Travel agents have been urged to exercise caution when entering into business relationships during the recession.
The warning comes after three bogus travel agents pleaded guilty to conning airlines out of flights worth £1.2 million.
Concert promoters Michael Sanchez, 29 (pictured left) and Rashid Hammou, 37, both from Eltham, London, and Paul Kelly, 53 (pictured right), from Lewisham, London, bought Essex-based Flights International (Southend) in March 2007, Southwark Crown Court heard earlier this week.
Agency owner Paul McDonald, who sold the agency after 21 years, received only 75% of the agreed price for the business.
Following the deal, during one weekend, the group sold £1.2 million-worth of airline tickets, although the business never received the money.
The court also heard the group used the good name and credit rating of Flights International (Southend) to purchase goods worth £120,000, without paying for them.
As well as running the agency in Maldon, Essex, the threesome opened a second office in London, which they used as a base to open accounts with several high-street retailers.
The business went into liquidation in August 2007 and the Civil Aviation Authority called in its ATOL bond in October 2007. All five staff also lost their jobs.
Prosecution lawyer Jane Bickerstaff said: “Bearing in mind the airlines suffered losses of £1.2 million, and the loss to the travel agency owner, the sentence is likely to be years, rather than months.”
All three pleaded guilty to conspiracy to defraud, and are due to be sentenced next month.
Trevor Sears, who acts as legal counsel to IATA and is a partner at law firm Davenport Lyons, said: “The group bought the company, and over the first two months sales were small. But the airlines never received payment for tickets booked in July and August.”
He said many consumers who had booked flights may have still flown at the expense of the airlines. Others who had paid discounted fares may have been asked to pay the balance before flying.
Prevention of Fraud in Travel chairman Barry Gooch said: “There have been several instances where companies have been tempted to enter into a business relationship that ends up costing the owner his livelihood.
“It is rare for a company to survive this type of attack.”
For more on fraud, go to www.travelweekly.co.uk/fraud
Fraud prevention tips
Fraud prevention tipsTop tips from Barry Gooch, head of the Prevention of Fraud in Travel Group
- Always discuss the mechanics of the proposal with, and take advice from, your bonding agency before signing the deal
- Use one of the many well-known software packages to check the creditworthiness and rating of your potential business associates
- Check the Director Disqualifications Register at Companies House to see that the people you are dealing with are eligible
- Carry out full due diligence checks through your lawyers on the potential business associate
- Get the potential business partner to show you their business plan, turnover report and profit and loss account
- Carry out background checks on the people you are planning the relationship with
- Carry out credit checks on all potential business associates
- Talk to other businesses who have worked with your new prospective business associates
- Make sure your solicitor draws up and vets all legal documents
- Do not be pressured into a quick deal