Sunday, February 22, 2015

Attorney General Launches Outreach to Manhattan Club Owners

A new chapter --- among many --- has opened in the New York Attorney General's investigation of possible fraud and securities violations at The Manhattan Club. This week, lawyers for New York Attorney General Eric Schneiderman launched a direct outreach campaign to club owners who previously filed complaints about the Manhattan Club's sales-and-reservations practices.

The outreach, confirmed by owners and representatives of the AG's office, follows many months of deliberate silence during which the AG continued its yearlong investigation without meeting or communicating with owners who had bitterly complained about their inability to secure timely reservations at the club. Over the past six months, in fact, many owners expressed outrage on RedWeek.com and other internet forums about the AG's seeming disinterest in keeping owners apprised of the inquiry. During this period, FYI, the AG also declined a direct offer from RedWeek to post occasional announcements about the case on RedWeek as a service to the many Manhattan Club owners who follow the case on RedWeek forums.

Now, however, despite the cold snap back East, the AG has warmed up to the idea of getting detailed testimonials from owners about their purchasing experiences with the club. The lead contact --- the gatekeeper --- for owner complaints and related communications is Brenda Heredia of the Real Estate Finance Bureau, based in Manhattan. She can be reached at 212-416-8956; her fax is 212-416-8179. Her e-mail is: Brenda.Heredia@ag.ny.gov.

RedWeek talked to several owners this week who have already been contacted by the AG. They told similar stories. They filed written complaints with the AG's office after learning that the AG had obtained a court order July 24th that temporarily (and indefinitely) shut down timeshare sales, stopped foreclosures, and froze spending at the club. The owners heard nothing for months, then recently received written confirmation from the AG that their complaints had in fact been received. Then they were contacted by an assistant attorney general (one of many) who interviewed them about the details of their ownership: the who, what, when, and where of what they bought and, most importantly, what they were told compared to what was in the public offering documents they received after purchasing their timeshares.

One owner, Greg Hyer of Florida, purchased a Metro Suite timeshare at the Manhattan Club in 2007 while living in Connecticut. At the time of purchase, he said he was told that his maintenance fees would be $990. Within a few months, however, he learned that the actual fee was $1,600, and that it was due and payable in April, eight months prior to the beginning of his first usage year. When he complained, he said the club told him that the sales people had given him "bad information." Like many other owners, Hyer also said he had a difficult time getting reservations and, as a result, started converting his ownership to RCI points so he could stay at other resorts. His complaints to the club, he said, went nowhere.

"I'm encouraged by my contact with the AG," Hyer said, "even though they told us they have no idea how this will all fall out. I told them I'd like to see owners who want to get out of their timeshare, get their money back."

Hyer's sentiments seem to be shared by the army of owners who have posted notes on RedWeek's forums and other sites. All talk of restitution, however, is extremely premature, because the investigation is nowhere near a conclusion, according to the AG's office and outside attorneys who are familiar with securities cases.

Manhattan Club Must Disclose Assets, Bank Statements, Electronic Files

This month, for example, the AG went back to court to compel the club to disclose more documents about sales and reservation policies, training documents, bank statements, tax returns and contracts with other travel-and-vacation companies. It also requested electronic files dating back several years. The first group of requested documents was turned over Feb. 13. The club has agreed to turn over a second group of documents to the AG by Feb. 27. These procedural steps will be followed up by a status conference March 6 with New York Court Referee Steven E. Liebman. That conference will be private, not public, the AG's office says.

According to attorneys interviewed by RedWeek, the electronic files may turn out to be more valuable than bank statements and check stubs, for the following reason: digital documents provide complete detail about the date and time when documents were originated, edited, revised and/or deleted. So even if a paper trail no longer exists for some documents, the original digital trail still lives, buried in the electronic files --- unless the hard disk drives are erased or destroyed.

In the midst of these discovery moves, other aspects of the case appear to be changing as well. The Feb. 11 court filing, for example, shows that the Manhattan Club recently switched attorneys. Developer Ian Bruce Eichner and his affiliate companies are now represented by the high-profile firm of Winston & Strawn LLP. The club's new lead attorney is Kelly A. Librera, a partner in the firm's litigation group who, according to her online biography, "advises clients in white collar criminal matters...complex commercial litigation, fraud and securities," among other specialty practice areas. The club's former attorney, Patrick Smith of DLA Piper US LLP, told RedWeek this week that he would not talk about the case without authorization from his client. RedWeek also tried to reach Librera but, according to her office, she was unavailable.

It is common for people to change attorneys. In high profile cases, substitutions are even more common. But in this case, the substitution follows a decision by the AG, in a Dec. 31, 2014 letter, denying the club's request to withdraw money "for the payment of legal fees and related costs." The wording of the letter makes it extremely clear that the AG is unhappy with the level of cooperation it has received from the Manhattan Club.

Here is a Key Excerpt of the AG's Dec. 31 Letter to the Manhattan Club

"As you know, over the past several months you [the Manhattan Club's attorneys] have repeatedly asked to modify the [July 24th] order, citing the need to pay employees' salaries, immediate construction costs, and trade payables, resulting in seven prior stipulations. As you also know, we consistently received misinformation or incomplete information in connection with the prior stipulations. Moreover, despite repeated requests, we have not received information sufficient to identify the amount of funds in the accounts [of the Manhattan Club companies], or all of their current sources of revenue, income or other receivables. We cannot agree to further stipulations until we attain an understanding of these issues."

When asked to provide additional information about these issues, the AG's office offered a succinct NO.

AG Forced Club to Put $525,000 in Escrow Account to Safeguard Assets

In December, the AG's office compelled the Manhattan Club (with the backing of Court Referee Liebman) to deposit $525,000 into an escrow account to safeguard the club's assets. In a stipulated agreement approved by both sides, the club also agreed to cancel "amnesty agreements" with 37 owners who had tried to turn in their units to cancel out future obligations and fees. Now, with the club barred from participating in any buy, sell or exchange agreements on timeshares, those owners get their usage rights back (along with the bills to pay current maintenance fees).

Since the Dec. 10 court filing, the AG has had many back-and-forth exchanges with the club to identify additional assets, including rental income, new accounts, investments and debts. In political circles, this pursuit is known as "following the money." The club's next deadline for filing additional documentation to the AG is Feb. 27.

Club's Contracts with Bluegreen, Disney and RCI Under Scrutiny

In addition to chasing the paper and electronic paper trails of the Manhattan Club's finances and programs, the AG's lawyers are seeking full disclosure of the club's contracts with Bluegreen Vacation Club, Disney Vacation Club, and exchange company RCI. The limited amount of documents filed to date show that Bluegreen had an "ownership interest" in several, if not many, units at the club. The court files also reveal that Disney had two contracts with the Manhattan Club. The first was signed Feb. 1, 2013 while the second is dated Feb. 4, 2014 --- during a time when the club was actively being investigated by the Attorney General's investigators. The club also had an extensive ongoing relationship with RCI, its preferred exchange company. According to an Oct. 31 e-mail from one of the Manhattan Club's former attorneys, Jeffrey Rotenberg, 5,917 Manhattan Club owners participated in RCI week exchange, 2,311 enrolled in RCI's points program, and 4,943 owners had no RCI membership.

The AG is seeking information about these third-party relationships to determine how many of the club's 286 suites were actually made available for owner reservations --- compared to the number of units that were sold to other clubs and/or rented to the general public. The answers may be critical, because a key question in the entire investigation is whether the club deliberately oversold memberships in the club, then denied reservations to owners while renting out rooms to non-owners.

All three companies appear to have ongoing relationships with the Manhattan Club. Disney added the club to its online Concierge Connection in February 2013. Bluegreen's website lists the club on its resort collection. RCI not only handles exchanges for Manhattan club owners, but maintains a "Welcome Desk" at the club, offering two free luggage tags to owners who drop by during their visit.

When contacted by RedWeek, none of these timeshare companies wanted to discuss any aspect of their relationship with the Manhattan Club.

"We have no comment other than to say that Bluegreen is not a party to the matter involving the Manhattan Club and the New York AG's Office," said Michael Kaminer, senior vice president and general counsel for Bluegreen Corporation.

Rebecca Peddie, a spokeswoman for Disney Vacation Club, and Steven Alessandrini, a senior PR director for RCI Wyndham (RCI is owned by Wyndham), also declined to offer any comment about the Manhattan Club investigation.

Other observers of the Manhattan Club puzzle aren't so reticent.

Next Steps? What Lies Ahead for Manhattan Club Owners

New York attorney Douglas F. Wasser, who specializes in business and real estate litigation, was hired recently by a group of owners to jumpstart owner talks with the AG's office. "I am communicating with the AG and still signing up owners," Wasser said this week. "We are offering our support, but they are already doing a bang-up job seeking documents and investigating." The AG's office confirms communications with Wasser, but won't discuss details. For owners who may be interested, Wasser can be reached at info@wasserruss.com or 212-430-6040.

Gregory Crist, chairman and CEO of the 10,000-member National Timeshare Owners Association, has written and talked publicly about the Manhattan Club investigation --- not as a case expert, but as to how it hurts the overall reputation of the timeshare industry. This month, Crist met with a group of Manhattan Club owners at NTOA's regional meeting in Florida. He has also communicated directly with the AG.

"The Manhattan Club owners deserve to understand what happened and how it started," Crist said. "And as an industry, we need to ensure that this does not happen again with another developer."

Crist is guardedly optimistic that the Manhattan Club investigation will trigger positive changes in the timeshare sales process. "I think we're going to see the industry make real changes in the way timeshares are sold, accounted for and managed as a result of the outcome of the Manhattan Club issues. The public offering statements, for example, have to be front and central and covered in detail, not glossed over as a diminished document. That's the only way to return trust and transparency back to this industry."

Meanwhile, the clock continues to tick on all sides in the Manhattan Club case. The AG's investigation, now more than a year old, is based on a withering paper trail as well as video-and-audio tapes of sales presentations at the club recorded by undercover AG investigators. Those tapes, AG Schneiderman said publicly last summer, show a classic "bait and switch" pattern where potential buyers were repeatedly misled about the details of their ownership, including the ease with which they could reserve nights or weeks at the club. Manhattan Club lawyers denied these allegations at the outset, but have said nothing publicly, or substantively, since. The club's PR team is also silent.

Many Manhattan Club owners, at the same time, are fretting about upcoming deadlines for maintenance fees. Given the uncertainty of the club's long-term future, many members told RedWeek they'd rather hold onto their money until the AG's case is completed. Unfortunately, neither the AG's office nor outside attorneys consulted by RedWeek were willing to offer any specific legal advice to owners about paying maintenance fees. The only ones who are providing input, in fact, are the maintenance fee staffers at the Manhattan Club, who are already sending out dunning letters to owners who have not paid their current fees.

One such owner letter, shared with RedWeek, says: "Your account [for $2,584.72] is past due. Late fees and finance charges [$422.90] have been applied...The Timeshare Association has the right to institute foreclosure action against you in an effort to collect your past due charges."

That Jan. 8, 2015 letter, all by itself, is a puzzling document in a case full of puzzles. Why? Because, as of July 24, 2014, the Manhattan Club was specifically prohibited from foreclosing on any timeshare owners. When asked about whether this letter was in keeping with the spirit of the July 24 court order, the AG's press office said, "We don't comment on ongoing investigations."

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This latest report is brought to you by Jeff Weir, RedWeek's Chief Correspondent. Please visit RedWeek.com for more articles and information on the ongoing Manhattan Club investigation.

Friday, February 20, 2015

Is All-Inclusive Right for Your Vacation?

All-inclusive. Just the word conjures up thoughts of delicious meals, tasty desserts and as many martinis as you can drink. But before you sign up for the plan offered by your resort, understand what is really included.

Many resorts today offer all-inclusive plans that include the entire property.  All of the amenities, entertainment, tours, activities, plus all food and drink - wine, liquor and beer - you would consume are included.  

For other resorts, especially those in the Caribbean areas, all-inclusive is a derivative of the European-tyle plan. This means that you can have all the food and drink you want for four days out of a week while three days are left for you to eat at various restaurants in the area where the timeshare is located.  

Some of the larger resorts are now offering an all-inclusive food and drink option in addition to offering another dining plan like a Full American plan. The Full American plans include all you can eat for three meals a day and unlimited water, tea, soda, hot chocolate or coffee, but liquor are snacks are not included and do come at a cost.

Not to be outdone, some resorts are offering families with children an all-inclusive plan that include kids' clubs and babysitting while mom and dad are dancing the night away.  

Or, at some resorts that are geared toward adults only, if you choose an all-inclusive property resort you might be enjoying activities such as golf. Deep-sea fishing, nightly shows, gambling, and even motorized water sports are included in some of these plans.

If you're not sure what your resort's all-inclusive plan offers, it never hurts to ask or do some research. Some questions you might consider are...
  1. Which meals or how many meals are included?  Your all-you-can-eat food plan may be only for breakfast and dinner with lunch not being included in the offer. Or, like in some college meal plans, you may be offered eighteen all you can eat or drink meals and you pay for the remaining ones in the time you are there. This plan gives you a lot of flexibility to plan days out for shopping, sightseeing, etc. and it allows you to eat at the various cafes and restaurants in the area to soak up a bit of the local "culture and cuisine".
  2. Are meals served at specific times or available 24/7?  If you pay for meals, you don't want to miss them. If you are a night owl and breakfast is only offered from 7:30-9 a.m. you might miss this meal for which you have already paid.  
  3. What is meant by “drink"?  Does this include all types of beverages?  Coffee, tea, water, soda, hot chocolate, milk, etc? Does it include wine, liquor and beer? 
  4. Are all restaurants onsite included in the plan?  Or are the specialty restaurants not included in the all-inclusive?  
  5. Does the plan also include transportation to and from the airport?  Resort-offered transportation is becoming more common, and if such a service were offered, you wouldn't want to miss out!
  6. Will there be additional resort fees such as tips for service?  When you are doing your research, be sure to get offers in writing so you know for sure exactly what is included.  
  7. Are different units rated at different amounts?  The view of the ocean will be different from the fifth floor as opposed to one from ground level.  Is it more costly to stay in a unit on the higher floors?  
  8. Does your all-inclusive plan allow you to choose what size unit you want?  Be sure to ask how big each unit is, how many beds and the size of the beds are in the unit.  Be careful…many resorts today call a "double bed" or one that is around fifty-four inches wide a "queen", whereas a typical queen bed is usually sixty inches wide.  Being able to sleep comfortably is important when on vacation.
  9. Are upgrades available?  If you are unhappy with the unit or its location, can you upgrade once you arrive? 
  10. Is the all-inclusive price a good deal?  Sometimes, plans are cheap for a reason. Always check online to see what reviews are posted about the resort where you will be staying.  
  11. What's high season at your resort? If you are going at high time or during a holiday, the all-inclusive vacation may not be relaxing.  Will you have to fight for a lounge chair at the pool?  Will there be enough towels so you can have one to sit on and one to wrap up in?  Do you have to wait at meal times for a table?  
  12. What is the goal for your vacation?  Do you want to go to a resort where you are busy most of the time? Or do you want a resort that is relaxing, restful and quiet?  
Remember, a travel agent or a brochure are not going to tell you want you want to know about the resort. Be sure to check online or get recommendations from someone that you trust to be honest with you about their all-inclusive vacation experience. Which ever you choose, enjoy!  

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This article is by guest author Helen Sabin. Helen Sabin is a timeshare traveler and RedWeek member from Colorado Springs, Colorado.


Monday, February 16, 2015

RedWeek Announces 8th Annual Top 25 Timeshare Rental Resorts List

Disney's Beach Club Villas takes first place again!
It's that time of year again... RedWeek's Top 25 Timeshare Rental Resorts List is here! This list represents which resorts RedWeek members find most desirable. What's in store for our eighth edition of the list? Check it out!

  1. Disney's Beach Club Villas
  2. Harborside Resort at Atlantis
  3. Disney's BoardWalk Villas
  4. Marriott's Aruba Surf Club
  5. Marriott's Maui Ocean Club
  6. Marriott's Ko Olina Beach Club
  7. Marriott's Aruba Ocean Club
  8. The Manhattan Club
  9. Marriott's Newport Coast Villas
  10. Villas at Disney's Wilderness Lodge
  11. The Westin Kaanapali Ocean Resort Villas
  12. Costa Linda Beach Resort
  13. Marriott's Grande Ocean
  14. Marriott's Maui Ocean Club - Lahaina Villas
  15. Disney's Old Key West Resort
  16. Hilton Grand Vacations Club (HGVC) at Hilton Hawaiian Village
  17. Marriott's Ocean Pointe
  18. Marriott's OceanWatch Villas at Grand Dunes
  19. Playa Linda Beach Resort
  20. The Royal Sands
  21. Marriott's Waoihai Beach Club
  22. Marriott's Maui Ocean Club - Napili Villas
  23. The Westin St. John - Virgin Grand Villas
  24. Holiday Inn Club Vacations at Orange Lake Resort - West Village
  25. Kaanapali Beach Club
What's different from 2014's list? Things remain pretty consistent, with mostly minor shifts. Disney's Beach Club ranks number one for several years straight, and Harborside Resort and Disney's BoardWalk Villas keep their respective places among second and third. This year, Marriott's Aruba Surf Club and Marriott's Maui Ocean Club switch places, but Marriott properties still remain consistent in our list - running off with eleven of the twenty-five places! The Manhattan Club has slipped down to eighth place from seventh, replaced with Marriott's Aruba Ocean Club. Disney's Wilderness Lodge gained some ground and switched places with The Westin Kaanapali Ocean Resort Villas, proving Disney Vacation Club properties are as popular as ever. A few more minor switches occur further down the list, but we do not see any newcomers for 2015.

Did your favorite resort make the list? Were you surprised with the results, and do you think we'll see any newcomers in the running for 2016? Let us know!

Monday, February 09, 2015

More Airline Controversy on the Horizon...

FlyersRights discovered this patent for
new airline seating.
Last December, we covered several airline changes that were reported to be implemented later this year. FlyersRights has since uncovered more industry changes that could impact your next flight.

JetBlue's announcement that flyers would now be charged for checked bags was met with disappointment. The change appears to be preparing JetBlue for it's new tiered pricing model. Where airfare once included everything in a slightly higher base fare, the new trend tends towards a more "pick and choose" approach. JetBlue will instead offer flyers three distinct tiers of fare. The base tier requires payment for each and every checked bag, the middle tier will allow one free checked bag and the final tier will allow flyers two free checked bags.

The exact benefits and pricing included with each tier has yet to be announced, and consumers can expect to receive an official announcement in the second quarter. These new tiered fares are reportedly being tested, but no one is sure where or how. Additionally, pricing for the line's Even More Space seats, quicker security and priority boarding will be changed and shifted in light of the new "fare families", although exactly how remains to be seen. Depending on what these tiers include, it could be a blessing or a curse depending on what sort of flyer you are. If you can squeeze every benefits out of the top tier, it might prove to be an excellent investment. Meanwhile, if you just want the checked bags from one of the top two options and nothing else, you might be more than let down.

FlyersRights also unearthed a patent filed by a major airline that allows for even more passengers to fit inside a standard aircraft. This restraint system allows for passengers to essentially "stand" during flight. Collapsible, bicycle-esq "seats" and backrests are anchored to a metal bar that replaces the standard seating row. These semi-seats appear to be held at a slightly higher height in such a manner that flyers don't sit with their legs parallel to the ground, but instead have their legs mostly straight with a slight incline, allowing for overall legroom to be compressed. Whether or not these seats will see the light of day remains to be seen, but we can imagine some major outcry if they go live.

Whether you love or hate Southwest Airlines, no one can deny the controversy circulating around them. This past January saw the settlement of a lawsuit that has revolves around the safety of Southwest aircrafts. As early as 2008, reports arose of Southwest falsifying safety reports, and recently in July of 2014, a mechanic discovered cracks in the aircraft and documented them. Southwest then reportedly issued the mechanic a warning that he acted outside the scope of work and further violation would be followed with disciplinary action.

The issue was elevated to court, and the judge stated the letter had the effect of dissuading Southwest employees from reporting flaws or abnormalities for fear of discipline. Naturally, this would mean that potentially unsafe crafts were still flying. The settlement saw Southwest paying proper compensation to the mechanic, but their overall attitude of silencing the mechanic instead of praising for unearthing defects is a bit worrying to many.

For more on JetBlue's upcoming changes, the potential "saddle-seat" seating model and additional information on the Southwest case, check out FlyersRights directly! And we'd love to have your take - what's your opinion on these recent airline controversies?