Letter scams business owners into paying fee
An alleged scam that for years has duped unsuspecting business owners across the country into paying exorbitant fees under the guise of coming into compliance with state regulations has made its way to the Westside.
Just last week, the Westside Economic Collaborative (WEC) received a suspicious-looking piece of correspondence from the Annual Minutes Compliance Board (AMCB), asking the Culver City-based non-profit to cut a check for $95 to pay for the preparation of minutes from its annual Board of Directors meeting. The two-page form cited various state codes that mandate corporations keep records of their shareholder and board of directors meetings, leaving the impression that if the WEC failed to respond, the organization would be out of compliance with state regulations.
“I looked at it and it didn’t seem right to me,” Palazzolo said.
He became even more suspicious when he saw a few typos throughout the form, including grammatical and spelling errors. Curious, Palazzolo ran a quick Google search and found a number of sites that confirmed his suspicion — the Annual Minutes Disclosure Statement was part of a scam that had been circulating the country the past few years under various names.
“Overall it looks pretty darn good and I bet you they’re doing quite well on it,” Palazzolo said.
The alleged scam has been making rounds across different states in different iterations, some under the title of Corporate Compliance Recorder, others as the Compliance Annual Minutes Board, all insinuating that the addressee should pay a fee, which ranges from $95 to $150, to avoid falling out of compliance. One resident in Oregon noted in his blog, Hinessight.blogs.com that he received a letter in an “official-looking envelope” from the Corporate Compliance Recorder, asking that a non-profit organization with which he’s a secretary pay a $95 fee.
“I believe this is the first time our annual corporation fee is due, so at first I thought the mailing was for real,” the blogger stated in his 2005 entry. “But the $95 fee was steep, and I’d never heard of a requirement to disclose annual minutes.
“Of course, there isn’t such a requirement.”
Locally, more than 17 complaints have been filed with the Better Business Bureau’s Southland division since 2004, many of which are from business owners who ended up paying the fee and were demanding a refund as well as an apology.
Many of the complainants mention that the notice appears as though it were sent from a state-affiliated agency and that the return address was listed as being in Sacramento. The form that the Westside Economic Collaborative received lists a P.O. Box address in Los Angeles, the same address that received the majority of the Better Business Bureau complaints.
The forms also state that the payments are “due now,” which according to Gary Almond of the Better Business Bureau, should be a sign of a scam.
“Government agencies aren’t out there soliciting people to file this in a timely fashion,” Almond said of meeting minutes. “It’s incumbent on the person running the corporation to keep on (top of the meeting of records).”
While there is nothing inherently wrong with the service that the AMCB is allegedly offering, the deception of business owners lies in the marketing tactic, according to Jonas Grant, a Burbank attorney who has represented a client who filed a lawsuit against one of the suspect companies.
Corporations are required by law to keep a record of minutes from the annual meeting of shareholders when officers are elected. The problem with the form is it implies that the corporation is required to file the minutes, when it actually just needs to make sure it has one on record, Grant said.
Grant noted that one of his clients who paid the fee to the compliance board did receive back the meeting minutes, though it was written in an unprofessional manner, he said.
When receiving similar types of letters, one of the warning signs that businesses can watch out for is the price of the fee, which should never be more than $25, Grant said.
Business owners should also always keep an eye out for the fine print.
The tip off in the letter sent to the Westside Economic Collaborative was the fine print at the very bottom, which states that the product or service being offered is not endorsed by any government agency. The fine print also adds that the service is not a “statement of account due,” but rather a solicitation.
“If you look at the fine print, you’ll know for sure if it’s garbage,” Grant said. “If it’s over $25, it’s probably not the right thing.”
Jump hedline: Fraudulent letter scams business owners into paying exorbitant fees
Suggested pullquote: “Overall it looks pretty darn good and I bet you they’re doing quite well on it.”
Joe Palazzolo
Originally published in the Santa Monica Daily Press print edition on February 27, 2008. Read the original PDF.