STA Travel used clients’ money to cover salaries and rent

By RNZ

STA Travel has been using New Zealand client deposits for overseas holidays to cover company salaries and office rentals, RNZ Checkpoint may reveal.

In their first report to creditors, Deloitte administrators say they have discovered a “significant mix of funds” within the company’s bank accounts here and around the world.

That has prompted a warning for Kiwi travelers who are considering using agents not registered with the industry association.

Abbey L’Estrange missed the three-month trip of her life when Covid-19 closed borders around the world.

But to make matters worse, he has now lost $ 10,000 due to STA Travel’s plummeting into insolvency.

“I was hoping that I could invest in buying a house this year to do something good in 2020. I couldn’t follow through with my travel plans, I thought it might be a good thing to get out of this, but if I don’t see any of that, I probably won’t it’s going to happen, “he said.

Travelers like L’Estrange, who deposited thousands of dollars for their trips abroad, could be forgiven for thinking that those funds would go towards the getaway of their dreams.

But sources within STA have told Checkpoint that this was not always the case, and customer funds are often diverted to pay for company expenses.

Those claims are confirmed in a report just released by Deloitte administrators, obtained by Checkpoint.

It claims that money withheld by STA, in the form of customer deposits for travel, as well as refunds reimbursed by suppliers such as airlines for trips that never happened, have been wasted elsewhere.

“Was the money received by STA related to customer deposits and refunds used for operational expenses such as staff salaries, PAYE and rent? We are still working on that, but it seems the answer to that question is yes,” he said Deloitte’s administrator and national director of turnaround services, David Webb said.

Together with his colleague Colin Owens, he has been investigating the cause and consequences of the closure of STA Travel NZ, which was caused by the bankruptcy of the Swiss-based parent company STA Travel Holdings AG.

He said many STA clients who pay out of pocket believe their deposits and refunds were held in a trust account of STA Travel NZ.

“The money was not kept in a trust account,” Webb said.

Instead, they were kept in a so-called customer fund account.

Trustees’ investigations have found that the funds in that account were sent to international STA entities for payments to providers.

The funds were also channeled to STA Travel NZ’s operating account, and from there they were used to pay company expenses.

As to whether it was legal, Webb said he would not comment, but repeated that the money was not in a trust account.

“There is no law that says travel agents have to keep money in a trust fund, it’s not like a real estate agent or anything like that,” the associate professor of business law at the University of Auckland told Checkpoint, Alex Sims.

However, Sims said the problem of agencies not using clients’ funds to pay for their trips had caused problems in the past.

The practice came as a surprise to the liquidator investigating Auckland’s Guru Travel affairs when it failed last year.

“The liquidator actually said that they thought it was irregular that it was not being held. So it may be something that’s being done in the industry, but it doesn’t really mean they have to do it legally.”

In Deloitte’s report to creditors, Webb and Owens said they have faced difficulties accessing the company’s records.

Financial records have been particularly difficult to come by, because they were prepared and maintained by an STA team located in Romania.

The downfall of STA Travel NZ has prompted Webb to issue a warning to New Zealand travelers.

“It is really important that when people book with travel agencies that are, particularly here in New Zealand, registered with TAANZ, the Association of New Zealand Travel Agents, but also, where possible, they book with credit cards that provide the possibility of obtaining more insurance. “

But that word of caution doesn’t help clients who have already been affected by the STA mess, like L’Estrange.

“It has been quite stressful. $ 10,000 is a lot of money to lose,” he said.

And it only gets worse for STA Travel NZ creditors, with losses now totaling $ 11.1 million and continuing to mount.

STA Travel’s global management has not responded to requests for comment, and the former general manager of STA Travel in New Zealand has directed questions to administrators.

– RNZ