Travel website YourTravelBiz.com International (YTB), which signed up 700 Bermudians, has suffered a setback after two of its board members quit and it posted a first-quarter loss.

The Alton, Illinois Telegraph revealed that Dr. Timothy Kaiser decided not to run for another term on the YTB board and Clay Winfield resigned, as recorded in filings with the US Securities and Exchange Commission (SEC).

Last night, YTB said total revenue for the first quarter of 2009 plunged 49 percent to $21.8 million, compared to $42.7 million for the first quarter of 2008, as the company made a net loss of $1.9 million. This follows a $4.5 million full-year loss for 2008.

YTB chief executive officer Scott Tomer said the loss reflected "the difficult economic environment that has affected, and is continuing to affect, the entire travel industry".

"To overcome this trend we put into place significant cost containment initiatives that included a reduction in labour and fringe costs, as well as reductions in our discretionary spending," Mr. Tomer added.

"The reductions in labour and fringe costs were approximately $1.1 million for the full year 2008 and approximately $800,000 for the three months ended March 31, 2009. I am also excited about the major sales initiative that the company intends to roll out in the coming months."

The newspaper said that YTB also announced it has reached a tentative settlement for a civil lawsuit filed against the company by the state of California to shut it down.

In August, The Royal Gazette reported that in a statement on the State of California's Office of the Attorney General webpage, California Attorney General Edmund Brown alleged that YTB operated a "gigantic pyramid scheme" that recruited tens of thousands of members with deceptive claims that members could earn huge sums of money through its online travel agencies.

In the same month, Independent MP and former United Bermuda Party leader Wayne Furbert, who set up his own affiliated business last year, was at YTB's US national convention in St. Louis, along with 20,000 people, including 44 Bermudians. Mr. Furbert told the paper yesterday he was waiting to see what the outcome of the settlement was before deciding his next move.

Fellow Bermudian Kenneth Minors, based in Lexington, Kentucky, also contacted the Gazette last year to tell the paper about the franchise of YTB Travel, of Illinois, called Minors Travel, which he runs, in a bid to target business in the Bermuda market.

The Alton, Illinois Telegraph reported that both Dr. Kaiser and Mr. Winfield were principal shareholders of Meridian Bank, which was shut down by the Federal Deposit Insurance Corp. and state regulators, who accused the bank management of unsafe and unsound lending practices.

The pair were also named in a foreclosure lawsuit against Meridian Land Co. State records list - Mr. Winfield as the secretary of Meridian Land Co. and Dr. Kaiser as president. The bank had loaned the land company money to build the former YTB headquarters in Edwardsville, said the paper.

In the foreclosure suit filed early this year, said the publication, Associated Bank of Green Bay, Wisconsin, claimed the land company owed millions of dollars in past-due mortgage payments.

Associated Bank claimed the land company was behind on loans taken out as early as 2005.

Both Dr. Kaiser and Mr. Winfield had been on the YTB board since 2005.

The California Attorney General's Office filed its suit last August to stop the Wood River-based company from operating in that state. The Better Business Bureau of Eastern Missouri and Southern Illinois claimed that there have been consumer complaints filed about YTB in 31 states in the US, said the paper.

Two groups of attorneys have also filed class action suits, claiming YTB is nothing more than "an elaborate pyramid scheme".

The class actions claim people taken in by the alleged scheme wanted to earn money by becoming marketing representatives selling travel packages over the Internet on individual websites. They paid a $500 licence fee and a monthly fee of $50.

They were told they could earn more money by recruiting others to join the firm, and lawyers claim the real money was to be earned that way, instead of actually selling travel to the public.

The California suit claimed 62 percent of more than 200,000 people who paid to join the YTB business failed to earn a single travel commission.

But company officials have denied any wrongdoing. However, an outside auditing firm recently filed a report with the SEC questioning the company's management practices. The auditors claim the board had little control over managers' spending, and company officials signed contracts without board approval.

Another SEC filing said the company officers took pay cuts last year, but still managed to earn millions of dollars.

Founder and chairman Lloyd (Coach) Tomer made $2.98 million in total compensation in 2008, down from $3.3 million in 2007. Mr. Tomer made $1.02 million in total compensation last year, down from $1.99 million the year prior.