Sensible traveler Destinations Where they went Travel gear Student travel38,000 victimized in time share scam
Two-year probe brings convictions
By Bruce Mohl, Globe Staff, 8/4/2002
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She owned two weeks at the Cape Winds resort in Hyannis in 1999, but she was tired of Cape Cod and her husband was ill. She wanted to unload the time shares and get out from under the annual maintenance fee. She listed them with a realty company, but the secondary market for time shares was (and is) so fragmented that she was having a hard time finding a buyer.
"It's a situation where people get desperate to get rid of them," Flanagan said.
Then out of the blue came a call from a company called Resort Investment and Trust, located in the Bahamas. The company wanted to buy up a majority of the weeks at Cape Winds and was interested in purchasing Flanagan's. Before any deal could be completed, however, the company wanted the time shares appraised, the cost of which would be reimbursed at closing.
The company sounded legitimate, Flanagan said. The appraisal had to be done by an independent third party and a list of qualified appraisers would be supplied by another company called MLS. She assumed MLS stood for the well-known Multiple Listing Service, but instead it stood for Multi-State Listing Service.
MLS called and gave Flanagan the names of three appraisal companies. Flanagan called all three, checked their rates, and settled on one in Hyannis called RCI Appraisals, since it was near Cape Winds and because it was willing to charge her just $544 for two appraisals. The standard price was $399 a week.
"These were very convincing people," Flanagan said. "They gave me their names. They sent me letters that were signed. They were pleasant to talk to on the phone."
She paid with her credit card and about eight weeks later she received the appraisals in the mail. They estimated the value of her two weeks at between $6,000 and $10,000, which was far more than she had paid for them. That should have been a tipoff that something was wrong, but Flanagan was so thrilled she didn't give it a thought.
Resort Investment and Trust ultimately offered Flanagan less than $1,000 for both weeks, but she was so desperate she accepted the offer. From that point on, however, Resort Investment and Trust seemed to disappear. Phone calls went unreturned. Phone numbers were disconnected. Flanagan couldn't close the deal.
Complaints about time share sales that never seemed to get done began trickling in to law enforcement officials and Better Business Bureaus in a number of states. They came slowly at first, and the relatively low amount of money involved attracted little attention. But gradually investigators took notice and began snooping around.
What they uncovered was a sophisticated scheme to defraud time share owners out of $399 appraisal fees. The seemingly independent appraisal process was a sham. All of the companies involved from start to finish were fronts and all of them were connected.
"The reason why this scheme worked so well was because they told people they weren't actually selling them something. They acted as if they wanted to buy something," said Joshua Levy, an assistant US attorney in Boston who worked the case for two years.
In one month, according to Levy, the bogus buying companies made 23,000 telemarketing calls to time share owners. In all, law enforcement officials say, 38,000 time share owners were sold $15.4 million in fraudulent appraisals.
The mastermind behind the scheme was Donald Gonczy, who was arrested in St. Maarten in January 2001 on charges of mail fraud, wire fraud, and money laundering. Gonczy and six other defendants, including three of Gonczy's children and his son-in-law, pled guilty prior to trial. Jill Gonczy and her husband, Michael Upton, ran RCI Appraisals on Iyanough Road in Hyannis. Scott Gonczy ran another appraisal company called Interval International Appraisers in Providence.
S. Joel Epstein of Deerfield Beach, Fla., and John Handel, of Yarmouth, were convicted after a four-week trial that ended July 18. Handel, 51, signed thousands of appraisal reports using the name of James Rose and was paid $5 for each report. Epstein ran the financial operations of the bogus companies. Sentencing for the defendants is slated for next month and October.
It's unclear whether Flanagan or any of the 38,000 victims will get any money back. Flanagan has since donated one of her time share weeks to her church and decided to hang on to the other.
Mileage insurance?
On June 2 , Sensible Traveler focused on some options for protecting air miles during a period of airline instability, and suggested insurance from PrivilegeFlyer.com as a possible answer.
Andy Dhuey of Berkeley, Calif., contacted me shortly after that column appeared, raising questions about whether the Award Guard coverage was legitimate insurance and whether it would truly offer any protection if a big airline went under. He said he had been unable to get any information from the company.
I followed up with Privilegeflyer.com and was told Award Guard is not insurance. A representative said the company does not pay out cash claims, but allows its clients to use their "lost" frequent flier miles on other airlines. While Privilegeflyer has protected customers in past airline failures, the company's representative declined to discuss whether it could weather the failure of a big airline.
"Privilegeflyer is a privately held company with private backers who do not wish to be identified," the representative said. "If you wish to know more about the stability of our company, like so many other customers these days, I can tell you that this is our 13th year in business and we are not planning on going anywhere."
Bruce Mohl can be reached at mohl@globe.com.