Better Business Bureau, BBB total ripoff, fraudulent business representation ripoff Colton California
AS MOST OF YOU ALL ARE UNAWARE OF HOW POORLY THE BBB TREATS SMALL BUSINESS IN SOUTHERN CALIFORNIA!
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THEY ARE A 21ST CENTURY MAFIA! BUYER BEWARE!
BBB has a spotty record
Local Better Business Bureau shows clean records for dozens of problem companies, some facing government action.
June 16, 2002
By CHRIS KNAP
and JAN NORMAN
The Orange County Register
The Better Business Bureau doesn't always live up to its powerful brand name.
The Orange County Register found that the Southern California bureau - the nation's largest - grants positive reports to troubled companies while devoting 40 of its 100 employees to soliciting membership dues from businesses.
The bureau name connotes ethical business practices, fairness and consumer protection. But critics say the Better Business Bureau of the Southland engages in practices that discourage complaints. Until just a few months ago, the bureau charged consumers $5 to lodge a complaint about a business over the telephone.
The Register findings include:
The bureau lists with a satisfactory or clear record more than 50 businesses that have been sued or disciplined by government agencies for shoddy or illegal practices.
The businesses were identified during a check of about 150 firms listed on the bureau's Web site, www.bbbsouthland.org.
At least three businesses accused by California regulators of a pattern of consumer fraud are still members of the Southland bureau.
The bureau gives members an additional chance to clear complaints from their record.
Several business owners alleged that bureau telemarketers promised they could clean up their company record if they paid annual membership fees ranging from $300 to $600. The dues are based on a company's size.
William G. Mitchell, the president of the Southland bureau, acknowledged problems with his telemarketing staff and said he has moved to correct them. But he said no business records were sanitized and that his office never authorized any such offers. He also expressed frustration with the quality of the bureau's reports on individual companies.
Our information is not always right, said Mitchell, who earns $245,000 a year. Is that a good thing? No, it's not a good thing. I'd love to be able to report all this information, but there are limits to the resources and the people. I think we do a hell of a good job with the budget we have.
Others are not convinced.
If you put out information that purports to be accurate and it's not, sometimes it's worse than no information, said Gail Hillebrand, a senior staff attorney with Consumers Union, the publisher of Consumer Reports.
Watchdog or protector?
For more than 75 years, U.S. consumers have relied on the bureau's torch logo and its pledge to encourage integrity in the marketplace. Each local bureau is independent and nonprofit - a franchise of the national organization. Some consumers mistakenly believe the bureau is a public agency. It is not. It is funded almost exclusively by businesses on its membership roster. Consumer advocates say the membership dues create a conflict of interest for the bureau.
Better Business Bureaus nationwide field complaints about local businesses, warn consumers about fraudulent practices, and contract with some corporations, such as major auto companies, to provide dispute resolution over manufacturing defects. But they have no enforcement powers.
The Southland bureau says it provides 159,000 reports a month to consumers - either on the telephone, by mail or on its Web site. The bureau says it has these reports on more than half of the 351,000 companies that do business in Southern California. About 17,200 companies are members.
The bureau warns the public about many questionable companies, such as those offering work-at-home schemes, credit repair and advance-fee loans. Companies in these industries are not allowed to become members.
But consumers logging on to the bureau Web site can't learn how many complaints have been filed against a company. And if there are complaints, the reports often don't say what they are.
When the BBB has a bad report on a business, you can be sure the business is bad, said Ed Magedson, a consumer advocate and creator of RipoffReport.com, a Web site that allows consumers to file, and view, any complaint about a business. But there are a lot of times when there are bad reports on members and you will never hear about it.
Through public records, Web sites and newsletters, the Register found more than 40 businesses that had lost their state plumbing, contracting or auto repair licenses for serious violations. These companies were accused of abandoning projects, performing sloppy work and diverting funds. But they were listed by the bureau as having a satisfactory or clear business record.
Other businesses with troubled records also have clear bureau reports, including a major residential landlord, a chain of auto body shops, an eyeglass maker, and several nail salons.
The newspaper chose companies that had problems in the past and checked the bureau's ratings for each.
Bureau member George Brazil Plumbing of Culver City, which also does business as Mike Diamond Plumbing and Orange County Services Inc., had its licenses suspended for 30 days and was placed on two years probation in 1999 for failing to obtain building permits, abandoning a project, failing to complete a contract for the agreed upon price, and false advertising, according to the Contractors State License Board.
The company did not contest the charges, state documents show, and agreed to pay restitution to consumers plus $11,110 in costs. Michael Diamond did not respond to calls seeking comment.
The bureau's nonpublic files show 34 consumer complaints against Diamond and 15 against Brazil in the past three years, officials said. But the bureau's Web site listed the plumber as having a satisfactory business record. The bureau amended its reports in this case and a half- dozen other companies after interviews with the Register.
The ratings of George Brazil and Mike Diamond were changed last month to include a complaint history that reveals that some consumers felt overcharged.
Mitchell said George Brazil's membership was suspended in 1997 by the staff after a series of complaints. But Diamond himself appealed to the bureau's board, which overruled the staff and re instated his membership.
Mitchell said his staff later reviewed the complaint history against Brazil, determined that it had improved, and revised the firm's report, giving it a satisfactory rating. At that time Brazil was still on probation.
The report shouldn't have said that,'' Mitchell conceded. I can't explain why the probation wasn't reflected.
The revised report on George Brazil still says nothing about the state discipline, suspension or probation.
Another bureau member, Arnel Management Co. of Costa Mesa, which manages 4,500 apartments in Orange County, agreed last September to pay $1.45 million to settle state attorney general allegations that it illegally overcharged thousands of tenants on security deposits, repairs and cleaning from March 1997 to September 2001. Arnel denied wrongdoing but agreed to refund $1.1 million to former renters.
Mitchell says he knew about that lawsuit. But Arnel was listed as having a satisfactory record until May 24. On that day, Arnel's report was updated to reflect the lawsuit and settlement.
Arnel was allowed to keep its membership, in apparent violation of the bureau's own rules: The membership agreement requires members to be free from any governmental action directly relating to the basis of its customer relations or fraud in the marketplace.
That's a judgment call, Mitchell said. It's possible they could be suspended, but I haven't made up my mind.
SLIPPING THROUGH THE CRACKS
Plenty of nonmembers with questionable business practices also slip through.
Vista Pacifica convalescent hospital of Riverside - where the administrator was convicted of failing to report criminal elder abuse by an employee - showed a clear record.
The company's report was revised May 24 to reflect the government actions. Vista Pacifica's administrator did not return phone calls.
Mitchell said the bureau is working to change its Web site so a listing of complaints will be visible to consumers. He also said that when the bureau does act aggressively to combat fraud it often gets dragged into court.
Take the case of Omenicus Financial Corp., of Irvine, which guarantees a 30 percent return on a commercial real estate investment - and boasts that returns will more likely be 100 percent.
The Securities and Exchange Commission and other regulators warn consumers about this type of promise. The only truly guaranteed returns are from a bank deposit or bond insured by the U.S. government.
The bureau had rated Omenicus satisfactory. Omenicus advertised its bureau membership on its Web site. Told by the Register about the company, Mitchell investigated. He asked Omenicus to document that it had extensive commercial real estate holdings returning high margins on equity.
When the company refused, he pulled its membership and revised its bureau report to warn investors that the company is not registered with the California Department of Corporations and that its guarantee is of questionable benefit.
One week later, on May 16, Omenicus sued the Southland bureau for defamation.
Robert Scott, president of Omenicus, said the bureau's report contains numerous errors and has damaged his business. Scott acknowledged that neither Omenicus nor its partnerships own any commercial real estate at this time. But five parcels in California and New York are in escrow, he said.
Benefit of the doubt
More than a dozen Orange County consumers who contacted the Register described unsatisfactory experiences when they tried to use the Southland bureau to find an honest business or complain about a dishonest one.
Consumers were particularly annoyed that for years they had to pay $5 to file a telephone complaint and $3 to have the bureau research the number of complaints against a business.
Mitchell said the fees, which raised about $150,000 a year, were halted earlier this year.
Some people clearly were turned off by them, he said.
Other consumers complained that the bureau didn't answer the phone, never followed up or wouldn't take a report. Jim Troeller, a Fullerton locksmith, wrote to the Southland bureau two years ago about a local computer builder that he says sold him a defective computer then defaulted on the warranty.
The company responded by saying Troeller owed money for repairs and it was going to sue. The company didn't sue. But that explanation was good enough for the bureau. They told me, 'We closed the file.'
I see so many references to the BBB as if its some sort of watchdog, but it's not, Troeller said. It's just a paper-shuffling organization.
Mitchell said that because the bureau has no police powers, it can only urge businesses to do the right thing.
If we think the business is being reasonable, that they are addressing the allegations, we would close it that way, Mitchell said. If you call that giving the benefit of the doubt to business, I guess that's what it is.
Drive for members
The Southland bureau has a permanent telemarketing department to solicit business memberships, which account for about 77 percent of the bureau's $4.9 million annual revenue.
The 40 telemarketers, who are paid solely on commission, make thousands of calls to businesses every week. The bureau has four staff members who investigate complaints.
The Register surveyed 180 Orange County business owners about the bureau. Of the 97 that responded, 89 reported negative experiences. More than a dozen business owners said telemarketers told them they had received complaints about their company - sometimes in a harassing tone. Others said telemarketers told them there were inquiries in such a way that it sounded as if a complaint had been filed.
For a business owner, it was a little bit like finding '60 Minutes' out in your lobby, said Donna McGovern, owner of Custom Business Results Inc. of Huntington Beach.
After complaints from business owners were reported in the Register, Mitchell instructed his telemarketers to make clear that their calls are about soliciting memberships, not about consumer complaints.
More serious are allegations from some businesses who say bureau employees offered to clean up negative reports if they joined.
Dan Golka of United Home Improvements in Tustin said a bureau telemarketer told him he could make a complaint go away by joining. Golka said his bad report stemmed from a dispute with now-defunct HomeBase, which urged consumers to complain to the bureau about him.
It was a shakedown, said Golka, referring to the bureau. Pay $300 for a good recommendation.
Allan Lobel of A-L Financial, a Santa Ana lender, had a similar encounter when he called to resolve complaints attached to his file.
The girl said, 'Join first, then we will look at the record,' Lobel said.
Mitchell said it's impossible to eliminate all problems with telephone solicitations.
I can tell you with absolute certainty: We would never, ever wipe out a complaint to get a membership, Mitchell said. We will not under any circumstances compromise our integrity.
Mitchell noted that numerous consumers have complained to the bureau about the Register's telemarketers - resulting in an unsatisfactory bureau rating for this newspaper.
Our telemarketers do not misrepresent the nature of their calls, said N. Christian Anderson III, the Register's publisher and chief executive officer.
Mitchell said it's possible that some of his telemarketers told businesses that a membership could help clear their record.
But he said those statements were unauthorized and false and that no salesperson has the access necessary to change a business report.
If a company has a legitimate complaint about something that appears in its report, he said, his staff will consider removing it. We have to consider the company's point of view, he said.
We do need to keep the lights on. But if we take money from someone who is fraudulent, it hurts our reputation. If some little old lady sees the BBB name on one of these companies and gets taken, I can't tell you in strong enough terms that is the absolute last thing I want to see happen.
Local BBB tops in U.S. in members, revenue
The Better Business Bureau of the Southland is the largest and most prosperous of 128 bureaus nationwide.
That success is due partly to Southland's perpetual membership drive. The Southland bureau's revenues have risen steadily in the past few years, reaching $4.9 million in 2000-2001. Seventy-seven percent of that is from dues paid by 17,200 members. The bureau - like all others nationwide - operates as a nonprofit business.
This is not a charity; this is an enterprise, Southland Chief Executive William G. Mitchell said. We're not seeking grants from anybody. Our bills are paid by memberships.
That financial success is one reason Ron Berry of the Council of Better Business Bureaus in Virginia calls Southland one of the best bureaus in the nation.
Mitchell has been rewarded for shepherding that growth. He earned $245,000 last year, more than the head of the national Council of Better Business Bureaus, which licenses the name and logo to local bureaus.
Mitchell not only makes almost one-third more than his national counterpart, he is paid almost three times more than the average chief executive of comparably sized nonprofit groups, according to a study by Abbott Langer & Associates.
Mitchell ran the Inland Empire bureau until the Los Angeles / Orange County bureau ran into trouble and folded in 1987. A year later, Mitchell merged his bureau with the Los Angeles / Orange County one.
LOS ANGELES, California
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