There seems no end to the lengths some will go to fleece innocent and elderly people of their hard earned cash, we thought we had seen it all, then this.
In a new twist which we have never seen before, another “scam” has appeared, it is actually quite audacious. The client who had previously been informed their case had been won and a cheque was about to be issued, upon payment of certain taxes, receives a letter from the court.
Attached to the letter is a cheque, unfortunately, the cheque is missing, the envelope was delivered open, all there is left is a staple and a torn piece paper where the cheque should be.
Next, they receive a series of letters stating that the cheque had been stolen and cashed by a gang of “Rumanians”. One of these is from Manuel Valentins Asesoria, who state they have been officially appointed by the Court of First InstanceNumber 6 of Santa Cruz de Tenerife.
As they will be dealing with the recovery of the misappropriated funds a 10% payment is required for them to act on the client’s behalf, in this case 718.80 Euros. Off course this in in advance, but will be fully recovered from the clearing bank and added to the original amount awarded by the court.
Another twist to this sorry tale is at the end of the letter, they state: “It is showing on the system that you have a refund of tax from Hacienda the Tax office for the amount of; 1,509.48 Euros and we shall also follow up on that for you”.
Again this is designed to give the impression of authenticity.
It must be remembered that when an award of this nature is made by a court, they do not send out cheques, especially on Banesto cheques, who were taken over by Santander many years ago and no longer exist. The payments would be made by wire transfer direct to the client’s account, the courts do not use cheques.
This particular scheme, from the start with letters of a pending case through to sentence, backed up with fake court documents, right through to the latest twist are a very sophisticated operation. The standard of English in the letters suggest a relatively high level of education and from a native English speaking person.
All the documents are very well put together and certainly would look genuine to those who don’t know.
Irene Parker is once again ending our week with the following article, she asks the question that many owners have wondered, How are points valued?
We all know that most timeshares are well overpriced, many reps will tell you about the “stack and drop” method of selling, which was mentioned in the last article. In this article Irene, points out the use of leased aircraft by company executives, again another question is posed, who pays for them?
Would the inflated price per point pay or does it come from rising maintenance fees?
Mind you I’m sure most of us would love to have the use of private company jets, at least we wouldn’t be lumbered with the screaming kid or the semi drunken holiday maker.
In the second part of the article, we get the views of five of the advocates from the Diamond Resorts Owners Advocacy facebook group. This is a new forum for owners to air their views, ask questions, seek help and guidance on many issues and share in the latest news. These advocates will also intervene on your behalf in negotiations with the resorts.
In the short time this has been running there have been some very good results, as we say at Inside Timeshare, debate is better than confrontation.
How is a Timeshare Point Valued?
By Irene Parker – February 24, 2017
There were many responses to this week’s article, “Is This Timeshare Proposal merely Monopoly Money?” We have summarized the comments in today’s follow-up article.
Old fashioned fixed weeks were real estate. Units were sold with a deed, meaning you could see, feel and touch what you bought. Points later developed claiming greater flexibility, but rising maintenance fees, problems with availability and the sinking feeling you get when checking in, knowing you must brace for the sales staff, has caused more than a few timeshare owners some discomfort.
Most of the original fixed week resorts did not maintain a fleet of aircraft. There is not enough information to know if a fleet of aircraft ends up in maintenance fees or in a point price. Here is one Timesharing Agreement concerning leased aircraft.
Relationship with the Company’s Executive Officers and Chairman of the Board
Time Sharing Agreements
Diamond Resorts Corporation (“DRC”), a wholly-owned subsidiary of the Company, is a party to time sharing agreements with each of David F. Palmer, President, Chief Executive Officer and a director of the Company, and Howard S. Lanznar, Executive Vice President and Chief Administrative Officer of the Company, in each case with respect to use of an aircraft leased by DRC. In each case, the time sharing agreement provides for the use by the individual of such DRC aircraft, together with use of DRC’s flight crew, and permits the relevant individual to reimburse the Company for specified costs related to such use. Stephen J. Cloobeck, the Company’s chairman of the board of directors, may also enter into one or more time sharing agreements with DRC with respect to his use of aircraft leased by the Company or DRC.
The Company and DRC have also agreed that the Company will not charge Mr. Cloobeck for use of Company-leased aircraft for non-business purposes for an aggregate number of flight hours with a value, based upon the relative costs of operating the Company-leased aircraft, equal to 50 flight hours on the most expensive to operate of the aircraft leased by the Company.
While leasing executive planes is not unusual for a corporation, it is disconcerting to many families struggling with rising maintenance fees and loans financed at 12% to 18%.
I would not be surprised if a company the size of Apollo has a lease fleet.
Back to Points
Critics accuse us of being dummies who don’t know how to use Diamond points.
Here are replies from a few of our Advocates.
Several members of our “think tank” and Diamond Owner’s Advocate Facebook expressed alarm over the $8.52 retail price. Today I learned the retail price is expected to increase 25% under Apollo’s guidance to $10.60 and then $12.25.
One of our Facebook members described this as “Anchoring” which is a way to make people think they are getting a bargain at $4 when the retail price is $8.52.
According to Wikipedia, and cognitive and behavioral economics, such a price creates a benchmark for perceived value.
Most people understand the MSRP sticker on the window of a car on a dealer’s lot is not the price the buyer will pay. The buyer understands the car will depreciate the moment the car is driven off the lot and they will in all likelihood sell the car for less due to depreciation. Consumers do have a reference point found in “The Blue Book” of automobile resale value.
We know there are people who will pay well above $3.00 a point for a Diamond point listed at $8.52. However, unlike a car, the selling side of the market doesn’t know what any specific buyer is willing to pay. Thus, they start with a high “opening offer” and then lower it until they discover the buyer’s willingness to pay. Economists call this price discrimination – selling the same product at different prices to different buyers. It is particularly effective when different buyers (or groups of buyers) have differing sensitivities to prices, often caused by differences in income and wealth.
A final observation is that when Diamond was publicly traded, they held quarterly earnings calls with Wall Street analysts. I listened to about 10 of these and was surprised that the price per point was never discussed. The CEO and CFO didn’t mention it in the prepared presentation and the analysts never asked about it. The focus was always the average price per transaction, which is the number of points times the price — something like $22,000. Even when an analyst asked: “what was driving the increase in the transaction price?” the answer was never price-per-point.
Our same advocate #1 offered a comparison of Diamond fees with other timeshare systems. The conversion factors are obtained from Diamond’s own Club Combinations valuations. Fees for the non-Diamond systems are trust fund fees (not deeds) for the respective systems.
A second Advocate
The company determines the price per point.
I would imagine that the value is based upon the “cache” of the brand, the location, demand and the competition, much like any company would value their product.
Say a developer has a resort with 100 units that they sell 50 times/weeks = 5,000 units. I would image that determines the profit they want to make, divide it by the number of units, and then turn that into points and pricing. How do they convert the value to other travel awards? How much does the award cost the resort and what does it take to recoup the points they traded in?
I know the conversion from timeshare points (a day or a week) to hotel points is not equal. It cost more points to stay in hotels than resorts.
I am concerned with the downturn in earnings announced coincidentally just after the Apollo acquisition announcement:
Diamond Resorts‘ second-quarter earnings release was delayed after the company’s independent registered public accounting firm BDO USA said that the company may not have correctly applied the relative sales value inventory valuation model when preparing its consolidated financial statements for 2014 and subsequent periods. Thus, even Diamond accountants did not answer the question accurately.
After the correction, the change resulted in a decrease in net income of $5.6 million for 2015 and a $1.3 million decrease for the first quarter, in each case from amounts originally reported, according to the second-quarter release.
Significantly, second-quarter net income decreased $10.1 million or 28.5% to $25.5 million year over year, compared with a first quarter increase of $8.4% or 32.6% to $34.4 million, prior to the restatement.
Following are descriptions of these inventory sources:
Self-developed inventory: Under the traditional timeshare industry development model, we finance and develop inventory specifically for our timeshare sales. The process often begins with the purchase of raw land which we then develop. Depending on the size and complexity of the project, this process can take several years. Such inventory can include mixed-use inventory developed in conjunction with one of our hotel brands, where a portion of the property is devoted to the timeshare product.
WAAM: In 2010, we introduced the first of our WAAM models, WAAM Fee-for Service (formerly known as WAAM 1.0). This timeshare sourcing model was designed to capitalize upon the large quantities of newly developed, nearly completed or recently finished condominium or hotel inventory in the real estate market without assuming the significant risk that accompanies property acquisition or new construction. This business model offers turn-key solutions for developers or banks in possession of newly developed inventory, which we sell for a fee through our extensive sales and marketing channels. WAAM Fee-for-Service enables us to expand our resort portfolio with little or no capital deployment, while providing additional channels for new owner acquisition and growth for our fee-for-service property management business.
In addition to the WAAM Fee-for-Service business model, we utilize our WAAM Just-in-Time (formerly known as WAAM 2.0) inventory acquisition model. This model enables us to acquire and own completed units close to the timing of their sale or to acquire completed inventory from a third party partner based upon a predetermined purchase schedule. This model significantly reduces the period between the deployment of capital to acquire inventory and the subsequent return on investment which occurs at the time of its sale to a timeshare purchaser. For the most part, inventory is recorded on our balance sheet at the time we are committed to purchase such inventory, which generally coincides with the time of registration.
Consumer loan defaults: As discussed in the “Purchaser Financing” section, we offer financing to purchasers of VOIs. In the event of a default, we are able to recover the inventory and resell it at full current value. We are responsible for the payment of maintenance fees to the property owners’ associations until the product is sold. As of December 31, 2016, inventory on the Consolidated Balance Sheet included estimated recoveries of loan defaults in the amount of $256 million.
Inventory reclaimed from owners’ associations or owners: We have entered into agreements with a majority of the property associations representing our developments where we may acquire from the association’s, properties related to owners who have defaulted on their maintenance fees, provided there is no outstanding debt on such properties. In addition, we frequently work with owners to acquire their properties, provided they have no outstanding debt on such properties, prior to those owners defaulting on their maintenance fees. This provides the owner with a graceful exit from a property that is no longer utilized due to lifestyle changes.
Inventories include unsold, completed timeshare intervals, timeshare intervals under construction and land and infrastructure held for future timeshare interval development at our timeshare properties (collectively, timeshare inventory), as well as hotel inventories consisting of operating supplies that have a period of consumption of one year or less, guest room items and food and beverage items.
Timeshare inventory is carried at the lower of cost or estimated fair value less costs to sell, based on the relative sales value. Capital expenditures associated with our timeshare intervals are reflected as inventory until the timeshare intervals are sold. Consistent with industry practice, timeshare inventory is classified as a current asset despite an operating cycle that exceeds 12 months. The majority of sales and marketing costs incurred to sell timeshare intervals are expensed when incurred. Certain direct and incremental selling and marketing costs are deferred on a contract until revenue from the interval sale has been recognized.
In accordance with the accounting standards for costs and the initial rental operations of real estate projects, we use the relative sales value method of costing our timeshare sales and relieving inventory. In addition, we continually assess our timeshare inventory and, if necessary, impose pricing adjustments to modify sales pace. It is possible that any future changes in our development and sales strategies could have a material effect on the carrying value of our timeshare inventory and purchase commitments for timeshare inventory. We monitor our projects and inventory on an ongoing basis and complete an evaluation each reporting period to ensure that the inventory and purchase commitments for inventory are at the lower of cost or market.
Hotel inventories are generally valued at the lower of cost (using “first-in, first-out”, or FIFO) or net realizable value.
It has been my experience that price per point representations were discretionary based on observations made in real time regarding the client’s perceived ability to pay. There appears to be a much more organized push to create acceptance of inflated price per point values by consumers. The timeline is consistent with Apollo’s takeover.
My recollection is that the most lucrative segment of DRI sales is up sell to existing owners. Given high incidence of owner re-tours it is no surprise that as they ramp up owner marketing to pursue this cash cow, consistency between properties regarding inflated costs creates a more effective sales tool.
When fictional upgrade options/letters are tied to an artificially high sales price per point a disciplined sales force will use this to their advantage.
The higher price is designed purely to strengthen and legitimize the subsequent price that will be offered. It was more random in the past. Since Apollo, it sounds like there is now some standardization regarding price point being offered. I would guess that final purchase price has become more uniform so as not to risk owners comparing prices while on property, and the fact that someone is paying attention, at least for now.
All in all, more questions than answers.
Once again a very informative article from across the “Great Lake”, if you have any questions, views or news, Inside Timeshare would be pleased to hear from you. Having a problem with your timeshare, contact us and if we don’t know the answer, we can find someone who does.
Just recently President Trump made very huge faux pas, announcing there had been a terrorist outrage, in of all places, Sweden. It was laughed at around the world with accusations of “fake news” and making up stories to enhance his views.
Well President Trump is not the only one to do this, on 8 August 2014 the RDO published a statement by Silverpoint. They made a big thing of how Silverpoint had appealed to the High Court and had the lower court rulings overturned. The article also stated that these rulings were not being published. Thereby implying that clients were being deceived, well that is the pot calling the kettle black!
Since then, the Supreme Court has overturned many of the judgments of the Tenerife High Court, that there were indeed breaches of the timeshare laws, with many more apparently in the pipeline. The Supreme Court is the end of the line, it is the Highest Court in Spain there is no where else to go!!
Another assertion (we use that term loosely) was that all cases would be lost, warning clients they would be liable for all costs and Silverpoint would pursue them for it. Well have they updated their views? It would seem not. No update that Silverpoint have lost in the Supreme Court, no update that they have been found to have usurped the timeshare laws, no update that it is they who have to pay clients costs and return the money paid. Sorry, these cases never happened. It’s “fake” news is the impression we all get.
One of the most long running cases is that of Mrs Shirley Wilson, who brought a case against the then Resort Properties, then Silverpoint, over the way she was sold multiple timeshare weeks. The case was originally won at the Court of First Instance, this was appealed at the High Court and overturned. Silverpoint claimed that the clients were “investors” therefore did not come under timeshare law.
This news is fact not fiction, as others would have you believe.
The case eventually went to the Supreme Court, it was overturned, with the Highest Court in Spain declaring that the clients were “Consumers” not “investors” and as such had the full protection of the timeshare laws. This has not been made up, unless the Supreme Court doesn’t actually exist in real life!
Only last week Mrs Wilson attended the offices of Canarian Legal Alliance, one of the so-called “scam exit companies” as the RDO put it in their 19 August 2016 news post. Mrs Wilson also attended a dinner to thank the lawyers and legal team for their efforts and hard work, this was attended by several State Prosecutors. Again this is not “fake news”, it actually happened.
Look we even have photos of the lawyers and a client who don’t exist!
I wonder if the following quote by Mahatma Gandhi is rather appropriate here:
“Truth Never Damages a Cause that is Just”
Or even this quote from Joseph Goebbels:
“If you tell a lie big enough and keep repeating it, people will eventually come to believe it”.
One day, the “fake” news will be replaced by the truth, the truth is starting here, Inside Timeshare will publish the facts. Inside Timeshare will publish what you the consumer needs to know about the timeshare industry. For too long this industry has ruled you, now it is time for you to rule them.