BBB Borrows to Publish, Not Perish

The Better Business Bureau of San Diego was forced to borrow $100,000 to complete the most recent edition of a consumer guide and yellow pages after Better Books Inc., the book’s San Francisco-based publisher, filed Chapter 7 bankruptcy proceedings, bureau President Janet Atkinson said late last week.

Additionally, the San Diego bureau has joined with seven other bureaus from around the country in a lawsuit that alleges fraud, breach of contract and forgery by executives at Better Books, which filed for bankruptcy in July, 1986.

Bureaus the Victims

The civil suit was filed earlier this year in Superior Court in Sacramento on behalf of independent, nonprofit bureaus in San Diego, Los Angeles/Orange County, Oakland, San Francisco, Sacramento, Stockton, Denver, Pittsburgh, and Des Moines.

“We’d like some recognition (through the court case) that someone else was the responsible party” for the problems surrounding the resource books, Atkinson said. “It seems to me that (the bureaus) were innocent parties, but we’re the only ones left after” Better Books’ bankruptcy filing.

Atkinson and bureau board members last week declined to discuss the bureau’s budget, but Atkinson did describe the bureau as “financially sound” after the problems generated by Better Books’ bankruptcy filing.

Neighboring BBB Closes

Financial problems created by Better Books’ bankruptcy forced the closing last week of the 59-year-old Los Angeles/Orange County bureau, according to William Fritz, president of the bureau that represented the two counties.

Membership at that bureau plummeted to 3,000 from a 1986 high of 6,800 when many members who paid to advertise in the resource book learned that Better Books had filed for bankruptcy. The two-county bureau borrowed $35,000 to distribute some of the books but lacked the funds needed to print and distribute four planned editions of the resource book, Fritz said.

Membership at the San Diego bureau tumbled to 2,000 from a high two years ago of 2,800, Atkinson said. Membership peaked at both bureaus during a Better Books sales campaign that offered discount rates to bureau members who advertised in the resource book.

The Los Angeles bureau evidently assumed that those members would renew, according to Atkinson, who expected about 60% of those new members to drop out after their memberships expired.

Unlike Los Angeles/Orange, San Diego “only had one book to be completed,” Atkinson said. “Los Angeles had something like four different editions in progress.”

Bankruptcy Unexpected

San Diego’s most recent resource book, with a circulation of 250,000, was one of half a dozen resource books that Better Books had contracted to produce. Better Books had several years left on a five-year contract when it declared bankruptcy, Atkinson said.

“The bankruptcy notice was something that came absolutely out of the clear blue sky,” Atkinson said. “The word came down from San Francisco that the doors were closed.”

Eight bureaus had resource books in progress when Better Books declared bankruptcy, but with the exception of Los Angeles, all of them used internal funds or borrowed money to complete publication and distribution, according to Bruce Gregor, the Sacramento attorney who is representing the bureaus in the bankruptcy proceedings and the civil suit.

San Diego’s bureau paid $100,000 to print and distribute the book despite the fact that it had no legal obligation to do so, Atkinson said. The book was completed “not just to protect the advertisers but because of the value that the publication has to consumers,” Atkinson said.

The eight bureaus hope to reclaim some of their expenses through the court action in Sacramento, according to Gregor. Better Books’ bankruptcy filing listed about $3 million in accounts receivable for resource books in progress, Gregor said.

Hopes for a Comeback

Atkinson believes that longstanding members of the Los Angeles/Orange bureau eventually will spearhead an effort to revitalize the failed organization.

“People get so used to having something like the BBB around that they begin to take it for granted,” Atkinson said. “Gradually it will filter down through the community that it’s a big loss.”

The San Diego bureau will not feel economic repercussions from the failure of the larger Los Angeles/Orange bureau because all bureaus in the U.S. are independent operations, Atkinson said.

However, the San Diego bureau will be unable to provide current information to San Diegans with questions about companies in Los Angeles and Orange County. The bureau handles an average of 7,000 requests each month for information on companies in San Diego and around the country, Atkinson said.

She predicted that local membership will increase during coming years because the bureau, which has “never been particularly aggressive in terms of member development,” has initiated a membership recruitment campaign. Nearly 70 businesses are being added each month, Atkinson said.