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An End to the BBB's Scandal in Los Angeles

The Southland chapter of the Better Business Bureau was reportedly expelled Tuesday from the national organization.

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The Southland chapter of the Los Angeles Better Business Bureau was reportedly expelled Tuesday from the national organization in the aftermath of a high-profile scandal.

"We worked with them again and again to resolve problems, but there were standards that they just wouldn't meet and we got to a place where we had no choice but to expel them," Katherine Hutt, a spokeswoman for the BBB told Inc. "It was our largest BBB so it was a hit, but the rest of our system is absorbing the work."

The decision came more than two years after an ABC News report that alleged that BBB employees in Los Angeles solicited accreditation dues that cost up to $425 from businesses in exchange for an A-level ratings on the consumer advocacy organization’s website. (Typically, businesses do not need to pay dues to the BBB to receive a rating from them.)

Some businesses that were unwilling to pay the dues were allegedly given C, D, or F ratings, in many cases with only one or two complaints filed against the business in question. Big names such as several of celebrity chef Wolfgang Puck’s restaurants and Disneyland had F ratings on the website.

According to ABC News, anonymous bloggers registered and paid the $425 dues for fake companies to demonstrate money-motivated nature of the BBB rating system. One of their fake companies, Hamas--named for the Palestinian Islamic resistance movement--received an A– rating within 12 hours of the BBB processing its payment. The official contact for the organization was listed as William Mitchell--the name of the CEO of the Los Angeles BBB, who stepped down after the ABC News report came out. 

In a Friday letter to the national BBB group, Jerry Dominguez, chairman of the board of directors of the BBB of Southland, wrote: “Our board has endured repeated, unjustified criticism that we haven’t been exercising our governance responsibilities as the auditors believe we should. Frankly, we’re disgusted with the actions of the Council."

For now, the Los Angeles Southland chapter has lost the right to use the BBB name and logo. Hutt said that, for the time being, the national organization has plans to operate a virtual bureau until a local group is established. She added that, because the Southland branch owns its own rating data, ratings under their jurisdiction have been suspended. But accredited businesses are still allowed to use the logo and a system is still in place for customers to submit complaints.

Last updated: Mar 13, 2013

SAMUEL WAGREICH is a reporter for Inc.com. He covers tech industry culture and trends, entrepreneurship, and issues facing small businesses.
@swagreich




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