Scammers have found a new way of bilking small business owners out of millions of dollars: posing as the government.
State of Washington Attorney General Bob Ferguson, a Democrat, announced Thursday that he is suing two companies that have used the state’s online public records and registration requirements to scam more than 15,000 entrepreneurs out of a total of $1.2 million.
The companies have cleared $3.6 million nationally from the scam and have sent at least 210,784 letters to Washingtonians since March 2019, according to the lawsuit filed in King County Court.
“Small businesses power our economy,” Mr. Ferguson said in a statement. “With this lawsuit, I intend to get the impacted business owners their money back — with interest.”
Several times each week, the complaint says, Michigan-based CA Certificate Services collects small business addresses directly from state government websites in Georgia, Michigan, Minnesota, Nevada, Ohio, Utah, Virginia and Washington.
Using an envelope with a localized address that mimics government paperwork, the company mails a request for $82.50 to thousands of businesses, telling them it’s for a “Certificate of Status” or workplace poster to stay registered in their state.
In its Washington mailings, the company calls itself “WA Certificate Services” and includes a state address to appear legitimate.
The lawsuit adds that another company, Labor Poster Compliance, has mailed 16,000 “bills” to Washington businesses charging them $79.25 for a workplace labor poster it claims is mandatory. That company has cleared more than $25,000 from the letters.
Mr. Ferguson is asking the court to make both companies pay restitution, attorneys’ fees and civil penalties of up to $7,500 for each violation of the Consumer Protection Act.
Victimized owners are unaware the state does not charge for registration.
“One King County resident wrote that she asked the company for a refund shortly after mailing in her check in November 2019 but does not recall receiving it,” Mr. Ferguson’s office stated in Thursday’s statement.
Washington’s lawsuit follows legal proceedings that Michigan’s and Virginia’s attorneys general and the Utah Department of Commerce have brought against the scammers.
Virginia’s lawsuit against CA Certificate Services, filed last year in the Circuit Court of the City of Williamsburg, said the company poses as “VA Certificate Service” or “Virginia Certificate Service” in the state and uses the address of a UPS store that forwards payments to the scammers.
Victoria LaCivita, spokesperson for the Virginia attorney general’s office, said Friday that small business owners should always contact government agencies about any unsolicited communications to see if the supposed services are actually free.
“Businesses should be wary of any mailings, phone calls or email solicitations that appear to come from a government agency, that request a fee for filing documents with a government agency, or that request a fee for obtaining records from a government agency,” Ms. LaCivita said.
The National Federation of Independent Business, a Nashville-based association of small business owners, said Friday that scams put more pressure on entrepreneurs already struggling with pandemic-related issues.
“With inflation, worker shortages, supply chain issues, and rising fuel costs, small businesses are facing numerous challenges. Potential scams and fraud committed against small businesses make it even harder to operate, and any charges of scam and fraud should be fully investigated,” the NFIB said in an email.
CEO Alfredo Ortiz of the Job Creators Network, a conservative small business advocacy group, said smaller companies often struggle more to catch the scams.
“A larger business would have more resources, likely even some form of a legal team, to make sure they aren’t falling victim to such a scam,” Mr. Ortiz said. “But most small business owners have to wear multiple hats, manager, accountant, HR, marketing, etc.”