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Owners of bankrupt O.C. firm sued
January 5th, 2011, 11:00 am · Post a Comment · posted by Jan Norman, small-business columnist
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Owners and top executives of Joystar Inc., a defunct Aliso Viejo travel company also known as Travelstar, are being sued by the U.S. bankruptcy trustee in south Florida for $1.2 million, according to several travel websites.
TravelPulse.com said the trustee sued William Alverson and wife Katherine West as well as West’s mother, Judy Red.
Although the company was headquartered in Orange County, creditors, including some 50 travel agents, forced an involuntary bankruptcy filing of the company in the Fort Lauderdale bankruptcy court in December 2008, according to Travel Agent Central. The case was converted to a chapter 11 reorganization in February 2009 and then a chapter 7 liquidation in June 2009.
On Dec. 30, 2010, U.S. bankruptcy trustee Soneet Kapila sued Alverson and West to recover company money they received from 2005 to 2008, Travel Agent Central said.
Joystar Inc. was incorporated in California in 1998 and changed its name to Travelstar Inc. in 2007. It sold leisure travel, including cruises and vacation packages through a network of independent home-based consultants.
According to the lawsuit filed by trustee Soneet Kapila, Joystar raised $2 million in 2006 but failed to pay payroll taxes after the third quarter of 2007.
“The company paid too large a share of travel commissions to its agents, and charged too little to its agents as a membership or signup fee, to be profitable,” the suit alleges. “By continuing to accept new agents and new bookings, the defendants knew that the debt would likely never be reduced.”
The suit also alleges that the Alversons knew the company couldn’t be profitable but continued accepting consultants’ commissions to pay themselves more than $841,000 over four years prior to the bankruptcy.
The suit alleges that West transferred $305,000 in Joystar money to her mother who used it to buy a house in Florida, where West and Alverson have lived since the 2007 purchase.
In addition to the money for the down payment on the house, the suit seeks $395,400 paid to Alverson and $117,000 paid to West and another $166,000 between 2005 and 2008, according to Travel Weekly.
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