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BBB looks to regain trust with relaunch of Southland branch

The Better Business Bureau branch, expelled after reports that it had been awarding inflated grades in exchange for cash, has returned as a 'virtual BBB.'

David Lazarus

7:15 PM EDT, May 2, 2013

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The Better Business Bureau wants you to know that it's cleaned up its act in Los Angeles.

The organization reached out to me this week to say that a new operation is up and running after the old BBB of the Southland was expelled in March after years of reports that the branch had been awarding inflated grades to businesses in exchange for cash.

Carrie Hurt, head of the national Council of Better Business Bureaus, told me that a "virtual BBB" has been launched in Southern California, enabling bureau officials from across the country to address local consumer issues via the Internet.

She also said the bureau has signed a lease for new office space in L.A. and hopes to have a local presence by the fall.

That's all fine and dandy. But the bigger question is what steps the Better Business Bureau has taken to reassure the public that its pay-for-play days are behind it.

In 2009, I broke the story that businesses that agreed to pay at least $300 in accreditation dues to the bureau routinely received a higher grade than non-accredited companies.

I cited the example of celebrity chef Wolfgang Puck, who owns several of the most prominent restaurants in Southern California. His non-accredited eateries received relatively low grades from the bureau, while lesser-known restaurants that paid dues to the organization were graded A-plus.

A year later, a group of Los Angeles business owners conducted its own sting 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 firms all received high marks. Hamas scored an A-minus.

Hurt said accredited businesses are no longer given extra points when determining a letter grade, so grades should now better reflect a company's track record for generating or resolving complaints.

She said many of the issues highlighted in my column were unique to the Southern California branch of the organization, and those issues were resolved when the old management team was shown the door.

"We can't fix what the former leadership did," Hurt said. "But we can move forward in a positive way."

As for the former leadership, they're now running a bureau clone called the Business Consumer Alliance. Kiry Peng, the head of the group, said he looks forward to going mano-a-mano with a reborn Better Business Bureau.

He said his group will offer more accurate ratings and better complaint resolution than the bureau. "What we're striving for is quality," Peng said.

The question is how many of the Business Consumer Alliance's roughly 16,600 dues-paying members, which it inherited from its days as a bureau chapter, will remain with the group and how many will defect to the rejiggered bureau.

As for a new-and-improved BBB of the Southland, the proof, as they say, will be in the pudding.

Ratings for most L.A. businesses aren't being given yet on the bureau's website, so I can't tell you what grade has been awarded to Puck's Spago restaurant in Beverly Hills or whether the Lakers, despite their disastrous season, at least enjoy high marks for customer service.

Hurt said grades for L.A. businesses should be available by September, after six months of data have been collected. She said the "virtual" SoCal bureau is already handling nearly 1,600 consumer complaints every week.

All I can say is that the bureau seems eager for consumers and businesses to give it another try as it makes an effort to address issues that have caused it trouble in the past.

That said, Hurt acknowledged that most of the organization's revenue still comes from the dues of accredited companies, which is a potential conflict of interest because the bureau has a financial incentive to boost the grades of businesses that give it money.

In L.A., accreditation can run from about $500 to more than $1,000 a year, depending on the size of the company.

Hurt insisted that the Better Business Bureau isn't selling high grades or overlooking any problems involving accredited businesses. She said the stakes for accredited businesses are even higher because they have more to lose if the bureau determines they've failed to live up to the organization's standards.

I'll be keen to hear your thoughts as the bureau returns to Southern California.

Travel insurance

Here's an update on my recent column about travel insurer Allianz denying a policyholder's claim after using a manipulative form letter to coerce her doctor into giving it the answer it wanted about her health.

Now that Barbara Butkus' cardiologist was permitted to speak his mind, Allianz has reversed itself and approved her claim for $451.20 to cover a canceled plane ticket.

"We apologize for any inconvenience she may have experienced while we worked to obtain more information from her doctor, but we're glad that we could provide coverage in this circumstance and we wish her the best in her future travels," said Daniel Durazo, an Allianz spokesman.

Butkus' doctor, Philip J. Patel, had told the insurer that he advised Butkus to cancel the trip because of her breathing troubles — a new condition, he said, and thus covered by her insurance policy.

However, Allianz followed up with a form letter requiring him to provide a yes-or-no answer to whether Butkus was being treated for a "primary or underlying" condition.

There was only one answer to this question, considering that Butkus has been treated for years for other issues related to an earlier heart attack and high blood pressure.

"I had to say, 'Yes,' " Patel told me. "What else can you say?"

In response to the column, the California Department of Insurance said it would investigate the matter. Allianz also said it would ask Patel again whether Butkus' breathing troubles represented a new or existing condition.

Patel, in turn, reiterated his original diagnosis: Butkus' breathing difficulties represented a new condition, separate from her underlying health issues.

"It is unfortunate that this information was unable to be conveyed to you during your decision-making for Mrs. Butkus' insurance claim," Patel told Allianz. "The form letters that were sent me did not offer a chance for a proper explanation."

I asked Allianz's Durazo whether, in light of concerns raised by Butkus' case, his company still believes its claims-approval process is fair to policyholders.

He declined to answer.

David Lazarus' column runs Tuesdays and Fridays. He also can be seen daily on KTLA-TV Channel 5 and followed on Twitter @Davidlaz. Send your tips or feedback to david.lazarus@latimes.com.