A series of fast-moving developments in the past two weeks has raised new questions about the ability of buyer Crystal Hospitality Holdings, based in Chatham, NJ, along with its affiliated company, Crystal Finance LLC, to successfully execute a planned purchase of the financially troubled tour operator SunTrips from OneTravel Holdings, based in Atlanta.

A class-action lawsuit filed Jan. 31 in San Jose’s California Superior Court on behalf of travel agents to block the SunTrips sale is designed to do more than collect unpaid agent commissions.

Replenish Fund
The breach of contract complaint aims to prevent California agents from being forced to replenish California’s minimum consumer travel restitution fund of $1.6 million. In the event of a SunTrips bankruptcy claim against the fund, according to travel attorney Al Anolik who represents the agent class, California agents would take a hit.

“I don’t want them to have any false assurance there is going to be a future [SunTrips] company,” said Anolik.

“It isn’t just that agents were losing commissions. If there is a problem [with SunTrips], the California consumers’ restitution fund, currently holding more than $1.6 million, is going to be depleted. Every California-based agent, under the California Sellers of Travel Law, will be required to pay an assessment to replenish the lost funds.”

Anolik said he has offered the defendants in the suit, SunTrips and its current parent OneTravel Holdings, a “win-win situation.”

“I have told them not to show agents their word, which no longer has value,” said Anolik. “I have told them to show me the money by starting to repay commissions.”

Anolik filed the complaint on behalf of Community World Travel, based in Denver; Four Winds Travel, based in Carmel, CA; and all other agents similarly owed unpaid commissions by SunTrips (Travel Trade, Feb. 13).

The 11-page complaint alleges “breach of contract, intentional interference, deceit, conversion and unfair business practices.”

The complaint states, “Plaintiffs estimate there are more than 1,000 class members” defined as U.S. travel agents “who booked one or more of their clients through defendant SunTrips during the period from Jan. 1, 2005 through and including the present who have not been fully paid the commissions owed them.”

In addition to damages for the full amount of injuries, plus consequential damages and injuries, the suit seeks an injunction prohibiting OneTravel’s transfer of SunTrips’ assets to Crystal Hospitality Holdings and to place all ongoing receipts of money for SunTrips sales in escrow for the repayment of agents.

Last week, OneTravel Holdings, the publicly-held SunTrips parent, disclosed to the SEC that it was officially delisted from the American Stock Exchange on Feb. 1 for failure to file several required financial reports.

OneTravel president Marc Brecoon issued a statement that his company is appealing the expulsion decision and plans to file its 2005 annual 10-K report, due six months ago, by the end of this month.

OneTravel’s last SEC report, for March 31, 2005, stated losses of $23.9 million.

In his Oct. 17, 2005 announcement of the planned sale of SunTrips, Brecoon stated, “We recently disclosed that as of June 30, 2005 our working capital position was a negative $33 million. Approximately $16 million of the current liabilities related to either past due or future obligations of FS SunTours Inc., which is the SunTrips business. We will not have to pay most of these liabilities based upon the terms agreed to in principle.”

Sepanski Renews Lawsuit
Another agent for whom SunTrips’ word is no longer valid is Zigmund Sepanski, owner of the San Juan Capistrano, CA-based host agency Authorized Agents Inc.

Sepanski said he is renewing an Orange County breach of contract suit he had postponed against SunTrips in Orange County Superior Court after two written promises of commission repayments were allegedly broken by SunTrips president Matthew Holliday.

“I received a fax from Matthew Holliday the day before our [Feb. 8] court date promising me that a check was being over-nighted and asking me to cancel the suit,” Sepanski said. “I postponed it based on a written fax he sent me while we were talking. No check came. I called him a day later and he promised me in writing again for a next day delivery. No check came.”

Sepanski said the final straw was when he called Holliday following the second failed delivery.

“He said, ‘We are stuck in the transaction being completed....I can’t promise when we will get you the check.’”

Sepanski said he was advising other agents with their own small claims suits to proceed without delay.

“Don’t stop no matter what SunTrips promises you,” Sepanski told one agent, who said she is seeking $2,500 in unpaid commission.

In discussing his Jan. 28 “definitive agreement” for the planned sale of SunTrips by OneTravel, Fabrizzio Busso-Campana, the Crystal Hospitality partner and intended CEO of SunTrips, told Travel Trade at the beginning of February that, “The travel agents will be paid.”

Not as Confident
At press time on Feb. 16, Busso-Campana did not sound as confident.

“We have run into some delays,” said the intended SunTrips owner. “Given the legal ramifications, this is a complicated transaction. It is a difficult deal to pull off. But we are plugging away.”

Asked when he plans to start paying back agents, Busso-Campana said, “I wish I could actually say it is going to be done today or tomorrow. When I spoke to you two weeks ago, we were extremely confident. But we continue to run into these last-minute details.”

---

SunTrip Purchaser

Travel Trade has obtained a full copy of OneTravel’s 8K filing to the SEC, dated Feb. 7, detailing the proposed “Asset Purchase Agreement” to sell SunTrips to Crystal Hospitality Holdings.

Among key features of the 35-page document is the disclosure, on page 5, that Crystal Hospitality will assume all of SunTrips’ unpaid debts, for which OneTravel will be indemnified.

“At the closing, Buyer shall assume and agree to fully and timely perform, pay, satisfy and discharge all the liabilities and obligations of the Seller arising under the Purchased Assets,” states the agreement.

However, Peter Dugan, a financial partner and executive of Crystal Hospitality Holdings, called Travel Trade to say that the details of the 8K, due to developments between OneTravel Holdings and Crystal Hospitality in the last two weeks, are no longer valid. He said the deal is being renegotiated between seller and buyer.

Dugan also referred Travel Trade to a Jan. 31 announcement by Mobile Reach International Inc., a Cary, NC-based company. Dugan confirmed Mobile Reach’s signed letter of intent, with Dugan’s partner Busso-Campana, to acquire Crystal Hospitality Holdings and its SunTrips business “within 30 days.”

Dugan said the Mobile Reach acquisition of Crystal and SunTrips will be a “follow-on transaction” that will occur soon after the closure of Crystal Hospitality’s acquisition of SunTrips from OneTravel.

Mobile Reach defines itself as “a leader in providing IT Asset Management solutions on barcode scanners to enterprises and government entities.”

A Jan. 30 letter of intent for the intended deal calls for Mobile Reach International to pay Crystal Hospitality “5 million shares of Mobile Reach stock at closing,” plus an additional 5 million shares only if SunTrips and Crystal achieve certain minimum revenue and earnings levels during 2006.

No cash is included in the description of the intended transaction.

A 10K report filed by Mobile Reach International, which trades under the stock symbol MOBR, for its fiscal year ended July 31, 2005, shows that it was incorporated in July 2003. At the time of its launch the company “was a wholly-owned subsidiary of Asphalt Paving International Inc.”

A consolidated statement of income in the report shows that Mobile Reach International posted a net loss of $970,881 for the year ended July 31, 2005, and an earlier net loss of $3,142,860 for the year ended July 31, 2004.

More recently, Mobile Reach posted a $244,054 net loss for the quarter ended Oct. 31, 2005.