YTB Lawsuit Questions Company Future

Everyone loves publicity for their business. It can really make all the difference in the world almost overnight, in a lot of cases. But what happens when this publicity ends up being bad publicity? Well, this can also have an effect on a companies business "overnight", but in a bad way.

This may be the case for the online travel company YTB (Your Travel Business). In August 2008, YTB was named in a lawsuit by the state of California for running an illegal pyramid scheme, and engaging in a deceptive business. The origional intent made by Attorney General Edmund Brown Jr. was to shut down the company's unlawful operation before more people were hurt by this scam.

What kind of effect has this bad publicity had on their company? I believe the YTB third quarter results, reported in early December 2008 say a lot. Their net income fell considerably! 2.1 million in third quarter profits a year ago, to only $287,999 for the third quarter of 2008. YTB is showing a loss of $3.4 million for the year, and a 13% drop in agents for 2008.

Although a company is innocent until proven guilty, this is a good example of what negative press can have on a business. YTB and the state of California will have their day in court later this year. A trial has been set for September 21, 2009, where the state is seeking $10 million in restitution for the California residents who bought into the business, and another $15 million in cival penalties.

Since YTB was first named in this lawsuit, they have reported some changes in their business plan and stratagies. But will it be a case of "too little too late"? We will all be watching the outcome of this case. One has to wonder why it had to come to this in the first place?