The Federal Court has determined that a business offering discounted travel and accommodation deals, along with opportunities for customers to make money from offering those same deals to others, was operating as a Ponzi scheme.
The ruling comes after another Ponzi scheme operator, James Lovell, was sentenced to jail earlier this year after disguising his operating as a hedge fund.
The decision against TVI Express System was prompted by an investigation by the Australian Competition and Consumer Commission.
The Federal Court found that TVI offered discounts to members, who had to sign up through a website and complete an application form, along with a fee of $US250.
Each person was given a unique user ID and then told they would receive a travel certificate that would entitle them to free accommodation for a week, a free flight, a virtual back office, an online travel portal, a website and other business tools.
But as Justice Nicholas discovered, the company’s founders Lualhati Jutsen, Tina Brownlee and David Scanlon were operating a pyramid scheme. They transferred $296,985 out of the country between February and May 2010, made up of the money collected from members.
“It is beyond question that new participants in the TVI Express System are lead to believe that they will receive payments for the introduction of further new participants,” Nicholas wrote in his judgement.
“Indeed, the only way a participant can earn any income in the TVI Express System is through the introduction of new members to the scheme.”
Members were encouraged to recruit new members so they could move up ranks and join the “Express Board”, as moving up each rank could earn the member more credit in a virtual wallet.
But as the court found, there were plenty of holes. One of the benefits promised to members was that they could access a “travel portal” through which they could book holiday services, but this turned out to be just a search engine.
“The interface of the travel portal featured a number of icons for each of the different types of service such as air, car, cruises, hotels and “last minute deals”.”
“However, the deals that were available through the travel portal were in substance the same as those which were available to the general public through the free website operated by the well-known travel business, Travelocity.”
Nicholas wrote TVI essentially used Travelocity’s booking tools to create its own tools. “I am satisfied there was no added value to be obtained through the use of the travel portal when compared to what was freely available on the Travelocity website,” he wrote.
The judgement also found there was no evidence to suggest TVI members had ever received their benefits, and that evidence from the Australian Competition and Consumer Commission suggested they couldn’t do so.
“There was no facility available on the TVI Express website to allow members to redeem their free companion ticket. And the ACCC investigators’ attempts to take advantage of the promised free companion flight by making inquiries of what is referred to on the TVI Express website as “support” led nowhere.”
The ACCC wrote in a statement that scheme was promoted through websites including tviteamoz.com, and a dedicated Facebook page.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
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