Q: I have recently read
several articles about travel agents who have been arrested or
indicted by grand juries for criminal fraud. Whats the difference
between normal, everyday tariff violations or unreported ARC sales
on the one hand and criminal fraud on the other hand? When would an
agents conduct cross the line?
A:
In theory, criminal fraud should involve a pattern of activity,
with large-scale loss to lots of people.
According to the
U.S. Justice Departments Criminal Resource Manual, Prosecutions of
fraud ordinarily should not be undertaken if the scheme employed
consists of some isolated transactions between individuals,
involving minor loss to the victims, in which case the parties
should be left to settle their differences by civil or criminal
litigation in the state courts.
Serious con-
sideration, how- ever, should be given to the prosecution of any
scheme which in its nature is directed to defrauding a class of
persons or the general public with a substantial pattern of
conduct.
However, in
practice, in the travel industry, there is very little difference
between civil and criminal fraud. The difference between what gets
prosecuted and what doesnt is a matter of prosecutorial
discretion.
The only consistent
thread that I have seen is this: If there is a pattern of activity,
a prosecutor might get interested.
A pattern just
means two or more acts that are violations and are part of a
deliberate plan.
What kinds of
patterns have been prosecuted?
I have heard
prosecutors argue that it is criminal fraud for agents to issue
government-fare tickets to nongovernment employees, and I have read
that issuing infant tickets to adults is also the subject of a
prosecution for fraud.
So, are all tariff
violations criminal fraud?
I have no doubt
that there are federal prosecutors who would say that all
intentional tariff violations by agents, including back-to-back and
hidden-city ticketing, are criminal fraud.
With respect to ARC
reporting violations, I am sure that prosecutors would see
criminally fraudulent behavior in all kinds of manipulations, such
as selling tickets and intentionally not reporting them.
I dont know whether
prosecutors routinely go after every agent ARC complains about, so
I cant say whether ARC has a good track record.
My guess is that
ARC would like to see a lot more agents get put in jail.
The chances of an
agency getting prosecuted appear to increase if there are many
complaints by powerful voters or local companies.
Further, I believe
that the chances of prosecution also increase if the agency is
ethnic, which means that it serves the southern European, Middle
Eastern, south Asian or Far Eastern markets. Prosecutors seem to
think that such agencies are generally up to no good.
Finally, chances
increase if the agent is not well connected politically or well
known in the community. One of the oddest aspects of these
prosecutions is that the prosecutors have such a poor grasp of how
the industry works.
For example, in one
recent indictment, the prosecutor wrote that the agent contracted
with the Airlines Reservation Corp. to make reservations and
purchase tickets.
Even though there
are three factual errors in that sentence, the agency owner was
eventually forced to plead guilty to fraud in order to avoid the
risk of a lengthy sentence if convicted by a jury.
Prosecutorial
ignorance is not a defense.
Up until now, its
only individual, rogue agents who have been prosecuted, not agency
corporations. However, the same legal principles apply to
corporations.
Therefore, the only
prudent course is to be on the lookout for patterns of intentional
violations at your agency.
If you find any,
put a stop to them immediately.
Mark Pestronk
is a Fairfax, Va.-based attorney specializing in travel law. He
answers your questions in the TravelWeekly.com Legal Ease forum. To
contact Mark directly, e-mail him at [email protected].