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State Fines Unregistered Companies $1.3 Million

by Hugh McQuaid | Aug 4, 2011 2:10pm
(5) Comments | Commenting has expired

Hugh McQuaid Photo

Attorney General George Jepsen and Secretary of the State Denise Merrill

The attorney general and secretary of the state announced Thursday that a combined effort by their offices collected more than $1.3 million in penalties from companies doing business in the state without registering to do so.

Businesses formed outside of Connecticut must register with the secretary of the state’s office to obtain a certificate of authority to conduct business in the state. At a press conference in her office, Secretary of the State Denise Merrill said registering is neither difficult nor expensive. Registration fees range from $40 to $120, depending on the type of business, she said.

The fines were collected from almost 330 businesses, some of which were likely not operating long in the state without registration and only penalized a few hundred dollars. But some companies were fined more than $20,000.

The five businesses paying the steepest penalties were:

- DAN Services Inc., an international safety service for divers based in North Carolina, which was penalized $26,955.

- The Providence Journal Company, a Rhode Island newspaper, charged $22,192.50.

- Global Med Technologies Inc., an international medical management and software company based in Colorado, charged $20,910

- Harris Environmental Services Systems Inc., a Massachusetts company specializing in environmentally controlled rooms, was penalized $20,842.50.

- Superior Technical Resources Inc., a New York IT employment recruiting company, penalized $20,685.

Merrill said the businesses that received the heaviest penalties were operating in the state without authority for many years. The penalty for operating unregistered is around $300 a month, she said.

The state has been consistent in enforcing the registration law and has collected more than $6 million in penalties over the last five years, she said. The purpose behind the requirement is to make sure that companies operating in Connecticut can be held accountable to consumers.

When businesses register they must list an agent for the service of process, someone who consumers can contact if they have grievances, she said.

“This is not a frivolous government action. This really makes an impact on our business community,” she said.

When they don’t bother to register, businesses cannot be held accountable for their work and can get away with doing a lower-quality job at a lower price, she said. That creates an unfair business climate for the companies who are playing by the rules, she said.

Attorney General George Jepsen said it’s important for out-of-state businesses to play by the rules in Connecticut.  But both Merrill and Jepsen said many of the companies fined simply didn’t know about the requirement.

The purpose of the Capitol press conference was to educate businesses about the registration requirement, Jepsen said.

“The experience of my office has shown that in many cases businesses don’t know what the rules are. We need to do a better job educating the public and making these rules clearer,” he said.

The Providence Journal told the Associated Press that its failure to register was an “unintentional oversight.”

“As soon as it came to light, we rectified the situation by registering with the state and paid the requisite license fees and penalties,” said Deborah Tomilson, the papers’s vice president of business development.

Other businesses disputed the penalties, saying that their level of business activity in Connecticut was not higher enough to require registration, Jepsen said.

“There’s a whole range from people who sincerely believe they have no requirement to register,” Jepsen said, “… to fly-by-night contractors who deliberately and willfully try to fly under radar to avoid being recognized.”

When the penalty is assessed they try to make the penalty reflect the reality of the situation, he said.

At least two of the highest fined companies actually self-reported their violation, Merrill said.

Connecticut Better Business Bureau President Paul Scarpetti said that people should think twice about doing business with a company that chooses not to register with the state.

The comment elicited a question from leader of the Connecticut Green Party and journalist Ken Krayeske, who pointed out that when of the companies penalized was Burton Capital Management, LLC, which was fined $1,695.00. That company is run by Robert Burton a major benefactor of the University of Connecticut’s athletic department.

Krayeske asked if UConn should now be wary of Burton.

Merrill said Burton initially didn’t feel he needed to register with the state but said an agreement was eventually reached and he is now registered. She did not comment on whether the university should be wary of him. Jepsen did not comment either.

But Scarpetti clarified his own statement: “We were talking about people giving second thought to who they do business with and whether or not they’re registered, we’re talking about at the consumer lever for the most part.”

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(5) Comments

posted by: Disgruntled | August 4, 2011  4:19pm

GeorgeJepsen comes back from Florida to run for office and drive business out of the state. Great.It works nicely with Dan’s FIRST FIVE JIVE.

posted by: Lawrence | August 4, 2011  9:17pm

Yeah, gee willikers! How come businesses in CT are expected to obey the law and stuff like that?? Just let ‘em do what they want!

posted by: skydogct | August 4, 2011  10:04pm

Way to go, George! I don’t think you’re driving business out of the state, I think you’re keeping a level playing field for businesses that play by the rules. I’m curious what legitimate businesses think about your actions, my guess is that they support it.

posted by: DirtyJobsGUy | August 5, 2011  1:03pm

Registering as a foreign corporation or as a local office is not the trivial thing the story makes it out to be.  Registration requires you to pay CT corporate taxes on the portion of your profits generated in CT.  So you have to have your accountant do an extra set of returns (for sales and income taxes).  In most states until very recently, a company that does only an occasional business in CT would not create a nexus for this.  The amount of taxes received by the stat would be less than the expense of processing the paperwork, plus CT firms do work in other states on an infrequent basis. 

Note the extremely low amount of money supposedly collected ($1.5 M).  These guys do this publicity stunt every few years with the same business killing results.

posted by: Disgruntled | August 8, 2011  11:31am

Why is crude under $84 and we are still paying $4.10 for gas?
Why is gas so much cheaper in NYC than in my town?