The Better Business Bureau chapter that predominantly served the Los Angeles area is no more.
The BBB of the Southland was expelled Tuesday from the national organization, losing the right to use the BBB name and logo.
The move comes after a 2010 ABC News report which detailed the group's practice of accrediting new members and awarding them inflated ratings in exchange for cash.
"Over a period of more than two years, BBB of the Southland failed to resolve concerns about compliance with several standards required of BBBs, including standards relating to accreditation, reporting on businesses, and handling complaints," said Carrie A. Hurt, president and chief executive of the Council of Better Business Bureaus, in a statement.
The Arlington, Va.-based group then conducted its own investigation of the Los Angeles chapter, examining its alleged "pay to play" culture.
In 2010, a group of Los Angeles business owners that had been critical of the BBB conducted a sting operation by paying dues for fake companies, including one named after the Palestinian organization, Hamas, which the U.S. government considers a terrorist group.
The fake businesses were all accredited and given ratings, according to the ABC News report. Hamas received an A-minus rating.
In 2009, The Times' consumer affairs columnist David Lazarus wrote about chef Wolfgang Puck, who owns several restaurants in Southern California. Puck's non-BBB restaurants were rated poorly, while lesser-known eateries paid roughly $300 in dues and were graded A-plus.
Hurt said in a statement that the national group will operate a "virtual BBB" until a local group is established and running again. Other BBB staff from around the country will take on local responsibilities in the interim.
In a Friday letter to the national group, Jerry Dominguez, chairman of the board of directors of the BBB of the Southland, defended his chapter's record and resigned its membership.
"Our board has endured repeated, unjustified criticism that we haven't been exercising our governance responsibilities as the auditors believe we should," he wrote.
In the letter, he detailed what he called the group's accomplishments and handling of consumer complaints.
"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," he ended the missive.
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