A Long Beach City Council candidate is being sued for fraud and breach of contract for allegedly concealing certain debts and financial obligations when she sold her advertising business this year.
In a lawsuit filed in Los Angeles Superior Court on Monday, Ivana and Dominic Cummins said Cindy Allen failed to disclose ten of thousands of dollars in vendor debt, missing office equipment and other liabilities when she sold her ETA Advertising business to the couple for $128,038.
As a result of the misrepresentation, the Cummins received an “insolvent company” that will result in a substantial final loss, according to the lawsuit.
Allen, a businesswoman and former Long Beach police officer, is pitted against Robert Fox in a November runoff for the 2nd District, which includes parts of the city’s Downtown waterfront.
Allen founded ETA Advertising in 2005 and the business has since been a point of attack for critics over its contracts with the city and potential conflicts of interest. Allen initially announced roughly a year ago, around the time she launched her campaign for the City Council, that she was selling the company to a firm called Blume Media. However the owner of Blume failed to follow through on financial agreements, and appeared only to be putting up a facade as a global media company, with fabricated executives listed on its website.
When that deal fell through, Allen announced in August that she had sold the business to the Cummins, who live in San Pedro and run a sales coaching and marketing consulting business called RightMind.
The Cummins could not immediately be reached for comment Tuesday.
Allen in an email said the “entire transaction selling ETA Advertising was aboveboard and full disclosures were made.” She said she has not yet received the lawsuit and declined to comment on the specific allegations.
“As a former business owner, I know how challenging it is to build a business even in the best of times, and it is even more difficult during Covid,” she said. “I was proud of the successful business I built and I am sad that the new owners are apparently struggling.”
Public records show ETA had generated at least $1.4 million in city advertising contracts since 2015. But ETA was “not in a healthy healthy financial state” when the Cummins entered into negations in the spring of this year, according to the suit. The couple, however, decided to buy it in July after working with consultants to develop a business plan to revive the company.
Beginning the week of Aug. 3, the couple said they began to uncover financial and employment information that Allen had not disclosed during the transaction.
Among the issues, the new owners said they discovered $22,615 in undisclosed vendor bills and $67,848 in missing company equipment.
The suit alleges that Allen also failed to provide details on salary arrangements for two ETA employees—Adam Carrillo and Jan Andrew Montoya. The company had cut salaries for Carillo and Montoya so that it could benefit from the federal Paycheck Protection Program (PPP) Loan, but the Cummins said the two employees later told them the cuts were “temporary” and that they were of the understanding that their original salaries would be reinstated after the PPP Loan was forgiven, the lawsuit said.
“This equates to additional undisclosed salary in the amount of $44,004,” the lawsuit said.
The Cummins said a cornerstone of their business plan was the ability to receive a Small Business Administration Economic Injury Disaster Loan for $29,000 to help revive the company. But when they applied, they discovered the company had already received the loan, though Allen had said she had not applied for such a loan, according to the lawsuit.
“Allen intentionally concealed facts from (the Cummins) in the negotiation and closing of the agreement that were known only to Allen, and affirmatively misrepresented material facts…” the lawsuit said.
The Cummins said they would not have purchased the company if they had been aware of the financials and the fact that the company had already received a business loan.
They are suing for an unspecified amount in damages.
Editor’s Note: Allen is a former owner of the Long Beach Post but has not had any involvement with the Post since she sold it in 2018.