Sponsor and Secretary of State back bill to speed removal of fraudulent business registrations

Representative Luz Bey told the Senate Commerce Committee that House Bill 406 responds to a string of fraudulent business filings that used names and addresses similar to established local restaurants. Bey described two incidents in which newly created entities used an existing restaurant's address; in one case, the restaurant owner later received credit card mailings addressed to the fraudulent entity.

Bey said she worked with the Secretary of State's corporations director to document the events. Under current practice, the office sends a registered letter to the listed address; if returned as undeliverable, the office can mark the entity not in good standing and — after the statutorily required timeline — administratively dissolve it. Bey said the timeline allowed perpetrators time to open bank accounts and otherwise use the registration to commit financial fraud before the entity could be dissolved.

Deputy Secretary of State Erin Hennessy and Tom Connolly, the corporations division leader, briefed the committee on the office's experience and the intended change. Connolly described two common fraud patterns: "synthetic entity" filings that mix real and fake information to create an apparently legitimate business, and "company hijacking" where malicious filers replace or insert names so a public record appears to show different principals. The Secretary of State's office said it has been manually marking suspicious filings not in good standing and administratively dissolving them, but that a statutory tool would let staff take faster action.

Connolly said the office is preparing to replace its online filings system and to incorporate data analysis and vendor verification tools that could flag suspicious filings (for example, repeated use of the same IP address or mailing address across multiple suspicious filings). He asked the committee to adopt HB 406 so the office could act more quickly to block fraudulent filings and reduce harms to small business owners.

Why it matters: Business registration is a public record used by banks and other commercial actors to verify entities; fraudulent filings that mimic existing businesses can enable identity theft, unauthorized credit lines and other financial harms. The bill is narrow and directed at administrative remedies and verification tools rather than criminal penalties.

Committee procedure: The committee took testimony from the bill sponsor and from Secretary of State staff and then closed the hearing; no committee vote was recorded in the transcript at the time of the hearing.

Provenance: committee hearing record for HB 406.