Welk Resorts, developer of family-friendly vacation resorts, has filed suit in U.S. District Court for the Southern District of California against Reid Hein & Associates, operating as “Timeshare Exit Team,” and law firms in two states for operating a nationwide racketeering scheme to induce vacation owners to disrupt Welk’s contractual relationships with its vacation owners, causing breach of contracts, delinquencies and defaults that damaged Welk, the vacation owner association and vacation owners.
The suit, filed on Tuesday, July 25, provides details on how Reid Hein, based in Lynwood, Washington, Timeshare Exit Team and its co-conspirators used false advertising, fraudulent guarantees and misleading correspondence to recruit vacation owners in a nationwide scheme based on the false promise of getting owners out of their timeshare contracts with no consequences.
According to the suit, when customers purchase a Welk vacation ownership, they typically enter into purchase contracts, which include payment obligations to Welk. In addition, purchasers become members of an association and incur maintenance fee payment obligations to the association. Timeshare Exit Team induced Welk customers and association members to breach their contracts and payment obligations to Welk and the association, and instead enter into a contract with Timeshare Exit Team.
Timeshare Exit Team and its cadre of attorneys would then conspire to send bare-bones, generic, one-page attorney demand letters to Welk, claiming they represented the owners in breaching the contract. Timeshare Exit Team charged fees of $5,000 and more for this “service.” The suit alleges that Timeshare Exit Team would split fees with two law firms (Schroeter Goldmark & Bender of Seattle; Privett Law Firm of Pawnee, Okla.). Owners who became delinquent and went into default under the Timeshare Exit Team scheme suffered significant damage to their credit records.
According to the filing: “Their (Timeshare Exit Team and the co-defendants) unscrupulous, callous and illegal schemes have caused severe consequences to unsuspecting consumers. Their schemes have caused financial and reputational damage to Welk, which has enjoyed more than 50 years of providing high-quality vacation ownership opportunities and stays to millions of people through its resorts.”
Jon Fredricks, president and CEO of Welk Resorts, said Timeshare Exit Team and the co-conspirators disrupted vacation ownership contracts, put consumers into default on their contracts, cost the company to write-off consumer debts and made the performance of vacation ownership contracts more expensive and difficult.
“Unless this racketeering scheme is stopped, Timeshare Exit Team and the others listed in the suit will continue to disrupt vacation ownership contracts, further damaging vacation owners and vacation ownership companies throughout the U.S.,” said Fredricks. “Due to high quality resorts, industry-leading net promoter scores and award-winning activity programming (“Inspired for You”), Welk Resorts is much less impacted by these schemes than the wider vacation ownership industry, with less than one percent of Welk Resorts owners affected. We are saddened to see former owners who were induced to breach their contracts have their credit scores plunge, while Timeshare Exit Team and the lawyers pocketed profits and moved on to their next prey.”
Resorts is much less impacted by these schemes than the wider vacation ownership industry, with less than one percent of Welk Resorts owners affected. We are saddened to see former owners who were induced to breach their contracts have their credit scores plunge, while Timeshare Exit Team and the lawyers pocketed profits and moved on to their next prey.”
The suit cites fraudulent racketeering activity, intentional interference with contractual relations, and violations of the California unfair competition law, California Vacation Ownership and Time-Share Act, California False Advertising Law and the state Running and Capping Law. The latter makes it illegal for non-attorney agents to obtain business for an attorney or law firm for compensation, or solicit others to engage in running and capping.
Key excerpts from the filing include:
• Defendants utilized their fraudulent scheme to interfere with Welk’s business, by impeding Welk’s ability to communicate with its members, and directing Welk’s members and the Association’s members to stop paying their pre-existing financial obligations to Welk, with false guarantees that there will be no consequences on the vacation owner’s credit scores.
• They misrepresented that Defendants have a preexisting agreement with Welk or otherwise do business with Welk to guarantee termination of any purchase contracts.
• They misrepresented to Plaintiffs’ owners and members that stopping payment on a Welk contract or on Association dues will not affect their credit or constitute a breach of their contracts with Welk.
• Defendants acted in concert, and participated in the enterprise’s affairs through a pattern of racketeering activity, consisting of numerous and repeated uses of mail and wire communications, in order to execute a scheme to defraud Welk, the Association, and vacation owners and members.
The suit asks for injunctive relief, attorney fees, costs, and punitive, exemplary and treble damages from Reid Hein, Timeshare Exit Team and the co-conspirators.
About Welk Resorts
Welk Resorts was founded in 1964 by famed television band leader Lawrence Welk. Since then, the Welk legacy has matured into an international hospitality business, developing or investing in over eighteen high-quality resorts featuring over 1,200 luxury vacation ownership accommodations in the San Diego, Palm Springs, Lake Tahoe, Scottsdale, Carlsbad, Kauai, Branson, Missouri, and Cabo San Lucas, Mexico areas.
Welk Resorts has been recognized as one of the most respected independent brands in the vacation ownership industry. Current president and CEO Jon Fredricks, CHA & RPP – grandson of the founder – guides Welk Resorts in the sales, marketing, and management of the properties, with assistance from over 1,800 employees. Welk Resorts is a family- and employee-owned company, and has won numerous industry awards, including Employer of the Year, Project of the Year and Most Innovative Company. With a history of family values, Welk Resorts fosters an environment where growth is achieved through greatness, personal responsibility, integrity and trust.
For more information about Welk Resorts, visit www.welkresorts.com.