Articles from November 2010

Source:  http://www.cbc.ca/canada/british-columbia/story/2010/11/22/bc-betterbusiness.html
Author:  Kathy Tomlinson
Date:  November 23, 2010

Audio

• The Early Edition BBB Business ratings B.C.’s Better Business Bureau is accused of favouring members over non-members in its online rating system, the CBC’s Kathy Tomlinson tells host Rick Cluff Listen: 7:25

The Better Business Bureau in B.C. is being accused of favoring members over non-member businesses in its online rating system. The consumer agency brought in a new international grading system two years ago, where both non-members and members are rated on its website, with a score ranging from A-plus to F.

“I think they need to look at how that rating system works,” said Victoria resident Dale Sketchley.

A CBC News investigation found all movers in Vancouver and Victoria who paid for a BBB membership — also known as accreditation — had ratings no lower than A-minus, including some with several recent complaints against them.

Sketchley filed a complaint about a Victoria moving company that is an accredited BBB member in August. Almost three months later, the case was closed by the BBB, without being resolved one way or the other.

Complaint not addressed: consumer

“It was completely designed for the business,” said Sketchley, “It was conveniently closed and none of my arguments were adequately addressed.”

Records show the BBB sent a letter to Straight Line Pro Moving Services after Sketchley complained he was charged more than he expected to pay and was treated rudely and sworn at by the movers.

Initially, the mail was returned from the business address, so the BBB simply closed the case.

“When I saw the case being described as “unpursuable” — just because the letter was returned — I realized that this was not right,” said Sketchley.

When he insisted to the BBB the movers could be found with one phone call, it re-opened the file. Ultimately, it closed the case again, saying there was no proof to support Sketchley’s complaint because he didn’t have a written contract.

Straight Line owner David Carlos told CBC News that Sketchley was an “extremely irate and unreasonable customer,” whose complaint was exaggerated.

His company still has an A rating with the BBB, despite this and one other recent complaint that was also closed without resolution. Two older, unresolved complaints are also listed on the BBB website.

BBB maintains impartiality

Before she knew the results of CBC’s investigation, Lynda Pasacreta, president of the BBB in the Lower Mainland, insisted all companies are treated equally in the ratings, whether they are members or not.

“We are impartial. We take — in the Better Business Bureau — a complaint that’s unresolved very seriously. An accredited business that does not resolve a complaint is up for immediate revocation,” said Pasacreta.”If they don’t respond to that complaint, they go to a D-minus.”

BBB accredited businesses in B.C. pay an annual fee of $368, for the smallest business, to $1,600 for those with more than 250 employees.

CBC News looked at all the companies listed under Movers in Vancouver and Victoria on the BBB websites.

Members keep A ratings

Of the 32 accredited movers listed — all with an A-minus or better — two of the larger companies, MiniMove and Purely Canadian Movers, each had 12 complaints filed against them in the last three years.

Two of those complaints were “administratively closed,” which means they could not be settled, like Sketchley’s case. Both companies maintained an A rating.

Pasacreta said they are allowed several complaints because of their size.

However, Van City Moving, a small member, kept an A-plus rating, despite a complaint the BBB called “unpursuable” because the “company cannot be located.”

On the other hand, none of the non-member movers in Victoria rated higher than a B, while more than half in Vancouver also have a B grade or lower.

“Either you are with them and they take care of you — otherwise it looks like they just give you the worst rating and leave you for nothing,” said Ed Pomalecki, who runs A Homart Moving and Delivery, a non-member given a D-minus rating.

Pomalecki has been in business for more than 20 years. His business was a BBB member in good standing until 2000 when he said he cancelled his membership because he no longer wanted to pay the annual fee.

“I think it’s very unfair that I have gone from an A to a D-minus,” he said. “I don’t think I deserve it.”

The BBB received one complaint about his company, in 2008, but said he “failed to respond,” so it downgraded the score.

Non-member says business hurt

Pomalecki insisted he heard nothing from the BBB about the complaint, but someone from there did call at one point, trying to sell him another membership.

He said he didn’t know his company’s rating had dropped until CBC News contacted him.

A Homart Moving and Delivery, which is not a BBB member, was given a D-minus rating after a complaint the owner said he didn’t know about.

The BBB confirmed it didn’t call Pomalecki about the complaint, but sent two letters.

“We typically do phone them, but in this case we sent two letters and he failed to respond,” said Pasacreta.

“I would have fixed it if I knew,” said Pomalecki. “It looks like [the BBB] was not interested in solving this — maybe to show someone else that this is what happens when you don’t pay.”

He said his business has dropped by 60 per cent in the two years since it got a D-minus rating and he now blames the BBB.

“They dropped me so drastically that it is like killing the business,” said Pomalecki.

“At least if I had known that was the system, I would have chosen to pay $400 [for a membership] but I didn’t even know.”

‘You’ve caught me’

When CBC News asked Pasacreta what the difference was between Van City Moving, the member with one “unpursuable” complaint and an A-plus rating, and Pomalecki’s case, she admitted there is a problem.

“You’ve caught me. And that’s all I can say on that one. You’ve caught me,” said Pasacreta. “[The rating system] is fluid. We have only been in business with the rating system for two years. The dispute resolution system, it is fluid.”

“I didn’t pay the membership and they did. That’s the only difference that I see,” said Pomalecki.

As a result of the CBC’s inquiries, Van City’s A-plus rating has been removed from the BBB website and it is now under review. Pomalecki’s rating may soon go back up.

“When he resolves that complaint, his D-minus will move back up to an A,” said Pasacreta.

Meantime, the Council of Better Business Bureaus in the U.S. has just announced it is changing its rating system because of complaints about favouritism there.

Mover Ed Pomalecki discontinued his BBB membership because he didn’t want to pay the annual fee.

“By next week, the BBB ratings system will no longer give additional points to accredited businesses because of their accredited status,” said a statement by the council on Nov. 18.

The Vancouver BBB said the statement applies to all bureaus in North America. It appears to confirm members were given preferential treatment, despite Pasacreta’s claim everyone is treated equally.

The council said it is also changing how it investigates complaints and how businesses are accredited. The changes have already affected the rating for Pomalecki’s business, which has been raised slightly, to a D.

Dale Sketchley complained to the BBB about the accredited moving company he hired, but felt his complaint was not addressed.

Source:  http://ctwatchdog.com
Author: George Gombossy
Date: November 24, 2010

Connecticut Attorney General Richard Blumenthal announced today that the Better Business Bureau (BBB) has agreed to his demands that it stop awarding rating points for dues and make other minor changes to its rating system.

However, Blumenthal said that he – as well as many consumer advoctates – is concerned that the 120 bureaus around the country and in Canada do not have sufficient resources to verify the information used in its controversial A+ to F ratings.

“I am pleased that the BBB is heeding my call to sever ratings from dues — but more needs to be done,” Blumenthal said. “Pay-to-play — or its perception — is unacceptable and unconscionable, as the BBB has rightly recognized. Cash can no longer inflate BBB ratings, as happened under the old system.”

While awarding the extra points is a positive step, I and other consumer advocates believe that it does not end the abusive practices that have taken place in some BBB chapters where high grades were purchased by becoming accredited BBB members. Nor does it end high pressure marketing where better grades are promised in return for paying annual does, as was pointed out in a recent ABC TV 20/20 investigation.

ABC filmed two small business owners in California with average ratings who immediately were given A+ ratings after they paid $425 each to become accredited members. One company, which had a complaint against it on the BBB website, had the complaint erased. The changes Blumenthal said are being taken will not prevent this from happening. Only by returning to the 95-year-old satisfactory/unsatisfactory rating system and ending letter grades can the BBB restore its lost credibility.

Blumenthal however called it a “significant step.”

He did say he remains ‘troubled by the BBB’s rating system. The BBB lacks the resources to verify much information used to rate, rendering its ratings unreliable and suspect. The BBB cannot rely on the word of businesses about licenses, state laws or other information; objective and independent confirmation is vital to accurate ratings. At the very least, the BBB has an ethical — and perhaps legal — obligation to clearly and prominently inform consumers of the severe and significant limitations of its rating system.”

Source:  http://ctwatchdog.com
Author:  George Gombossy
Date:  Nov 24, 2010

One of the starkest examples of how the Better Business Bureau’s two-year-old letter grade system rewards dues paying accredited members and punishes those who refuse to pay, is the difference in ratings consumers see when they check the BBB website to purchase office supplies.

When consumers look up Staples at BBB.org the see that the Framingham, Ma., firm has an F rating and is not an accredited BBB member.

When consumers look up its competitor, Office Depot, they find that the Boca Raton based firm has a high A- rating.

The BBB insists that paying dues will have little impact on a firm’s grades and deny critics’ claims that it changed from its 96-year-old satisfactory/unsatisfactory rating system to letter grades as a way to pressure businesses to pay up.

However, comparing the statistics of the two office supply companies makes it difficult to accept the BBB assurances.

Staples had 833 complaints in the last three years with the BBB while Office Depot had 1,369 complaints.

One major strike against Staples is that the BBB claims that it did not respond to 23 of the complaints. That doesn’t mean that Staples did not deal with those complaints, it simply means that the BBB has no record of them being satisfied.

However, there is no known government investigation or action against Staples.

With Office Depot, BBB website lists recent actions by Missouri, and Florida:

On April 29, 2010 the Missouri State Attorney General announced a consent judgment against Office Depot Inc. for alleged violations of Missouri’s Merchandising Practices Act. The Attorney General’s investigation discovered issues with overcharging Missouri government and non-profit customers. The charges included, misrepresenting cost savings and failing to be forthcoming about such cost savings in their ads and sales pitches. Under the judgment Office Depot is to pay $320,000 in restitution and $120,000 to reimburse the state for the cost of the investigation and enforcing the Missouri Merchandising Practice Act.

The court issued a permanent injunction prohibiting Office Depot from violating the Missouri Merchandising Practice Act and suspend a $100,000 penalty contingent on compliance with the terms of the judgment and permanent injunction.

On June 4, 2010 Florida Attorney General Bill McCollum announced that his office has negotiated a settlement with Office Depot, Inc. regarding allegations that the company overcharged governmental agencies and non-profit organizations for office supplies in violation of the Florida Deceptive and Unfair Practices Act.

Under the settlement, Office Depot will pay approximately $4.5 million in refunds to eligible Florida customers, including Florida government agencies. According to an investigation, Office Depot allegedly switched certain local governmental agencies and private non-profit organizations in Florida from one pricing plan to another without their full understanding or knowledge, potentially resulting in higher prices for those customers.

In addition to the refunds, Office Depot will reimburse the Attorney General’s Office for its investigative costs and for costs associated with ongoing and future enforcement actions. Office Depot also agrees to comply fully with the Florida Deceptive and Unfair Trade Practices Act. Office Depot entered into the Assurance of Voluntary Compliance without any admission that they have violated the Florida Deceptive and Unfair Trade Practices Act or any other law.

The BBB report made no mention of a Dallas Morning News report from last year that says that officials in Texas, Georgia, California, Nevada, North Caroline and Alabama were looking into similar issues against Office Depot.

BBB Responds To Criticism

Steve Cox, the president of the 120 chapter Better Business Bureau Council in the U.S. and Canada, last week conceded that the BBB chapter in Southern California made mistakes.

In response to a devastating ABC TV 20/20 investigation this month on his organization (which did not mention the office supply stores), Cox now says that errors were made – unintentionally – and that reforms will take place.

Connecticut Attorney General Richard Blumenthal launched an investigation into the Connecticut BBB chapter after he was embarrassed by it when he attended its annual program with a company being honored for its high integrity, that turned out later to be a sham.

Cox, as the result of the push back, agreed to take away the four extra points (out of 100)  that the BBB gives to businesses that pay annual fees ranging from $300 to the millions, depending on their size.

What Cox however failed to address was  the most damaging and telling part of the ABC investigation, which proved that businesses COULD BUY better grades – not just a couple of points – by simply joining and paying annual dues.

That went way beyond the formation of fake businesses like Hamas (which last summer got an A- rating), which the traditional media just learned about.

The critical part was about two small businesses in California that had C ratings, even though they only had one complaint between the two of them.

ABC filmed the two owners calling up the BBB and asking how their grades could improve on the BBB website, which lists and grades hundreds of thousands of businesses.

Simple, was the answer. Pay $425 in annual does to become accredited BBB members.

Forget about all the promises that Cox and others in the BBB said two years ago when they changed the satisfactory/unsatisfactory grading system to an A+ to F ratings. Cox then insisted that the BBB would evaluate every business on 16 criterias and would thoroughly investigate all accredited members to make sure they deserved their grades.

As soon as the charges cleared the credit cards, the two businesses suddenly had their C ratings skyrocket to the top A+ and the one complaint disappeared from the website.

I would love for the BBB to explain to me how their tinkering would have avoided those clearly Pay To Play proven and unchallenged incidents.

Source:  http://www.latimes.com/news/la-fi-bbb-20101124,0,1284863.story?track=rss
Author: Sharon Bernstein
Date: November 24, 2010

William Mitchell’s salary exceeds that of the BBB’s national president. The head of a watchdog organization for nonprofits calls such compensation ‘much more than normal.’

The executive who heads the organization’s Los Angeles branch makes more than $400,000 a year. His San Diego counterpart brings in $206,000. The head of a smaller office in New York earns $175,000.

Salaries at a corporation? Guess again.

That’s the compensation for local presidents of the nonprofit Better Business Bureaus, which issue letter ratings to businesses that are supposed to reflect how fairly they treat consumers.

The organization’s national president earned $335,000 in 2008, according to the latest available documents from the Internal Revenue Service.

But that salary was eclipsed by William Mitchell, president of the Better Business Bureau of the Southland, which includes Los Angeles. He made $409,490 that year, according to IRS documents.

“I can’t remember any case where somebody running a local chapter is earning more than the person who is running the national organization,” said Trent Stamp, former head of the watchdog organization Charity Navigator and now executive director of the Beverly Hills-based Eisner Foundation.

The Better Business Bureaus have come under a spotlight after disclosures that the organization gave better ratings to businesses that were paid members — and, in some cases, awarded A-grade ratings to phony companies that paid up.

Small businesses have long complained that many chapters of the Better Business Bureau used telemarketers armed with high-pressure tactics to get them to sign up for memberships that could cost $400 or more.

In the wake of fresh news reports on its practices last week, Steve Cox, president of the national Council of Better Business Bureaus, said the organization would no longer boost ratings just on a basis of paid membership.

He also said the BBB would investigate activities at the Southland branch, which initiated the controversial grading system.

The salaries paid to the local chapter executives are set by local boards of directors, which have discretion to pay any amount that they feel is appropriate, said Alison Southwick, spokeswoman for the national office.

The national office does not set a specific formula or approach, she said.

Mitchell and other executives at the Southland branch did not return calls for comment on the salaries.

The salaries took a significant bite out of the budgets of the chapters, which were supported by members’ dues. The Southland chapter spent $5 million of its $7-million budget on compensation, according to the tax documents. The national office spent $10 million of its $16-million budget on employees.

Daniel Borochoff, president of the American Institute of Philanthropy, said the fact that Mitchell was paid vastly more than heads of other chapters raised a red flag. Mitchell got nearly twice as much as the president of the Chicago BBB, for example, who was paid about $206,000, according to the tax documents. The head of the New York chapter made about $170,000.

“Why is the L.A. person paid so much more than the other ones?” Borochoff asked. “Is he getting paid based on what kind of sales he can bring in?”

Southwick said the salary earned by Cox, national president of the BBB, was reduced to $300,000 when he took over the job last year, and was in line with the earnings of chief executives at nonprofit industry associations.

Mitchell also made far more than others in the Southland office. The senior vice president of the chapter, for example, got $97,000, according to tax documents.

“You fall off a cliff after you look at that salary,” said Ken Berger, current head of Charity Navigator, concerning Mitchell’s compensation.

Claire Rosenzweig, president of the Better Business Bureau of Metropolitan New York, was paid about $168,000 in 2008, about 59% less than Mitchell. She declined to comment on Mitchell’s salary, but applauded the investigation into the accreditation of the fake Los Angeles businesses.

“Accreditations must be earned,” Rosenzweig said. “If some people have made mistakes, I’m glad that it’s being investigated.”

Source: http://abcnews.go.com/Blotter
Author: JOSEPH RHEE
Date: Nov. 16, 2010

Connecticut Attorney General Richard Blumenthal: “BBB Rating System is Unworthy of Consumer Trust”

“Right now, this rating system is really unworthy of consumer trust or confidence,” said Connecticut attorney general Richard Blumenthal in an interview that was broadcast Friday on 20/20. In an official demand letter sent to the national headquarters of the Better Business Bureau Thursday, Blumenthal called on the BBB to stop using its grading system, which he said was “potentially harmful and misleading” to consumers.

Read Attorney General Blumenthal’s 3 Page Demand Letter to the BBB!!

Cox defended the BBB accreditation and ratings systems, saying it was “not about generating money,” said the A minus grade for Hamas was a mistake.

Better Business Bureau: Pay for Play?

Yet, as part of the ABC News investigation, an ABC News producer with a camera was present as two small business owners in Los Angeles were told by Better Business Bureau tele-marketers that their grades of C could be raised to A plus if they paid $395 membership fees. Terri Hartman, the manager of a Los Angeles antique fixtures store, Liz’s Antique Hardware, was told only a payment could change her grade, based on one old complaint that had already been resolved. “So, if I don’t pay, even though the complaint has been resolved, I still have a C rating?” Hartman then read off her credit card number and the next business day the C grade was replaced with an A plus, and the one complaint was wiped off the record. In a second case, Carmen Tellez, the owner of a company that provides clowns for parties was also told she had to pay to fix her C- grade, based on a two-year old complaint that she says had already been resolved. The C minus became an A plus the very next day after she provided her credit card number for the $395 charge. “If I’m paying for a grade, then how are the customers supposed to really trust the Better Business Bureau?” she asked. Cox said the examples provided by ABC News were violations of sales policy and not a standard way of doing business. “The BBB is not operating fraudulently,” Cox said. In his demand letter to the BBB, Attorney General Blumenthal said, “I am deeply concerned that certain BBB practices threaten its reputation and effectiveness as a reliable resource for consumers.”

BBB media relations manager Allison Southwick said that the BBB had worked with Attorneys General across the country, including Blumenthal, to fight fraud. “We disagree with his characterization that BBB does not adequately disclose the fact that Accredited Businesses financially support BBB,” said Southwick. “However, we are always interested in hearing from our partners in consumer advocacy and are pleased to accept constructive feedback from his office and other consumer advocates.” “We have made good progress in working with his office on these issues, and anticipate that we will satisfactorily address his concerns,” said Southwick.

Source: http://abcnews.go.com/Blotter
Author: JOSEPH RHEE and BRIAN ROSS
Date: Nov. 12, 2010

Watch the 20/20 Investigative Report Now Below!

The Better Business Bureau, one of the country’s best known consumer watchdog groups, is being accused by business owners of running a “pay for play” scheme in which A plus ratings are awarded to those who pay membership fees, and F ratings used to punish those who don’t.

To prove the point, a group of Los Angeles business owners paid $425 to the Better Business Bureau and were able to obtain an A minus grade for a non-existent company called Hamas, named after the Middle Eastern terror group.

“Right now, this rating system is really unworthy of consumer trust or confidence,” said Connecticut attorney general Richard Blumenthal in an interview to be broadcast as part of an ABC News investigation airing tonight on 20/20.

In an official demand letter sent to the national headquarters of the Better Business Bureau Thursday, Blumenthal called on the BBB to stop using its grading system, which he said was “potentially harmful and misleading” to consumers.

“The BBB accreditation and the BBB ratings systems is not about generating money,” said BBB national president and CEO Steve Cox. He said the A minus grade for Hamas was given in error. “Plain and simple, we made a mistake,” Cox told ABC News.

Errors seem to abound at the Better Business Bureau. As reported by an anonymous blogger the BBB also awarded an A minus rating to a non-existent sushi restaurant in Santa Ana, California and an A plus to a skinhead, neo-Nazi web site called Stormfront.

Each listing cost $425.

“They ran the credit card and within 12 hours they were an approved, accredited member,” said the anonymous blogger, who runs a site called bbbroundup.com.

“They’re more interested in the money than their credibility,” he said.

The BBB’s Cox said the three listings were all mistakes made by sales people.

“That’s an inaccurate statement that business people are able to buy A’s,” Cox said. “We have more than 500,000 non-accredited businesses who have A ratings,” he added.

Better Business Bureau: Pay for Play?

Yet, as part of the ABC News investigation, an ABC News producer with a camera was present as two small business owners in Los Angeles were told by Better Business Bureau tele-marketers that their grades of C could be raised to A plus if they paid $395 membership fees.

Terri Hartman, the manager of a Los Angeles antique fixtures store, Liz’s Antique Hardware, was told only a payment could change her grade, based on one old complaint that had already been resolved.

“So, if I don’t pay, even though the complaint has been resolved, I still have a C rating?”

Hartman then read off her credit card number and the next business day the C grade was replaced with an A plus, and the one complaint was wiped off the record.

In a second case, Carmen Tellez, the owner of a company that provides clowns for parties was also told she had to pay to fix her C- grade, based on a two-year old complaint that she says had already been resolved.

The C minus became an A plus the very next day after she provided her credit card number for the $395 charge.

“If I’m paying for a grade, then how are the customers supposed to really trust the Better Business Bureau?” she asked.

Cox said the examples provided by ABC News were violations of sales policy and not a standard way of doing business.

“The BBB is not operating fraudulently,” Cox said.

In his demand letter to the BBB, the Connecticut attorney general said, “I am deeply concerned that certain BBB practices threaten its reputation and effectiveness as a reliable resource for consumers.”

Allison Southwick, media relations manager for the BBB, said that the BBB had worked with Attorneys General across the country, including Blumenthal, to fight fraud. “We disagree with his characterization that BBB does not adequately disclose the fact that Accredited Businesses financially support BBB,” said Southwick. “However, we are always interested in hearing from our partners in consumer advocacy and are pleased to accept constructive feedback from his office and other consumer advocates.”

“We have made good progress in working with his office on these issues, and anticipate that we will satisfactorily address his concerns,” said Southwick.

Better Business Bureau Grading System

The Better Business Bureau, a non-profit group that began 98 years ago, instituted its A plus through F grading system just two years ago, replacing a “satisfactory/unsatisfactory” ratings system.

One of the first to raise concerns about the new grading system was New York Congressman Anthony Weiner. Weiner was investigating complaints to his office about the popular precious metals dealer Goldine. Some customers had alleged they were ripped off after responding to Goldline’s television ads, which appear in heavy circulation during conservative talk radio and television programs.

Goldline responded to Weiner’s criticism in part by pointing to the stamp of approval the company had received from one of the nation’s most respected consumer groups.

“We are proud to be rated A+ from the Better Business Bureau,” Goldline VP Scott Carter said at a congressional hearing convened by Weiner in September.

Weiner told ABC News he considered Goldline’s A plus grade to be suspect.

Weiner and other critics say they believe the BBB has used the new grading system as part of an extensive tele-marketing campaign to increase membership and revenue.

Ritz-Carlton, Wolfgang Puck Get Fs

An ABC NEWS examination of filings with the federal government revealed that at least 25 of the Better Business Bureau’s top officers had salaries in excess of $100,000.

The head of the Los Angeles Better Business Bureau, William Mitchell, was paid more than $400,000, according to the Better business Bureau.

“I think the Better Business Bureau changed course and lost its way by adopting a system of pay to play that maybe enhanced its revenues but also greatly diminished its credibility and honesty,” said attorney general Blumenthal, who was elected to the United States Senate from Connecticut last week.

“It’s very troubling and it could be illegal because the failure to disclose to consumers could well be deceptive and misleading,” he added.

The ABC News investigation found numerous examples of well-known companies that are not members of the Better Business Bureau being branded with F grades, often apparently based on scant evidence or a small number of complaints.

The five-star Ritz Carlton Hotel in Boston was given a F rating after only two complaints.

“A million customers served, two complaints resulting in an F rating, seems to be somewhat unusual, to say the least, ” hotel general manager Erwin Schinnerl told WCVB-TV in Boston.

Celebrity chef Wolfgang Puck told ABC News that parts of his food and restaurant empire have received an F grade because he refused to pay to join the Better Business Bureau.

“You know, if you become a member, you’re sure to get an A, but if you don’t pay, it’s very difficult to get an A,” said Puck, who has been a regular on the ABC News program “Good Morning America” since 1986.

“I think where you have to join an organization to get a good grade is wrong,” Puck said.