Evergreen Reporter

SEATTLE — A King County Superior Court judge has ordered two companies and their owners to pay more than $24.8 million for their unlawful conduct targeting small business owners. The judge determined that both companies’ “entire business model was based upon deceiving small business owners.”

CA Certificate Service and Labor Poster Compliance sent hundreds of thousands of letters to Washington business owners that deceptively appeared to originate from the government. The letters demanded payments for posters or certificates that they deceptively implied were required to purchase. The certificate is not mandatory and available from the state for a fraction of the cost that CA Certificate Service demanded. The posters are available from state and federal agencies for free. 

Attorney General Bob Ferguson filed lawsuits in March against Florida-based CA Certificate Service and Labor Poster Compliance and their owners.

In total, the companies sent 232,091 deceptive letters into Washington. More than 15,000 Washington businesses paid approximately $85 to these two companies for a total of $1.27 million. King County Superior Court Judge David Whedbee granted Ferguson’s request that the companies repay Washington businesses in full, plus pre-judgment interest. The amount of pre-judgment interest will be determined at a later hearing.

The court ruled that the two companies committed 232,091 separate violations of the Consumer Protection Act. The court ordered the two companies to pay $23,518,200 in penalties.

The judge permanently blocked the defendants from mailing letters into Washington that appear to be a bill or invoice that a consumer must pay. The court order also bars them from sending letters that appear to be from a government or someone working for a government.

The Attorney General’s Office uncovered evidence that the defendants made more than $5.3 million in profit from their nationwide deceptive schemes. The action is the first judgment against the businesses and owners finding them liable for breaking the law anywhere in the country.

In March 2019, the Washington Secretary of State issued an alert regarding the CA Certificate Service scam, but the company continued to operate in the state until Ferguson filed a lawsuit.

“This scam preyed on business owners who were juggling multiple responsibilities and wanted to play by the rules,” Ferguson said. “My family ran a small business in Everett for decades. The last thing they needed was somebody trying to take advantage of their desire to play by the rules. We will continue aggressively standing up for Washington small businesses.”

At least 15,437 Washington business owners paid $82.50 to CA Certificate Service — a net total of over $1.23 million. The Attorney General’s Office estimates over 400 Washingtonians paid Labor Poster Compliance up to $85.25 — a total of more than $33,000.

If you suspect you are the target of similar scams, please contact the Attorney General’s Office. You can file a complaint online at atg.wa.gov/file-complaint or call the office toll-free at 1-800-551-4636.

Small business owners detail the scam

The motion before the judge included declarations from small business owners across the state who sent money to both companies. Among them were:

• Sherrie Hovde, who has a Master’s Degree in Public Administration and worked for both King County and Washington state governments. In November 2019, she registered a new business and quickly received a letter from CA Certificate Service (which sent letters into the state using the business name WA Certificate Services, or WACS). She wrote: “Based on how soon I received the WACS letter after registering my business and after observing its form and content, that included a detailed request for payment with due date, initially I thought WACS was working on behalf of the Washington SOS [Secretary of State]  informing me of additional requirements to complete registration of my business ... I then contacted the Washington SOS office and was informed that WACS was known by the SOS as a company engaging in ‘deceptive’ business practices. I was also told that similar complaints from new business owners about WACS had been received by the SOS.” She asked WACS for a refund but does not recall if she received a refund. She still filed a formal complaint with the Attorney General’s Office because she believed the WACS letter was “both deceptive and misleading.”
• Tracy Baker, who has a master’s degree in merchandising, registered her Seattle business in December 2019. She wrote: “I thought the WACS letter was from a Washington State government agency so I sent a personal check to WACS in the amount of $82.50, as requested in the letter. I made the payment because I thought WACS was a Washington State government agency and my belief that in order to finalize registration of my LLC I needed to obtain the certification document referred to in the WACS letter … shortly after submitting my payment to WACS I visited the SOS website and determined that I had been misled by WACS. I immediately contacted my financial institution to place a stop payment on the check.”
• Denis Sullivan, who registered a property management company in Gig Harbor in early January. Shortly after registering he received letters from both WACS and Labor Poster Compliance (LPC). He wrote: “Upon receipt of the LPC envelope and letter I thought it resembled government correspondence. Following my review of the LPC letter and believing it was government correspondence I submitted payment to LPC … I also thought by submitting payment to LPC for a labor law poster I was ensuring that my business complied with state and federal labor law as well as Washington State business registration guidelines.” Sullivan did not have employees, so he was not required to display any labor law poster.

How both companies targeted Washingtonians

Several times each week, CA Certificate Service’s owners used computer software to pull business owner information from the Washington Secretary of State’s web site. They grabbed publicly available information like the business’ names, registration dates, principal addresses and their unique identifier numbers.

Shortly after they registered their business, the company mailed letters to Washington business owners through its print and mail vendor located in Florida.

The letters and envelopes imitated official government mail, and created a false sense of urgency that the business owner was required to purchase a “Certificate of Status” for $82.50 to complete a business registration process.

Like CA Certificate Service, Labor Poster Compliance obtained business owner information from data made publicly available by the Secretary of State.

Labor Poster Compliance initially sent a letter that urged small business owners to pay $79.25 for an all-in-one workplace poster, then later raised its price to $85.25. It claimed the poster had required disclosures of certain state and federal laws. The company also cited federal laws that it represented as a requirement to place labor posters, and included threats of penalties and legal action for non-compliance.

CA Certificate Service disseminated 206,312 letters into Washington state. Labor Poster Compliance disseminated 25,779 deceptive letters into the state that appeared to be bills sent by or on behalf of a governmental agency.

James L. Beard, Chad M. Davis and Joshua T. Strawn own both CA Certificate Service and Labor Poster Compliance. Dean G. Marshlack is the fourth owner of CA Certificate Service.

During the litigation, the Attorney General’s Office identified the fourth owner of Labor Poster Compliance, Sean Wilson, and he has until Nov. 1 to respond to the lawsuit. The five owners are located in the St. Petersburg, Florida, area and Labor Poster Compliance continues to operate in states across the country.

From March 2019 through March 2022, CA Certificate Service’s owners distributed more than $3.9 million amongst themselves from its national earnings. Three of the men — Marshlack, Davis and Strawn — each generally received 30 percent of those illegal gains, while Beard received 10 percent. In 2021 and through March 2022, Labor Poster Compliance’s owners distributed more than $1.3 million amongst themselves from its national earnings. Davis, Strawn and Wilson each received 30 percent of those illegal gains, while Beard received 10 percent during this time frame.

Assistant Attorneys General Shidon Aflatooni, Sebastian Miller and Sean Garvey, investigators Scott Henderson, Anton Forbes and Eric Peters, paralegals Khalid Ali and Emin Aliiasov, and legal assistants Kristina Winfield, Michelle Paules and Elliot Raven are handling these cases for Washington.

What is actually required for a small business

The Secretary of State’s Office does not require purchase of this certificate to complete the registration process. A Certificate of Status, also called a Certificate of Existence, simply shows a business is current and authorized to conduct business in Washington. If needed, Washingtonians can purchase the certificate directly from the Secretary of State for a $20 fee.  

Businesses with employees are required to display certain workplace posters, which can be obtained for free from the Washington Department of Labor and Industries, Washington Employment Security Department and the U.S. Department of Labor. Workplace posters are not required for businesses with no employees.

Ferguson’s prior enforcement actions standing up for small business owners and other consumers targeted in scams

In March 2016, a King County Superior Court judge ordered civil penalties and restitution of $1.15 million in Ferguson’s lawsuit against Mandatory Poster Agency. The judgment included $793,540 in civil penalties and up to $362,625 in restitution for victims. The Michigan-based company duped thousands of Washington small businesses into paying for documents many Washingtonians thought were coming from a state agency. The judge found Mandatory Poster Agency violated the state Consumer Protection Act 79,354 times.

Also in February 2016, a Thurston County judge ordered LA Investors LLC, a California company that duped new Washington property owners into buying overpriced deeds, to pay more than $3.6 million for its deceptive practices. The court found the company violated the state Consumer Protection Act at least 256,998 times by sending deceptive mailers. It sent official-looking notices implying that consumers needed to buy a dramatically overpriced $89 copy of their deed. Deeds typically cost only a few dollars from a local county office, and many property owners can obtain a copy of their deed for free online.

Judge Whedbee cited both of these cases in his court orders.

Original source can be found here.