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Brown Wins $1.2 Million Ruling Against Small Business Rip-Off Artists

Friday, July 31, 2009
Contact: (415) 703-5837

San Diego – Continuing his fight against “rip-off artists,” Attorney General Edmund G. Brown Jr. won a $1.2 million ruling against Gaston Muhammad, 42, and Ronna Green, 41, of Duluth, GA, who billed nearly a million California business owners $150 each for deceptive and unnecessary corporate minutes services.

“These rip-off artists sent nearly a million deceptive mailers to business owners, threatening them with loss of their corporate status if they didn’t pay $150 for unnecessary services,” Brown said. “In reality, this was a massive scam costing California small business owners hundreds of thousands of dollars.”

The defendants mailed solicitations to California business owners that were designed to look like State of California official forms—specifically, the Secretary of State’s “Annual Statement of Information.” The solicitations implied that unless the corporations paid the defendants a $150 annual fee, they could lose their corporate status. The defendants sent out 986,000 solicitations to California businesses between July 2007 and November 2008.

The solicitation appeared to be a government document featuring an official-looking seal, an official-sounding name, the corporation number, citations to the Corporations Code, and a return address in Sacramento. The defendants, in fact, resided in Georgia and the Sacramento address was a mail drop.

The defendants promised to prepare annual minutes for the recipient corporations, even though the information sought on the forms was insufficient to create minutes. Defendants simply invented the dates, meeting places, participants, and actions taken in the fictitious minutes they created.

Brown filed suit in San Diego Superior Court in May 2008, charging defendants with violating:

• Business and Professions Code section 17533.6 (Deceptive Mailing Statute) and 17550 (False Advertising Statute)
• Civil Code section 1716 (Phony Billing Statute)
• Permanent injunction from a previous mail scam judgment against Gaston Muhammad
• Unfair business practices within the meaning of Business and Professions Code section 17200.

On June 22, the Trial Court ruled that the solicitations were misleading. The Court also found that the disclaimers were not big and bold enough to alert the recipients that this was not an official form. It found that the defendants violated all four statues and the permanent injunction.

The court ordered defendants to pay restitution of $200,000 and imposed civil penalties of $986,000. It further issued a permanent injunction which, in addition to requiring the defendants to comply with the law, barred them from engaging in the business of providing corporate minutes in California for five years. The Court also awarded the state the costs incurred in the prosecution of this case.

Earlier this year, Brown filed suit against two brothers operating a similar scam, billing homeowners nearly $200 each for property tax reassessment services that were almost never performed and are available free of charge from local tax assessors.

The judgment and a copy of the mailer are attached.

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AttachmentSize
Final Judgment and Permanent Injunction612.2 KB
Mailer531.11 KB

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