After an ABC News investigation uncovered allegations that L.A.'s BBB offered "A" grades to nonexistent businesses solely because they signed up for paid memberships, the national BBB stated over the weekend it had launched its own probe into the local chapter, the nation's largest.
The L.A. BBB and its CEO, William Mitchell, have been blasted by critics over what they allege is a "pay for play" scheme in which A plus ratings are only given to business that pay an accreditation fee while F grades are routinely given to business that don't want to join. The probe could have repercussions for the rest of the nation's BBB chapters, however, since the L.A. chapter developed the controversial grading system that is now under fire nationally.
According to ABC, world-renowned chef Wolfgang Puck's business received an F, allegedly because it didn't sign up.
The accusations are similar to ones made against the website Yelp, which was alleged in a class-action suit to have erased or minimized negative reviews of businesses that advertised on the site.
In response to a similar controversy in Connecticut, the BBB stated that it will no longer award extra points for grading to "accredited" businesses (we're guessing that means paid members) and that it would review its process for accrediting businesses.
"For nearly 100 years, the BBB has stood for public trust, and we are taking these steps to maintain that trust," BBB CEO Steve Cox stated.
ABC News reports that the L.A. chapter brought in more than $6.2 million in "accreditation fees" in 2008. L.A. CEO William Mitchell, paid $409,000 and change that year, brought the grading system to all the BBB chapters.
Business owners said it was all about membership money. And ABC set out to prove that by buying $425 annual memberships for businesses that didn't exist, including one called ... Hamas (the radical Islamic group) . The news organization listed Bill Mitchell as Hamas' leader.
Another nonexistent business also gained membership, ABC News claims. It was named Stormfront, for a white supremacist group.