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Wednesday, July 7, 2010

California Sued For Shortchanging Business Owners With IOUs

Posted By on Wed, Jul 7, 2010 at 2:22 PM

click to enlarge moneystack1.jpg
A National Guard veteran who sold $28,000 worth of uniforms to the state of California for a youth camp has filed a lawsuit against state officials, asserting the state violated state law by paying her with  IOUs in lieu of cash during last year's budget crisis.

Nancy Baird, a resident of San Luis Obispo County who served for 29

years in the Army National Guard, asserts in her

lawsuit that the IOUs conflict with the California Prompt

Payment Act.

Under that law, Baird's complaint states, recipients of

the IOUs were due a 0.25-percent daily penalty rate for interest,

rather than the 3.75-percent annual interest rate the state pays on the


The lawsuit also notes that Baird was unable to pay sales tax to the state -- with its own IOUs -- owed as a result of her sale to the California National Guard of uniforms and polo shirts for a military youth camp. She now owns a screen-printing and embroidery business.

The lawsuit in Sacramento Superior Court names only Baird as a plaintiff but was filed as a class-action suit in anticipation of more business owners joining her. If successful in proving that the state underpaid its many IOU creditors, the suit could have a significant financial impact on California's coffers. The complaint states that 450,000 IOUs worth about $2.6 billion were issued during the 2009 budget crisis.

H/T   |   Courthouse News

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