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Shady Business Owners Can Hide Behind LLCs. CA Should Make Their Identities Public.
gvw_calmatters
By CalMatters
Published 1 month ago on
March 13, 2024

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It took a year to identify the owners of an unsafe converted warehouse in Oakland.

State Sen. Durazo’s bill would require LLCs to identify the people who control them.

LLC transparency will increase government efficiency and save taxpayer dollars.


In 2018, when I was a lawyer in the Oakland City Attorney’s Office, a code enforcement inspector walked into my office and said, “I have to tell you about something that keeps me up at night.”

Susan Dershowitz Portrait

Susan Dershowitz

Special to CalMatters

Opinion

It was a heartbreaking story. Families with young children, pregnant women and largely low-income immigrants who spoke little to no English were enduring extraordinarily unsafe living conditions. They were renting dangerous units in a converted warehouse near the Oakland airport with no heat, no hot water, major leaks and serious fire hazards.

The building was so unsafe it was ultimately condemned.

It took over a year to uncover the full extent of the problem, investigating a landlord who owned numerous unsafe properties in Oakland through different companies, including Dodg Corporation and others. We discovered the neglect was actually a business model: For years, the property owners profited from renting uninhabitable units to dozens of working families desperate to find an affordable home during an unprecedented housing crisis.

Our investigation ultimately led to a 2019 lawsuit to hold this landlord accountable for subjecting people to grave health and safety risks at six different rental properties.

Monumental Task to Trace Owners of Unsafe Properties

Government attorneys have access to a lot of information, but the lack of transparency in corporate ownership hampered the investigation. It was a monumental task to determine the reach of this local real estate empire by linking all of the companies. We were finally able to determine that one family, led by Baljit Singh Mann and Surinder Mann, owned 130 properties in Oakland through a web of limited liability companies and corporate entities, which we discovered only after studying hundreds of city code enforcement records and connecting the dots.

In 2021, the case against the Manns went to trial and the court ordered them to pay the city nearly $4 million in civil penalties. As an attorney for the local government team, funded by taxpayer dollars, I alone spent hundreds of hours investigating this case.

Even though LLCs must register with the Secretary of State, they are not required to provide the names of the individuals who control the LLC – the “beneficial owners.” This presents challenges for the public and for agencies tasked with protecting public health and safety, preventing businesses from cheating their workers, and enforcing a wide range of laws.

The lack of accessible LLC ownership information should not give bad actors cover to shield themselves from liability and profit from predatory business models. That’s why state Sen. María Elena Durazo authored Senate Bill 1201 to require LLCs and other corporate entities to make beneficial ownership information public.

Lack of Transparency Ends up Costing Taxpayers

Enforcement agencies have limited resources to catch the worst actors, who hide behind these opaque ownership structures to then oppress community members with the least power. Identifying the most flagrant violators of local and state law is critical to advancing justice for every Californian. Requiring corporations to disclose the name of each person who exercises substantial control over the business would provide a level of transparency necessary for accountability.

It would make it easier to enforce existing laws to protect the people who live and work in our communities across the state, increase government efficiency, and ultimately save taxpayer dollars.

SB 1201 will not only allow for more robust enforcement of our laws but it will also give the public access to much-needed information. Understanding where corporate power and wealth is concentrated will help inform policy choices to create a California where everyone can thrive.

It will also give everyone the information they need to enforce their rights. While the most egregious cases rise to the level of enforcement by local and state governments, shining a light on the people doing business in California is good for everyone who calls the state home. The public needs the legislature to pass SB 1201 this year because accountability cannot wait.

About the Author

Suzanne Dershowitz is a senior staff attorney at Public Advocates. She previously served as housing policy attorney for Legal Aid of Sonoma County and was a Neighborhood Law Corps attorney at the Oakland City Attorney’s Office. She wrote this for CalMatters, a public interest journalism venture committed to explaining how California’s state Capitol works and why it matters. 

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GV Wire encourages vigorous debate from people and organizations on local, state, and national issues. Submit your op-ed to bmcewen@gvwire.com for consideration.

 

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