Mexican timeshare scams thousands

When Enid Masotti heard about the police raid last spring at the Sol Caribe timeshare and vacation club resort on the Mexican Caribbean resort island of Cozumel, she began to hope her problem might be resolved.

The federales had dogtrotted managers and employees out, carried off time-share sales files and padlocked offices.

But the multi-million-dollar Mexican timeshare scandal is nowhere near resolution. Masotti and at least 2,800 other tourists who thought they’d bought tiny slices of a Mexican Caribbean paradise have lost up to $25 million U.S. They are victims of a fraud-laced struggle between two Mexican resort companies.

Fraud charges laid
Enid and her husband, John, of Hamilton, paid $8,000 U.S. in July 1999 for their Sol Caribe timeshare. They never used it. Their first booking, for March 2000, was cancelled when a call from Cozumel told them not to show up for their week’s confirmed accommodation. The hotel would not honour the reservation.

The Sol Caribe had collapsed. Fraud charges had been filed against the hotel’s holding company, C.C. y G, owned by Cozumel’s prominent Munoz de Cote family. Charges were also filed agnst family member and hotel manager Gustavo Miranda’s Tutti Mundi timeshare operation.

Scandal hugely embarrassing
The scandal is hugely embarrassing, admits Roberto Marroquin, president of the Association of Vacation Clubs of Cozumel.

“It doesn’t help the image of Cozumel at all,” he concedes, saying his organization tried to get Mexico’s consumer protection agency, PROFECO, to intervene before the mess blew up. Unfortunately, they “did not act appropriately and immediately.”

Some 70 Canadians hold worthless Sol Caribe contracts. The Masottis bought theirs with their American Express card and were not reimbursed by Amex. 

Timeshare is huge
Mexico’s timeshare industry is big business. It encompasses 273 timeshare resorts and more than 568,000 timeshare owners (16 per cent of the world’s total). Total sales since the 1970s is worth $6 billion U.S.

While there are frequent small-scale frauds, massive scandals like the Sol Caribe are rare. Gloria Collinson is executive director of the Canadian Resort Development Association (CARDA).

She says the sad fact is the Masottis “bought from an organization in another country under its laws. So Canadian law doesn’t apply, and there’s no reciprocal legal entity that can deal with it.”

Next page: Lawsuit is last hope

Lawsuit is last hope
The Masottis’ last hope is a lawsuit launched by an American who’s using the Internet to fight back. A dozen Canadians have tagged onto the group of 270 people rounded up by Schaefer O’Neill, a software developer from North Carolina, through his website
Some victims, like Burlington, Ont., scuba diving instructor Michael Levy, aren’t suing. Unlike the Masottis, they managed to get credit card refunds. Levy and his wife, Rosamund, visited Cozumel for years and watched the charming island become a bustling resort holiday destination where timeshare “sharks”, endemic in trendy Mexican resorts, began to proliferate.

Playing the game
Levy played the timeshare pitch game for years, taking bait such as free jeep rentals or dive trips. He sat through sales presentations where sales teams dangled inducements such as free bonus weeks or discounted maintenance fees, while threatening the offer was off if he left to think about it.

He finally bit in 1997. The couple paid $7,500 U.S. for 30 weeks. The following year, they upgraded to all-inclusive status for another $4,500 U.S. Annual maintenance fees were a flat $250 U.S. for each week the room was used by up to four people. By 2000, when the bubble burst, they’d used five weeks.

Levy got his refund because the services he’d contracted would now not be rendered. The process is called charge-back. The issuing bank (the credit card bank) refunds the customer and charges the cost back to the acquiring bank-in this case, the Mexican bank that received the Levys’ money.

Deals looked solid
Consumers who bought Sol Caribe timeshares had no way of knowing the potential trouble they were buying. In fact, for many years, they were buying a solid deal.

Industry players like RCI (Resort Condominiums International, the world’s biggest time-share exchange company), II (Interval International) and VNI (Vacation Network International) worked with the hotel.

The Royal Holiday Club, headed by businessman Pablo Gonzalez Carbonell, who’s also president of the Mexican time-share industry association AMDETUR, sold time-shares there.

The Royal Holiday Club’s parent company is giant resort developer Grupo Costamex. Time-share sales went so well Costamex put up money for a second hotel tower.

Next page: Hurricane aftermath

Hurricane aftermath
But in 1995, Hurricane Roxanne roared through Cozumel. The Sol Caribe was hit hard. Insurance companies paid $8 million U.S. to repair the damage, but few repairs were done.

For some unknown reason, hotel manager Gustavo Miranda threw out Carbonell’s Royal Holiday Club and started peddling time-shares through his own company, Tutti Mundi.

The second tower Costamex had financed was left to moulder. Grupo Costamex and the Royal Holiday Club sued the Sol Caribe and its owners.

As the legal mess mounted, Tutti Mundi stepped up time-share sales activities, even as international timeshare exchange organizations hastily began to sever relationships with the hotel.

RCI left in 1998. Century 21/TRI-Timeshares, a time-share “re-seller” (for a fee, they’ll sell your time-share week as a hotel room and give you the profit), pulled out in late 1999.

O’Neill thinks time-share companies generally should “have some responsibility to make sure the companies they’re doing business with are reputable. This was out-and-out fraud.”

Mess is bad
“The mess it’s in is pretty bad,” notes Rod Hackman, editor of the Hawaiian-based Timeshare Beat online magazine who’s followed the unfolding financial disaster closely.

“Right now down there, you’re facing the legacy of virtually 27 years of no government interference — not from PROFECO, not from anyone.”

Hackman suspects O’Neill’s lawsuit will go nowhere. He’s not surprised PROFECO has been useless.

“If there’s not a cut in it for them, they’re going to pass it on-eventually to the federales who will confiscate the properties because there’s a lot of money at stake.”

Companies took over
The federales did raid the Sol Caribe in February of last year. Within days, the hotel re-opened as the Crown Paradise-managed by Grupo Costamex, the company the Munoz de Cotes had once spurned.

And tourists were again buying time-shares from Pablo Carbonell’s Royal Holiday Club-which the Munoz de Cotes had thrown out in 1995.

The festering problem of the victimized time-share owners would evaporate, points out Hackman, if resort developer Grupo Costamex and the Royal Holiday Club honoured the 4,000 Tutti Mundi contracts sold by the Munoz de Cote family.

But that’s not likely to happen. And there’s not a thing Enid Masotti and thousands of others can do about it-except hope Schaefer O’Neill’s long-shot lawsuit succeeds.
Judy Waytiuk is a freelance travel writer based in Winnipeg.