Photo/IllutrationChikako Yamada, 67, president of Tellmeclub, speaks at a news conference at the Ministry of Land, Infrastructure, Transport and Tourism. (Asahi Shimbun file photo)

Police arrested the president and a former employee of discount travel agency Tellmeclub, whose bankruptcy burned 90,000 would-be tourists and prompted a review of the reimbursement system in the industry.

Chikako Yamada, 67, and Toshiyuki Sasai, 36, who was in charge of accounting at Tellmeclub, are accused of fraudulently gaining a bank loan worth about 200 million yen ($1.76 million) by window-dressing the company’s financial statements, Tokyo police said Nov. 8.

Tellmeclub is also believed to have obtained another loan worth about 200 million yen from the same bank based on fake invoices, investigative sources said.

The two suspects have generally admitted to the allegations, according to police.

The Tokyo-based company’s dirt cheap prices for overseas tours were described in the industry as “impossible” to maintain.

This description proved correct; Tellmeclub was already struggling financially in the business year to September 2014.

Police suspect Yamada, from Tokyo’s Machida, instructed Sasai, from Kasukabe, Saitama Prefecture, to perform the misdeeds to gain the loans in an attempt to keep the company afloat and to pay its business partners.

Forged documents and counterfeit papers stamped with seals were used to obtain the loans from Sumitomo Mitsui Banking Corp., according to the sources.

From June to September 2016, the suspects submitted fake invoices, inflated financial statements and other falsified documents to the bank to make it look like Tellmeclub was in a healthy financial state.

The company received the first loan after the suspects said they needed money to charter aircraft for tours.

Police found no evidence that any of the money was used to charter aircraft, the sources said.

The company around December 2016 obtained the second loan also based on fake invoices, the sources told The Asahi Shimbun.

Tellmeclub filed for bankruptcy protection at the Tokyo District Court on March 27.

The move affected up to 90,000 individuals who had paid a total of 9.9 billion yen to reserve seats on about 36,000 tours.

Only a small fraction of the total will be reimbursed, according to the sources.

“It’s totally unforgivable,” said a 33-year-old woman from Chiba Prefecture who paid 274,000 yen for a tour. “The money I saved up so hard vanished in a blink of an eye.”

Tellmeclub’s low prices were widely known.

One person at another Tokyo-based travel agency said the cheap prices of its competitor were shocking.

Airline companies sell unsold seats at lower prices to travel agencies such as Tellmeclub, which can then curb their own tour fares.

“We relied on Tellmeclub as a company to sell our leftover seats over a certain period,” said an executive of a major airline company.

However, as fuselages shrank in size, airlines had fewer leftover seats, leading to a drop in sales of seats to discount travel agencies.

Tellmeclub also got caught up in the online price-slashing war among travel agencies.

Many in the industry believed it was only a matter of time before Tellmeclub’s business model would reach a deadlock.

After the collapse of Tellmeclub, the Japan Tourism Agency set up an expert panel in April to review the supervision and reimbursement system for travel agencies.

As early as this fiscal year, the agency is expected to check the financial statements of travel agencies offering overseas tours every year from the current system of every five years.

The tourism agency will demand travel agencies clarify the purpose of money collected from customers who are asked to pay in advance.

It will also prohibit travel agencies from using agressive advertisements that encourage people to pay at an early stage.