

FLORIDA:

FORT LAUDERDALE: BFC Financial Corp., which owns a 54% economic interest in Boca Raton-based Bluegreen Corp. and is hoping to gain complete ownership, disclosed a loss in its first quarter financial report.

BFC, which also owns a 53% economic interest in BankAtlantic Bancorp, derives most of its financial results from its portion of the profits or losses of BankAtlantic and Bluegreen. In the first quarter, BFC lost $2.7 million on revenue of $104.8 million, compared with a $2.6 million loss on revenue of $98.8 million in the same quarter a year ago.

The proposed merger with Bluegreen, announced in November, calls for BFC to exchange eight newly issued shares for each share of Bluegreen. In order to consummate the deal, BFC must be listed on a major stock exchange.

BFC will hold a special shareholder meeting on June 19 at the Westin Fort Lauderdale, where shareholders will vote on the merger and a reverse stock split, which will be needed to boost BFC’s per-share price so it could qualify for a major exchange.

It’s a tricky deal though. At the Bluegreen shareholder meeting, scheduled to start a half-hour before the BFC meeting at the same location, two-thirds of its shareholders are needed to approve the merger. BFC, Levan and Abdo control 54 percent of its votes.

BUT, a class action lawsuit on behalf of Bluegreen shareholders that is seeking to block the deal is still pending in Palm Beach County Circuit Court. The plaintiffs allege that Bluegreen shareholders would not get adequate compensation and its directors did not do enough to shop the company to other potential buyers. The companies have filed a motion to dismiss the complaint.

So even if the merger is approved by the shareholders, will it actually go into effect if the lawsuit has not yet been decided?

Stay tuned.

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ALSO: Is the Berkley Group being sneaky with its marketing? They say no no no, but the Boston law firm of Shapiro Haber & Urmy says yes yes yes. The firm is, in fact, preparing a potential class-action lawsuit against Berkley.

What’s it all about? Well, it seems that a new phone campaign from an outfit called “Political Opinions of America” has been annoying recipients of its robo calls. Purporting to be conducting a political opinion poll, recipients are asked a few questions about political issues and then, if they are amenable to the suggestion, are transferred to a live operator from “corporate travel services” who is giving away free cruises thanks to an “anonymous donor”. The offer allows up to four free guests and requires a $60-per-person “port fee” to be secured by a credit card. The attorneys say Caribbean Cruise Line and the Berkley Group are behind the calls.

I’ll bet you can all guess how that whole presentation goes, can’t you.

Berkley Group attorneys say it’s all copacetic, that incentives are used in some of the polling company’s survey programs to increase response rates and they’re doing nothing illegal.

Critics say it’s just another way of getting around the Do-not-call laws.

And the FTC’s opinion? FTC officials said to remember that if the purpose of the call is to sell something, it is telemarketing and all DNC rules apply. Simply adding a few questions about unrelated topics such as politics or weather does not constitute a bona fide survey. At least two similar “sham survey” ruses have resulted in enforcement actions against companies for such illegal calls.

You can get all the gory details from someone who took the bait at this link (among others): That political survey robo-call you just got? It’s a scam

I report. You decide. :)

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MASSACHUSETTS:

BOSTON: Charles R. Caliri, of Woodstock, Vt., has been found in contempt of court in relation to a lawsuit filed against him by the Massachusetts AG’s Office in July 2010. He was ordered to pay $310,000 in civil penalties and also ordered to pay into the court $430,000 to be held until a final judgment is entered in the lawsuit.

The lawsuit alleges Caliri and others engaged in an unfair and deceptive vacation club sales scheme through his former businesses Only Way 2 Go Travel of Plymouth and Fantasia Travel Group of Methuen, through which they were selling memberships in Outrigger Vacation Club. (See the April 30 Eastern USA Timeshare News for details)

State Attorney General Martha Coakley’s staff has been unsuccessfully trying to recover the victims’ money ever since.

For more information about this court action see Vacation Club Business Owner Held in Contempt

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NEW JERSEY:

CAMDEN: Here’s an update on the Adam and Ashley Lacerda/VO Group case. If you remember, they and 14 others affiliated with the VO Group were arrested April 17 on a complaint that charged them with conspiracy to commit mail and wire fraud relating to an alleged $2.6 million timeshare mortgage fraud scheme.

On Monday, May 14, Ashley Lacerda, Francis Santore, and Brian Corley were arraigned in Camden federal court for conspiracy to commit mail and wire fraud, plus mail and wire fraud and conspiracy to commit money laundering. As you can see, the number of charges against them has grown since they were arrested.

Ashley Lacerda, co-owner/founder of the VO Group with her husband Adam, has been charged with one count of conspiracy to commit mail and wire fraud; two counts of mail fraud, six counts of wire fraud, and one count of conspiracy to commit money laundering.

The mail and wire fraud conspiracy charge, and mail and wire fraud charges each carry a maximum potential penalty of 20 years in prison and a $250,000 fine. The conspiracy to commit money laundering charge carries a maximum potential penalty of 10 years in prison and a $250,000 fine.

Adam Lacerda, Steven Cox, Alfred Giordano, and Joseph Diventi are scheduled to be arraigned on May 21. Adam Lacerda has been indicted on a total of 15 counts of conspiracy to commit mail and wire fraud, mail fraud, wire fraud and conspiracy to commit money laundering.

The remaining nine defendants are still awaiting their fate under the original charge in the complaint.

You can get much more information, including a list of who has been charged with what, at Three From VO Group Arraigned on Timeshare Mortgage Fraud Charges.




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INDIANA:

INDIANAPOLIS: Kara Kenney, a highly respected investigate journalist who was once named Indiana’s journalist of the year, has taken her investigative prowess to a vacation club sales room for an undercover exposé. In this case she secretly taped a sales presentation by SmarTravel (aka Sundance Vacations/Sunshine Vacations), which sells memberships for Travel Advantage Network (TAN).

Her Call 6 report, both in video format and a transcript, appeared on ABC-affiliate RTV6, “The INDY Channel”, Thursday May 17. It was an interesting and sometimes unintentionally comical report— such as when SmarTravel CEO David Wise said, “Our objective is not to sell a vacation, the objective is not how to figure out how to get a bigger sale. The objective is every human being leaves there feeling happy.”

He also said he would be surprised if any consumer felt misled or pressured by his salespeople.

He said it with a straight face, too. :)

While RTV6 did not find SmarTravel or similar companies breaking any laws with their sales tactics, it should be noted that Indiana’s AG is investigating a complaint against the company along with another complaint against a different travel company.

The title of the article/video is High-Pressure Tactics Often Accompany Prize Entries Read the story, click on the video, sit through the short advertisement then settle in for the exposé (about 7 minutes long). To view the video in FULL screen, hit the full screen button (it’s obscure) at the lower right hand corner of the video screen.

It speaks for itself.

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IOWA:

DES MOINES: On April 4th, the Better Business Bureau warned consumers about the risks of getting involved with a timeshare escrow company called Wade Capital Management. Now the BBB is investigating the legitimacy of another timeshare company by the name North South Title. Says the BBB:

Claiming to be from Davenport, Iowa it is hard to ignore the uncanny similarities to Wade Capital Management as both company’s “sale agreements” were identical in language and layout. Whether it is all part of the same ring or a copycat scam, the bottom line is that consumers who become involved end up losing thousands of dollars and are still stuck with a timeshare that they thought was sold.

You can get all the details at Phony Timeshare Services Strike Once More As usual in these cases, let the buyer beware!

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BALI:


SEMINYAK:
Thailand’s luxury Anantara Vacation Club has announced a new addition to their Club Resort portfolio on the island of Bali. Anantara Vacation Club Bali, Seminyak has a variety of luxury villas to choose from: 12 one-bedroom villas, each with indoor and external living space totaling 180 square metres; four two-bedroom villas offering 220 square metres; and two three-bedroom Royal Villas, offering extensive living space totaling 260 square metres over two storeys and a balcony. Each villa, with Balinese-inspired design, offers a private pool and sun deck, bedrooms with king size beds and en-suite bathrooms with an outdoor rainfall shower. In addition, each villa has a separate living area with a fully-equipped kitchen.

And of course the resort offers all the other fancy amenities one would expect at a high end property, too. But don’t pack your bags immediately. Over the coming months the resort will undergo a significant refurbishment, before being officially rebranded Anantara Vacation Club Bali, Seminyak later in the year.

Anantara’s Club Resort Collection currently comprises luxury private villas on the islands of Koh Samui and Phuket in Thailand and Bali in Indonesia, plus a selection of suites in Queenstown, New Zealand. Over the next five years, the Club will include up to 10 more resorts and expand its marketing reach to Indonesia, China and the Middle East. Three sales preview centres can be found in Thailand, in Bangkok, Koh Samui and Phuket.

Launched in December 2010, I guess you could say they are getting BIGGER, and in a hurry, too!

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SOUTH AFRICA:


DURBANVILLE:
Research from Grant Thornton on behalf of the Vacation Ownership Association of Southern Africa (VOASA) has revealed some encouraging news for the shared ownership industry in South Africa.

The results of the study are based on surveys conducted on 99 timeshare resorts and 12,410 existing timeshare owners between November 2010 and March 2012

Covering timeshare, fractional and private residence clubs, the survey showed:

  • Average annual occupancy rate of 80.5% in 2010, down just slightly from 2009 when occupancies were 81.4%.
  • It takes 3.8 years on average to sell out a resort and 40% of resorts sell out within a year
  • At least 30 new resorts were either being developed or completed in the last ten years at an average of five resort developments per developer.
  • The average total trip spend for timeshare holidays in 2010 was R7,358, compared to the much lower R1,650 on average for domestic holiday tourists in the same period
  • There are currently at least 400,480 members of clubs, using points systems, and 341,295 owners of vacation ownership products at resorts.
  • The vacation ownership industry permanently employs about 26,000 people permanently, of which 72% are black and 70% are female.

Alex Bosch, executive director at VOASA, said that new resort development potential existed in the Western Cape and North Coast of KwaZulu-Natal, as well as within urban/city areas.

“While we have seen a source of growth from fractional ownership products in recent times, we expect this to remain a niche market.

“We are however seeing a trend towards mixed use developments which incorporate hotels and vacation ownership,” said Bosch.

It’s all GOOD!

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Join us for a pithy morning meeting timeshare sales tip of the week, originally published in InsideTheGate.com, to help you to greater success in selling timeshare. Brief and to the point, these sales training tips are designed to get you thinking, to expand your knowledge, to help you to become all that you can be in the timeshare sales arena.

Whether you’re an industry veteran or a green pea, it never hurts to brush up on your skills! Today’s tip:

R & D:

REMEMBER: Before you razzle and dazzle a sales guest keep in mind, from the ‘get-go’, at some point during the sales process you are going to ask them to decide whether or not they want to invest (e.g.) $35,000 (USD) in a vacation lifestyle.

For most prospects (and reps, too) that is a good chunk of change and sales guests will reach their decision, in part, on how the rep is perceived, such as being the happy go lucky sort, a Slick-Willie type, someone who is simply going through the motions, etc.

Being on the front lines is an awesome responsibility and unlike ‘heat merchants’ who will say anything to make a sale, the reps who are knowledgeable, professional, courteous, upbeat and who control and adjust the selling and closing process to meet their prospects’ needs will always be in the top 10% of the sales force and laugh all the way to the bank!



Copyright InsideTheGate.com All rights reserved

QUOTABLE QUOTES: “A good traveler has no fixed plans and is not intent on arriving.” – Lao Tzu



ARDA is scheduled to address Home Owners Association (HOA) and resort management challenges at its upcoming ARDA Northeast meeting in Providence, Rhode Island on June 4 and 5, 2012. Resort operators including HOA board members, managers, and developers will be attending to network and share industry information.

According to ARDA New England chairman and president of InnSeason Resorts Dennis Ducharme, resorts are facing greater challenges than ever before. “As many of our timeshare resorts have aged, so have their original owners,” says Ducharme. “Many of them are facing changes in their financial condition or ability to travel and are no longer interested in retaining their week. One of the topics we’re addressing at the meeting will be a case study of a resort that is successfully dealing with this situation.”

I’m glad to see this very serious issue being addressed and hope that the case study mentioned does some good. Mostly, I hope that word gets out to the HOAs that really need the help!



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RCI has affiliated a new resort in Trinidad and Tobago. Footprints Eco Resort & Spa’s Culloden Bay Vacation Club offers a unique blend of tropical forest and coastal environments for the enjoyment of a whole new segment of the travel market. It comprises a mix of studios, one-bedroom units and two-bedroom villas scattered across the 62-acre nature preserve. The resort also offers tropical butterfly and bird gardens and nature trails, and access to nearby Culloden Reef for world-class snorkeling and kayaking. Saltwater pools, a solar-heated Jacuzzi and an organic farm and garden round out a truly one-of-a-kind vacation experience.

cheerleaderRCI: getting BIGGER!




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ARDA has issued a consumer advisory concerning a new timeshare scam targeting timeshare owners. The companies in question are Vacation Services International (VSI) and HP Consultants. They are allegedly calling people up and inviting them to an “industry” update, often held at a Perkins Restaurant, and at least in some instances are claiming to represent ARDA. Then, of course, the reps try to sell various services/products to their marks. You can get all the details at American Resort Development Association Consumer Advisory on Resale Companies

I wonder if that VSI is the same one that is now called GPS Resort Serivces (formerly VIP Travel, Elite Escapes and Tripps, among others)? There are some indications that VSI may have closed its doors…

Once again, buyer beware.

Are RCI and I.I. Obsolete? Well, Scoop has his opinion and I’m sure you have yours. Read the column, give it some thought, share your insights…




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In honor of last week’s “super moon”, and just because it’s such a timeless piece, here is Monty Python’s “Galaxy Song” (also known as the “Universe Song”). It was written by Eric Idle and originally appeared in the 1983 film Monty Python’s The Meaning of Life. And that’s all you really need to know. Just sit back and enjoy.

Send in your own playlist and if I can find a good version on YouTube I’ll post it for you! What would you like to hear?

Email: gatekeeper@insidethegate.com

Eastern USA: May 12, 2012

FLORIDA:

BOCA RATON: Bluegreen has released its first quarter financial report and they’ve made more money on timeshare sales than in the same quarter last year even though the average sales price has declined.

That’s interesting, don’t you think?

Bluegreen posted net income of $5.65 million on revenue of $97.2 million, up from net income of $2.53 million on revenue of $89.8 million in the same period a year ago.

Its sales of interests in timeshare units grew 28 percent to $74.7 million. Sales of VOIs made on behalf of its fee-for-services clients, which are included in those figures, rose 17% to $19.7 million from $16.9 million in Q1 2011.

However, the average sales price per timeshare transaction declined to $11,549 in the first quarter from $12,106 a year ago.

Bluegreen’s fee-for-services business grew by 13 percent.

As of March 31, 2012, Bluegreen managed 45 timeshare resort properties and hotels compared to 42 as of March 31, 2011.

Doin’ good!

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ORLANDO: All you sales reps working for Wyndham VO better pay attention to this, because it’s entirely possible that you’re in line to get screwed.

According to an article in the Orlando Sentinel, analyst firm UBS AG hosted Wyndham Vacation Ownership management at a recent lodging conference. In the course of the conversation, Wyndham revealed the company wants to limit its growth to high single-digit percentages (it grew 20% in the first quarter), with the goal of spending $125 million to $150 million on inventory, whether it be new development or turnkey projects.

But here’s the money quote (emphasis provided by me):

“If sales get too high, there may be opportunity to bring commissions down a little, reduce spend on sales and marketing, to not have to put more dollars into development of new inventory and not have to lower its average buyer FICO score,” UBS wrote.

Bring commissions down a litte? Because you did too good a job??? I didn’t notice any mention of bringing management’s salaries and bonuses down a little.

Just another example of sticking it to the little guy? Freakin’ bean counters… annoyed

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ALSO IN ORLANDO: Orange Lake Resorts has officially closed on a transaction with Cooper Industries, Inc., to expand its destinations to Tropical Breeze Resort in Panama City Beach, Fla., and Galveston on the Gulf Resort in Galveston, Texas. The intent for both resorts is to become a part of the Holiday Inn Club Vacations brand in late 2012.

The two resort locations include:

  • Galveston on the Gulf Resort, located on the barrier island of Galveston on the Gulf of Mexico, is a 78-unit resort featuring one- and two-bedroom luxury villas with lock-off features, all with Gulf of Mexico views from a private balcony or patio. Amenities include an outdoor, heated infinity-edge swimming pool, hot tub, kiddie swim area, fitness center and complimentary Wi-Fi Internet service. The resort offers direct beach access.
  • Tropical Breeze Resort, located on Panama City Beach, is a 37-unit resort featuring one- and two-bedroom luxury villas, all with gulf views from a private balcony or patio. Amenities include an outdoor, heated swimming pool, hot tub, kiddie swim area, fitness center and complimentary Wi-Fi Internet service. The resort offers direct beach access.

Both resorts were previously Escapes! resorts (previously called CooperShare Resorts), which of course means that Escapes! is getting smaller while Holiday Inn Club Vacations is getting BIGGER.

Will Escapes! continue to operate, or will they sell of all their resorts? Just wondering.

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ST. PETERSBURG: The FTC has permanently banned Vacation Property Sellers Inc., Vacation Property Services Inc., Higher Level Marketing Inc., Frank M. Perry, Jr., David S. Taylor, and Albert M. Wilson from the timeshare resale and rental business, and from all telemarketing. Whoopee!!

The settlement order against Perry, Vacation Property Sellers, and Higher Level Marketing prohibits them from misrepresenting material facts about any goods or services, and selling or otherwise benefitting from consumers’ personal information. The order imposes a $23.5 million judgment that was suspended when Perry and the companies surrendered almost all of their assets. The settlement order against Taylor contains the same conduct prohibitions and imposes a $3.7 million judgment, which was suspended based on his inability to pay. The full judgments will become due immediately if the defendants are found to have misrepresented their financial condition.

Litigation continues against the remaining defendants, Vacation Property Services Inc. and Albert M. Wilson.

What do you think the odds are that any of those folks will find a legitimate way to make a living from here on out?

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Western USA: May 12, 2012

CALIFORNIA:

SACRAMENTO: Heads up! California has a new law involving earned commissions which goes into effect on January 1, 2013. It says that for any employee whose wages involve commissions, all commission agreements with employees have to be in writing, specifically setting forth the method by which commissions are computed and paid.

The employer has to provide a copy of the agreement to the employee and retain a “receipt” signed by the employee, indicating that the employee was provided a copy of the agreement.

If a contract expires, and the employer and employee continue to operate under the terms of the agreement, the terms “are presumed to remain in full force and effect until the contract is superseded” or the employment is terminated by either the employer or employee.

Note also that according to one California court wages are considered “commission” if (1) the employees are involved principally in selling a product or service, not making a product or rendering the service; and (2) the amount of their compensation is a percent of the price of the product or service.

That is all. You may resume your activities.

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COLORADO:

TELLURIDE: There’s a new private residence club in town and its name is Urban River Club. Located just steps away from the town’s Gondola, it offers deeded fractional interests in 24 fully-appointed 2- and 3-bedroom residences, with prices ranging from $51,250 to $341,500. Ownership also includes membership privileges at Telluride Ski & Golf Club – one of the most desirable private membership clubs in the Rocky Mountains. And oh yeah, it’s pet friendly, too.

But what’s the BIG incentive to purchase at the River Club? They are guaranteeing a three-year buy-back if you aren’t happy. That’s right. Buyers have three years from the date of contract to sell it back for the price paid. Sales are apparently being handled by broker associate Mitzi Mallard.

Not a bad deal, assuming they keep their promise.

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AUSTRALIA:


QUEENSLAND:
“A complete ratbag.” ”Megalomaniac.” ”Bully.” Oh! you say, Donald Trump is in the news again? Nah. Not this time. Those are some of the names timeshare owners at the Coolum Golf and Spa resort (formerly the Hyatt Regency Coolum) have been throwing at mining billionaire Clive Palmer (aka “the billionaire blowhard”), who bought the resort last September and promptly took steps to freeze them out.

It’s a sleazy story. Made me want to wash my eyes after reading it in The Sydney Morning Herald. In a nutshell, without informing the timeshare owners Palmer withdrew the timeshare scheme, an Australian Securities and Investments Commission deed that exempted the scheme from the Corporations Act. Says The Morning Herald (click on the link above and scroll about 2/3 of the way down):

His actions meant the scheme was non-compliant with the law, and Palmer used this as justification to strip owners of many of their entitlements: discount green fees, free tennis court hire and, most importantly, the ability to book multiple units for holidays. …

For many owners, Palmer’s coup de grace was a takeover offer to the timeshare owners of $55,013 per quarter share of a standard villa, substantially less than the $90,000 that many timeshare owners had paid and less even than what Palmer had paid for a handful of villas only months before.

He then tried to say the timeshare owners brought the problems upon themselves “by the failure of the directors to comply with the managed investment scheme legislation”. Say WHAT?

The Sydney Morning Herald has more about this at Regulator rebukes Palmer in time-share row.

Nasty bit of work, that. But that’s not all. According to a story in The Courier-Mail, back in February Palmer attempted to sack Hyatt, which had managed the property for 24 years, by terminating its management agreement. Hyatt went to court, citing breach of contract, and in March won an emergency application for an interim injunction, stopping the termination from going ahead.

But that’s not all, either. On March 2, lawyers for Palmer said the business refused to spend any more money on the resort while Hyatt continued to manage the property. Palmer had already voluntarily placed the resort in the hands of administrators. At the hearing, the court was told an operating account funded by Palmer’s companies and used by the Hyatt Group to run the resort was likely to run out of money within a week.

On March 29 a confidential resolution was reached between the two companies, and Hyatt bowed out. Somehow that doesn’t make me feel any more confident about the future of the resort.

This is definitely a “stay tuned” kind of story. Who will prevail in this ongoing soap opera of billionaire megalomaniac vs many livid timeshare owners? Has Donald Trump been out-trumped in ratbag blowhard ruthlessness by an Australian? :D

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MEXICO:


LOS CABOS:
So who’s most at fault here, Raintree Resorts or Starwood or the Great Recession?

Here’s the deal. Beginning as early as 2002 and continuing into 2007, nearly 300 individuals / families from across the United States and Canada paid over $25 million in pre-construction costs to Raintree Resorts for the privilege of owning a fractional interest in villas at the Grand Regina in Los Cabos. Problem: The villas were never built.

The buyers purchased their deeded fractional ownership interests from CR Resorts, a subsidiary of Raintree Resorts. And then they waited as various construction delays were announced. And waited. And waited.

Then, seemingly out of nowhere, in late 2006, after a series of long restructuring negotiations initiated in 2004, owners were notified that CR Resorts and Raintree were selling the Villas land and development rights to Starwood. As an element of the restructuring, Starwood agreed to develop the 64 Grand Regina Villas units as part of its Starwood Vacation Ownership Club (SVO) program. The conveyance of the Villas land included the obligation for Starwood to provide usage rights to Villas owners at such time as the Villas would be built by Starwood and further provided that the Villas owners could join, at their option, the SVO program.

None of that worked out, either. Instead, as the financial meltdown of the economy unfolded, Starwood announced its intention not to develop the Villas at all. On February 9, 2009, Villas owners received individual “Refund Proposals” offering two options: (A) a cash refund of 35% of the price paid, distributed in installments over four years commencing on October 1, 2009, with the balance in Raintree Vacation Club (RVC) “points,” or (B) the ability to trade Villas ownership interest for an RVC membership at a 40% discount to the significantly higher current price list.

That was a no go, so Starwood sweetened the pot a little bit. But that was a no go with most of the buyers, too.

The situation deteriorated further when other information came to light indicating that marketing and sales of Villa interests took place for many years during which Raintree and Starwood knew the project was financially distressed. None of this information was ever disclosed to potential buyers.

And to make it worse, proceeds of pre-construction real estate sales did not go into an escrow account to fund future construction. On a March 26, 2009 phone call, Raintree’s CEO Doug Bech admitted to a group of Villa owners that, in addition to paying commissions to Villa sales staff, a large portion of the proceeds from Villa sales went to pay interest on their debt and to pay down $20mm in principal on Notes held by White Plains, NY-based Starwood and Los Angeles, CA-based Trust Company of the West (TCW).

After their initial efforts to resolve matters with Raintree and Starwood failed, a group of over 150 owners retained the legal representation of Chicago attorney David A. Novoselsky of the Novoselsky Law Offices. Novoselsky’s attempts to elicit reasonable offers from Raintree and Starwood also failed. He then filed a mass tort claim on behalf of his clients on August 25, 2009 in the Circuit Court of Cook County, Illinois. In the case CHARLES ADAMS, et al., v. RAINTREE VACATION EXCHANGE, LLC, et al, the owners group sought full and immediate reimbursement of their full purchase price plus interest, legal fees, and $75 million in punitive damages.

And how did that go for them? In September 2011 the Circuit Court granted Raintree and Starwood’s motion to dismiss under Rule 12(b)(3) for improper venue because the Plaintiffs’ contracts for the condominium interests contain a forum selection clause that requires all disputes arising from the sale of the interests to be litigated in Mexico. Read the court’s decision here, it’s pretty interesting stuff.

Keep in mind that the court’s decision had nothing to do with the merits of the case filed by the plaintiffs; it was a narrow ruling dealing only with the issue of venue.

Does that mean it’s all over except for the shouting? Probably.

But the whole thing does leave kind of a bad taste in the mouth, doesn’t it?

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NATIONWIDE: Mexico has long had its own kind of “unemployment insurance”, which essentially boils down to when you fire an employee without just cause you have to provide him/her three months salary plus 20 days pay per year of service.

Firing employees without incurring financial compensation is possible only when an employee grossly violates the work relationship. And you have to provide written notification within 30 days of a violation stating reasons and effective date of termination in order to legally fire an employee.

Additionally, dismissed employees with two or more years of service have the right to sue for reinstatement. If the employee wins the suit he will regain his job, receive full back pay, and may even receive punitive damages.

Are you still following me? OK, then. Way back in olden times when I worked in Mexico that law didn’t seem to apply to timeshare sales reps— at least not to gringos. Or if it did no one knew about it (or cared). You could get fired in an instant for any or no reason at all, and frankly (except for ego issues) it wasn’t that big a deal. You shrugged, fought for your final paycheck and headed over to greener pastures. Next!

Apparently things have changed. According to a reliable source there have been lawsuits filed against Mexican developers by timeshare reps over “illegal” firings (and for other reasons?). In response, a group of about 30 timeshare companies, called the “Mexican Timeshare Coalition”, now keeps track of people who sue Mexican timeshare companies and makes it difficult or impossible for that person to work in the industry in Mexico. Can you spell b.l.a.c.k.b.a.l.l.e.d.?

In addition, I hear that when a Mexican timeshare company wants to get rid of you nowadays, instead of firing you they make your life on the line so miserable that you’ll quit instead. Much easier, and cheaper, all around for the company.

That last part also applies to many companies in the USA, of course. It’s pretty easy for a PD to freeze you out if he/she wants to. Love line; playing with the wheel; interminable room fill… Been there done that, anyone?

I guess the lesson here is that if you’re thinking about working in Mexico, don’t be thinking about suing the developer?

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UNITED KINGDOM:

WALES: Remember the new development proposed for a £50m resort in tiny Carmarthenshire village near Pantglas Hall in West Wales? The one planned by Maxhard Ltd, the Chinese company that says its development would bring 20,000 Chinese tourists a year to the resort?

The plan, which includes developing a large tract of land surrounding the 25 current timeshare cottages on the 22-acre estate, comprises a five-story 92-bedroom luxury hotel that would incorporate an existing grade II tower – the only structure left standing from the original 1830s hall.

It would also include 80 new, very modern timeshare houses within the grounds.

Well, that plan is now on hold following a scathing report from the Design Commission for Wales that called it “bland and disparate” with “rootless architectural language.” And that was the kinder part of the report.

The local planning authority was expected to discuss the plans in March, but now both the authority and Maxhard Ltd have said there is no fixed date for a decision to be made.

Will Maxhard Ltd go forward? Will they design a better project, one more in line with the history, beauty and heritage of the area? Will a deal be reached? We wait with bated breath.

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