Central Basin Contract Scandal Screens Light on State Tax Irregularities after LCCN Revelation
In a series of revelations, MV Cheng and Associates, a company owned by Misty Cheng, has found itself at the centre of a controversy. The company, which claims to provide staffing and consulting services in various sectors, from finance to IT, is under scrutiny for several questionable practices.
A formal complaint alleging tax fraud has been filed with the California Franchise Tax Board. If the allegations are true, MV Cheng and Associates, and Misty Cheng, could face severe consequences, including financial penalties, back taxes, and legal risks associated with tax evasion and regulatory non-compliance.
California law requires foreign LLCs (LLCs formed outside California but doing business there) to register with the California Secretary of State. Failure to do so can lead to annual penalties of around $800 in franchise taxes, plus late fees and penalties for failing to file required annual reports or pay required taxes on time. Additionally, the Secretary of State can impose penalties of roughly $500 to $1,000 per year for not registering as a foreign LLC.
Operating without registration while "doing business" in California, as defined by thresholds of California sales, property, or payroll, means the LLC is subject to California tax laws regardless of registration status, and tax authorities may require back taxes, interest, and penalties.
The contract awarded to MV Cheng and Associates by Central Basin Municipal Water District, worth $500,000, has raised major red flags in terms of adhering to California procurement law. The contract was pushed through by Board President Nem Ochoa and Directors Joanna Moreno, Juan Garza, and Gary Mendez, and it has been alleged that contract splitting was used to avoid competitive bidding.
The contract was amended multiple times, pushing it past the $250,000 threshold, and the June amendment to the contract left the agenda item number and board approval date blank. This amendment is considered dangerous legal territory unless it can be shown that there was an emergency need or a valid exemption.
The Public Contract Code was designed to protect public funds from cronyism, and this contract has raised major red flags. The contract's validity is further questionable due to the lack of transparency on MV Cheng and Associates' website, which features an amateurish appearance, no client list or testimonials, and a "News" section with a seven-year-old cached article.
Further investigation revealed that MV Cheng Properties LLC, a company controlled by Cheng and operating out of her California residence, was registered in Texas and had not registered as a foreign LLC in California, a clear violation of state law.
Emails to President Ochoa, Vice President Mendez, and Directors Moreno and Garza went unreturned, and the Pasadena location listed as the company's headquarters was a single-family home owned by Cheng. The Upland property, where the company operates, was owned by MV Cheng Properties LLC, a company unknown to anyone at Central Basin.
Upon being contacted about the complaint, Cheng admitted she had been operating under the radar and later registered MV Cheng Properties LLC with the CA Secretary of State. The status of the no-bid contract with Central Basin remains in place despite the admission and apparent tax evasion.
This case serves as a textbook example of contract splitting to avoid competitive bidding and highlights the importance of transparency and compliance in public contracts. It underscores the need for strict adherence to California procurement law and the Public Contract Code to protect public funds from cronyism.
The community news has highlighted the controversy surrounding MV Cheng and Associates, a company under scrutiny for questionable practices in the industry. Additionally, the company's failure to comply with California's foreign LLC registration requirements may lead to financial penalties and legal risks, potentially impacting the upcoming events within the business sector.
