STA Travel used customers' money to cover wages, rent

In its first report back to creditors, administrators Deloitte say they have uncovered a ...
In its first report back to creditors, administrators Deloitte say they have uncovered a "significant co-mingling of funds" within company bank accounts. Photo: Getty Images
STA Travel has been using New Zealand customers' deposits for overseas holidays to cover company wages and office rent, Checkpoint can reveal.

In its first report back to creditors, administrators Deloitte say they have uncovered a "significant co-mingling of funds" within company bank accounts here and globally.

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

Abbey L'Estrange missed out on a three-month trip of a lifetime when Covid-19 shut borders around the world.

But to make it worse, she has now lost $10,000 due to STA Travel's nosedive into insolvency.

"I was hoping I could possibly put it towards buying a house this year to make something good out of 2020. I wasn't able to go on my travel plans, I thought that could be something good to come out of it but if I don't see any of that back it's probably not going to happen," she said.

Travellers like Abbey, who deposited thousands of dollars for their overseas trips, could be forgiven for thinking those funds were going towards their dream getaways.

But sources inside STA have told Checkpoint that was not always the case, and customers' funds were instead often syphoned off to pay for company expenses.

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

It states that money held by STA - in the form of customers' deposits for trips, as well as refunds paid back by providers like airlines for trips that never happened - has been squandered elsewhere.

"Was money received by STA relating to client refunds and deposits used for operating expenses, such as staff wages, PAYE and rent? We are still working through that but it would appear the answer to that question is yes," administrator and Deloitte's national head of restructuring services David Webb said.

With his colleague Colin Owens, he has been investigating the cause and fallout of STA Travel NZ's closure, which was proceeded by the failure of Swiss-based parent company STA Travel Holdings AG.

He said many out-of-pocket STA customers believe their deposits and refunds were held in a trust account by STA Travel NZ.

"The monies were not held in a trust account," Webb said.

Instead, they were held in a so-called client fund account.

The administrators' investigations have found that funds in that account were forwarded to STA international entities for supplier payments.

Funds were also funnelled into STA Travel NZ's operating account, and from there used to pay for company expenses.

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

"There's not actual law saying that the travel agents have to hold the money in a trust fund, it's not like a real estate agent or anything like that," University of Auckland associate professor in commercial law Alex Sims told Checkpoint.

However, Sims said the issue of agencies not using customers' funds to pay for their travel had caused issues in the past.

The practice raised eyebrows for the liquidator investigating the affairs of Auckland's Guru Travel, when it failed last year.

"The liquidator actually said they thought it was irregular that it wasn't being held. So it may be a thing that's done in the industry, but it doesn't actually mean to say they legally have to."

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

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

STA Travel NZ's downfall has prompted Webb to give a word of warning for New Zealand travellers.

"It's really important that when people are booking with travel agencies that they are, particularly here in New Zealand, registered with TAANZ – the Travel Agents Association of NZ – but also where possible, booking on credit cards which give you the ability for further insurance."

But that word of warning's no help for customers already stung by the STA mess, like L'Estrange.

"It's been pretty stressful. $10,000 is a lot of money to lose," she said.

And it only gets worse for creditors of STA Travel NZ, with losses now totalling $11.1 million and counting.

STA Travel's global management has not replied to requests for comment, and STA Travel's New Zealand former general manager has directed questions to administrators.

 

 

Advertisement

postanote_header_620_x_80.png

postanote_620_x_25.jpg

Local trusted journalism matters - now more than ever

As the Covid-19 pandemic brings the world into uncharted waters, Star Media journalists and photographers continue to report local stories that matter everyday - yours.

For more than 152 years our journalists have provided Cantabrians with local news that can be trusted. It’s more important now than ever to keep Cantabrians connected.

As our advertising has fallen during the pandemic, support from you our reader is crucial.

You can help us continue to provide local news you can trust simply by becoming a supporter.

Become a Supporter