The Case of Michael McDonagh’s Multimillion-Dollar Scheme
In a world where travel is increasingly accessible and desirable, the concept of timeshares has grown in popularity. However, alongside the rise in timeshare ownership, there has been a parallel surge in timeshare scams, preying on unsuspecting owners. One recent example of such a scam was the multimillion-dollar boiler room operation led by Michael McDonagh, which left dozens of timeshare owners out of more than $3.5 million. Let’s look closer at timeshare fraud: lessons for owners
On May 8th, 2023, the Department of Justice (DOJ) from the Central District of California publicized a statement announcing McDonagh’s guilty plea for wire fraud. The purpose of this article is to shed light on timeshare fraud and offer valuable lessons to owners.
The McDonagh Timeshare Scam
According to the DOJ, Michael McDonagh was the mastermind behind a complex network of telemarketing companies that targeted timeshare owners with promises of financial relief. McDonagh controlled several companies, including Irvine-based Global Transfer Inc., Costa Mesa-based Global Transfer SoCal Inc., Santa Ana-based Nationwide Transfer Inc., and Signal Hill-based Nationwide Exit Specialist Inc., all purporting to offer timeshare relief services. In reality, these companies were part of a sophisticated telemarketing scam, designed to exploit timeshare owners.
When one of his companies started receiving too many consumer complaints, McDonagh would simply establish a new one to continue his fraudulent activities. The scam ran from 2015 to May 2019 and followed a predictable pattern. Initially, ‘Openers’ from McDonagh’s companies would contact timeshare owners, offering to help them terminate their timeshare interest for a fixed fee. If the timeshare owner showed interest in their services, the call was transferred to a ‘Closer’.
The closer’s job was to convince the victims to sign contracts with the telemarketing companies to get them out of their timeshare for a so-called “one-time fee”. However, the scam didn’t stop there. Once the victims had paid the initial fee, they were contacted again within weeks and fed a series of lies designed to extort more money from them. McDonagh was quoted in the matter as instructing his team of telemarketers to…
“Take No Prisoners – Have No Remorse – Take Every Penny You Can”
McDonagh’s Timeshare Fraud Scheme Causes Millions in Losses
For instance, some victims were falsely informed that they could obtain a large settlement payment based on supposed litigation against their timeshare company, but only if they paid an additional fee. Similarly, McDonagh and his associates made false promises of securing a substantial “restitution” payment from the victim’s timeshare company, claiming that the timeshare company had illicitly rented out the victim’s timeshare property without their consent.
In his plea agreement, McDonagh admitted that his activities and those of his associates caused over $3.5 million in actual losses, with the money being accrued through his fraudulent telemarketing companies. Officials have confirmed that the four individuals charged in conjunction with McDonagh have also admitted guilt to a single count of wire fraud. Upon sentencing, McDonagh could be subject to a maximum term of 20 years in a federal penitentiary.
Tips for Timeshare Owners to Avoid Scams
The case of Michael McDonagh and his scheme serves as a stern warning for timeshare owners. Here are some tips to help timeshare owners protect themselves from becoming victims of similar scams:
- Be wary of unsolicited offers: Be skeptical if you receive an unsolicited call or email from a company offering to help you terminate your timeshare interest.
- Research the company: Before doing business with any company, do your homework. Check for consumer complaints, look at online reviews, and verify the company’s standing with the Better Business Bureau.
- Understand the fees: Be suspicious of companies that charge high upfront fees or repeatedly request additional fees. Genuine timeshare resale companies will clearly explain their fee structure upfront.
- Watch out for false promises: Be cautious of any company that guarantees a large settlement or restitution payment from your timeshare company. These are often tactics used by scammers to trick you into paying more money.
- Seek legal advice: Before making any decisions, seek legal advice from a licensed attorney who specializes in timeshare law. This is the best way to ensure that your rights are protected.
- Understand your legal rights: As a timeshare owner, it’s crucial to be aware of your legal rights under the contract.
- Consider all factors when exiting a contract: If you’re considering exiting a timeshare contract, be aware of the legal implications, potential fees or penalties associated with cancellation, and other possible costs. Ensure all documents related to the contract are in order and kept in a safe place as you may need to refer back to them when dealing with any legal ramifications.
- Explore alternatives: Exiting a timeshare contract may not be the right choice for everyone. Consider alternatives such as working with a licensed real estate broker who handles timeshares.
- Have an exit strategy: If you’re looking to exit a timeshare contract, it’s important to have a strategy in place. This could involve negotiating with the resort, or finding someone to take over the contract. In any case, consulting with legal counsel is essential.
- Seek professional advice: When considering exiting your timeshare contract, working with a knowledgeable attorney or financial adviser is important to ensure you are making the best choice for your individual circumstances and financial future.
A Tale Full of Lessons For Owners
The story of Michael McDonagh and his multimillion-dollar timeshare scam serves as a stark reminder of the risks inherent in timeshare ownership. However, by following these tips, timeshare owners can protect themselves against potential scams and make informed decisions regarding their contracts.
This article is for information purposes only and is not considered legal advice. If you feel you need a timeshare attorney, reach out directly for legal assistance about your matter.
Led by timeshare attorneys J. Andrew Meyer and Michael D. Finn with over 75 years of combined experience. The Finn Law Group is a consumer protection firm specializing in Timeshare Law. For a free consultation, please contact our office at (727)214-0700 or email us at [email protected]
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