March 12, 2013 -- The Better Business Bureau has expelled its Southern California chapter in the wake of an ABC News investigation into allegations of a "pay to play" culture in which higher ratings were awarded to businesses that paid for membership status.
"They did not meet our standards, it resulted in expulsion," said Carrie Hurt, the Better Business Bureau president and CEO.
Among the allegations, an ABC News report in 2010 found the Southern California chapter had given an "A-" rating to a phony business naming itself as the Hamas terror group. The listing had been registered by an anonymous blogger who paid a $425 membership fee.
"They ran the credit card," said the blogger, "and within twelve hours [Hamas was] an approved, accredited member."
Other business owners, including celebrity chef Wolfgang Puck, who has regularly appeared on ABC News programs, said they were told they had to pay in order to get an "A" grade.
"If you don't pay, it's very difficult to get an A," Puck said after receiving an "F" rating for one part of his food empire.
The story was "painful but true" said Hurt, the Better Business Bureau president.
She said the corporation that runs the California chapter "no longer has the right to use the Better Business Bureau name, our logo, or any of our trademarks."
In a letter dated March 8 to the national office, Jerry Dominguez, the chairman of the board of directors of the Southern California chapter, the largest in the country, admitted the Hamas "A-" grade was a mistake, but disputed the allegations of widespread problems and said the chapter had resigned before it could be expelled because of the "absurd proposed terms" the national office wanted to impose on the selection of its executives.
"Frankly, we're disgusted with the actions of Council and we find resignation to be not just the only, but the best, course of action for us," Dominguez wrote.
Founded 100 years ago, the Better Business Bureau had enjoyed a sterling reputation as a consumer watchdog group until the ABC News report and complaints from business owners.
Hurt said she was eager to dispel the belief that there was a "pay to play" culture throughout the organization.
"Our ratings are not for sale," she said. "Our standards are not for sale."
Hurt says the BBB is looking to partner with a new organization in Southern California but insists consumers can still find help through the organization's website.
"There will not be a local entity there immediately. We'll be working for that long-term. But the services will absolutely be there."
The group that made up the now-former BBB in Southern California is continuing operations under a new name, Business Consumer Alliance.