Jetsgo, a Canadian discount carrier, filed for bankruptcy protection yesterday. This isn’t something I would ordinarily write about here, but I don’t practice bankruptcy law and one aspect of the case has me a little puzzled – I’m hoping for some comments from those in the know that might shed some light on this.
Jetsgo seems to have filed on the eve (literally) of the busiest travel season of the year. So, effectively, right at the exact moment (could it have been timed any better?) when it would have received as much as it could ever hope to in payment for future travel but not yet have spent the operating $ required to provide that travel. It’s difficult to accept that this was a coincidence. (In fact, one suspects that this is routinely how bankruptcies are designed.) The Company has made it clear, though for different reasons, of course, that the event was planned (" "The decision to cease operations was only taken after difficult deliberation," said Jetsgo president Michel Leblanc.")
Which raises an interesting question. There is presumably, therefore, a premeditation to the plan to take as much money as possible from the travelling public, with no intention to actually provide them the services purchased. The timing is so impossibly coincidental as to make any other explanation seem quite unlikely. What’s more, this happened at a time when the company knew their customers were at their most vulnerable moment – standing in lines at the airport waiting to leave on vacations.
Why isn’t that fraud?
Sure, bankruptcy law serves important public policy goals by allowing troubled companies time to get back on their feet. But it’s one thing to help businesses to do that, and it’s quite another, or at least it seems to me it ought to be, to allow them to dupe customers by making knowingly false promises, if that’s what happens. Isn’t it?
And, apropos of, for example, the debate in the US over recently enacted amendments to bankruptcy legislation (which many critics claim are designed to protect the credit card industry from customers who file for bankruptcy to get out of the financial difficulties caused by stratospheric interest rates), one wonders whether the law is as concerned about protecting customers from businesses that file for bankruptcy in a manner designed to deceive the customer ….
Update: The Toronto Star has fastened on this issue in its story this morning.
Further update: A friend who knows far more about these matters than I wrote in to say the following:
Taking money under promise of future performance when you know that there is a substantial risk you won’t perform, and where the money taken in is not set aside to cover the future obligations but instead immediately used for current debts (or even worse, personal lifestyle) is fraud.
This from some recent experience he’s had as a creditor in a bankruptcy situation where money was taken when the recipient knew it was effectively insolvent. And here’s the summary he prepared of recent Canadian cases on the matter: