Beware: Common Business Compliance Scams and What to Do If Your Business Has Been Targeted

Sparks Law | April 26th, 2017

Recently, Sparks Law has been contacted by several clients with questions concerning a form that they received in the mail, from an entity called “Georgia Council for Corporations.”  This form offers to complete and file annual corporate minutes with the Georgia Secretary of State’s Office for a fee of $125.  Georgia corporations (and LLCs) are required to file an annual registration with the Secretary of State’s office, and corporations must hold annual shareholder meetings, pursuant to O.C.G.A. 14-2-701(a), and keep minutes of all shareholder and board of directors meetings with their corporate records, under O.C.G.A. § 14-2-1601.  However, contrary to the claims made by Georgia Council for Corporations, Georgia corporations are NOT required to file corporate minutes with the Secretary of State’s office.  When we researched Georgia Council for Corporations, we discovered that Georgia’s Secretary of State, Brian Kemp, has, in fact, posted an alert to business owners concerning this entity, warning that his office has received complaints from business owners targeted by Georgia Council for Corporations.  We immediately reached out to those clients targeted by Georgia Council for Corporations, to notify them of the Kemp’s warning.

Compliance scams are perpetrated by companies using different official-sounding names (oftentimes impersonating government agencies) and several states have issued warnings about the various types of scams targeting businesses. Ultimately, the motive of these scammers is to trick businesses into giving them money by alleging that the business is non-compliant with various legal and regulatory requirements.  The solicitations frequently cite statutes, include legal looking forms, create fraudulent requirements and threaten fines if businesses do not provide information or payment by a certain date.

Which got us wondering, what other ploys are these scammers using to target business owners?

When we dug deeper, we uncovered a few other common scams currently targeting businesses, including but not limited to the following:

  • A sham entity, calling itself the “Business Compliance Division,” has been sending postcards to business owners, falsely warning about a “potential compliance violation” and to “call immediately” to “avoid potential fees and penalties.” Once a company calls Business Compliance Division, they are tricked into ordering a copy of their business’ Certificate of Existence, allegedly to remain in compliance with Georgia law, for $125. However, if anyone wants to order a valid Certificate of Existence from the Secretary of State’s Corporations Division, it may be ordered directly from that office, and only costs $10.
  • Businesses have recently reported receiving deceptive mail selling overpriced labor law posters from an entity calling itself “Labor Poster Services.” The mailing cites various federal laws and threatens thousands of dollars in fines for labor poster non-compliance. However, the Georgia Department of Labor provides the following posters for free: Employer Vacation (DOL-154), Equal Pay for Equal Work (DOL-4107) and Unemployment Insurance Protections for Employees (DOL-810). Copies may be obtained by (1) downloading from the Department of Labor website, (2) calling (404) 232-3396, or (3) emailing Clayton@gdol.ga.gov.
  • Following Hurricane Matthew in 2016, Florida, Georgia and South Carolina businesses were contacted by scammers pretending to be Federal Emergency Management Agency (FEMA) officials, charging between $195 and $1,200 for various services, including adding businesses onto a “preferred vendor” list. However, FEMA does not have a preferred vendor list.  With the 2017 hurricane season on the horizon, it is important to be aware of scammers taking advantage of business owners, even in the aftermath of a natural disaster.

So what should a targeted business do?

Secretary Kemp has warned, “Georgia’s corporations should be cautious regarding any suspicious solicitation, and practice their due diligence to prevent corporate fraud and identity theft.”  Notifications of non-compliance should only come from the official government office, and while there are sometimes fees, companies should only pay directly to that office.

If you receive a threatening phone call or mailing, do not hesitate to contact Sparks Law.  We would be happy to verify whether the notice is legitimate and advise you of options available if you have been a victim of a scam.  Alternatively, businesses should contact the applicable government agency directly or may file complaints with their state Secretary of State’s office and the Better Business Bureau.

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