Q: Two weeks ago, your column covered the top 10 legal problems that agencies face today. Last week's column covered ways to prevent the bad things from happening. However, if they happen anyway, what are your recommendations for lessening the damage to our agency?
A: Since fraud by independent contractors (IC) resulting in debit memos is the No. 1 problem agencies face, let's focus on it first. In the most typical scenario, an IC makes a bunch of airline reservations and charges, say, $75,000 worth of tickets to unauthorized credit cards. The airline sends you a debit memo, and you have no defense because you did not obtain signed and imprinted charge forms.
Assuming that you need to keep the airline's plate, then you should follow a two-part strategy to try to keep from having to pay the entire debit memo. First, if you are certain that the IC has defrauded you (as opposed to having merely made dumb mistakes), you should report the matter to a district attorney where the IC resides, the Secret Service and ARC.
None of these reports will eliminate or reduce the debit memo by themselves, but they do serve valuable purposes. The report to the prosecutor and the Secret Service (which has jurisdiction over credit card fraud) may possibly pressure the IC into paying for the debit memos, if the IC is afraid that he or she might go to jail if the debt remains unpaid.
Another purpose of the reports is to show ARC and the carrier that you are cooperating, separating yourself from the IC's fraud and trying to help the carrier. The key here is to try to align yourself with the carrier's interests and show that you are on its side.
The second part of your strategy should be to contact the carrier's fraud department and offer whatever assistance you can in recovering the funds from the IC. Although there is probably not much that you can do, and although the carrier will look only to you for payment, it does show a cooperative attitude, and the fraud department will be impressed with your efforts.
Explain the corrective action that you are taking to prevent the problem from recurring. Agree to help entrap other fraudsters if the carrier asks you to do so. Stay in frequent communication. Once you take these actions, the chances are excellent that the carrier will settle for substantially less than the amount of the debit memo.
For other legal problems involving carriers, which comprise at least five of my top 10 legal problems, follow a similar report-and-cooperate strategy. When the other legal problems arise, your first step should be to engage a knowledgeable attorney who can represent you in dealing with the other party.
For example, if a client erroneously blames you for what went wrong on a trip and threatens to sue you, your attorney can explain to the client (or his aggressive attorney) that agencies are not liable for suppliers' acts or omissions or other occurrences beyond the agency's control.
If employees depart and take a major portion or your client base or if you get sued for civil rights or Seller of Travel Law violations, you need a knowledgeable attorney to advise you about your rights and what steps you can take to minimize liability.
Mark Pestronk is a Washington-based lawyer specializing in travel law. To submit a question for Legal Briefs, email him at [email protected].