Timeshare Fraud Seems to Target the Elderly
Tuesday, December 18, 2007
Sadly, it seems that many timeshare scams target the elderly, but then, a lot of fraudulent business or investment deals in general prey on some older people who may be more trusting or more willing to believe that they are being given all the facts in a credible way.
This week, the Arizona Corporate Commission ordered Leonard Clark Rhodes, Jr., of Gilbert, Arizona to pay $160,663 in restitution and $50,000 in administrative penalties for defrauding elderly investors in two different investment programs. I am going to give you several facts about Rhodes’s scheme, because I think the more we drag this type of timeshare fraud out into the bright light of day, the less likely people are to fall for it in the future.
Rhodes told investors that his Universal Lease program offered the timesharing of investment hotel units in Mexico and Central America. The timeshare unit “investors” (and I use the word with sarcasm because these people were victims, not investors) were given the option to use the timeshare units themselves or to use them as timeshare rental units. Using the timeshare units was downplayed as an option in the written and oral presentations to investors, and in many cases was not even an option that interested some older investors.
The option to actually use the timeshare unit applied only to “investors” (there’s that word again) who had contributed a minimum of $5,000, in return for which they received no choice of location or date of the timeshare vacation week they received. Personal use of the timeshare unit also carried with it annual fees ranging from $380 to $645, which could increase based on the Consumer Price Index.
In the Universal Lease deal, “investors” were given two other options, besides using the mystery-location timeshare units themselves. The first option was to use the timeshare unit as a rental for potential investment return, but again the timeshare buyer was only told the location, date, and timeshare unit he or she owned, after the timeshare transaction was completed. In this option, the timeshare buyer was responsible to find timeshare renters and handle the timeshare rental transaction himself. The timeshare buyer was still obligated for the same annual fees, and was also told that managing his own timeshare rental was likely to yield less return than taking advantage of the other option.
The second timeshare rental option was to let a “professional third party servicing agent” manage the timeshare rental, a choice that the timeshare buyer was told, “…provided a superior rate of return over most other investments…” Investors—the timeshare buyers—were told that the Universal Lease would yield 11 percent annual return over 25 years if the investor used the designated servicing agent to manage and lease the timeshare units.
If you would like to read the charges brought by the Arizona Corporate Commission for violation of the Securities Act of Arizona, click here.
I can only shake my head in disgust that people were defrauded of their money in this way and breathe a sigh of relief that the State of Arizona is demanding restitution for the timeshare fraud victims. So here’s my summary of what this timeshare fraud case should teach all of us:
- If it seems too good to be true, assume that it is.
- If someone tells you that timeshares are an investment, be skeptical of everything else that person says because it is a flagrant violation of Securities and Exchange Commission rules to represent in any way that a timeshare is an investment.
- Never buy timeshare “blind”. You should always know what timeshare resort and what week you are purchasing, or if you are buying a floating week. Where your timeshare unit is located, and when your timeshare week occurs during the calendar year both help determine the fair price you should pay for timeshare. It is impossible to know you are making a sound purchase if you buy timeshare without knowing all the facts!
To learn more about buying, renting or selling timeshare, visit the website of timeshare resale and timeshare rental marketing company, Sell My Timeshare NOW.