Construction Fraud Increasing and Difficult to Prosecute

By Beacon Staff

LAKESIDE – Sitting in the basement recording studio of his house, George “Cheyenne” Allen reflected on being scammed out of thousands of dollars by the contractor who built it.

“They say your house is supposed to be like your dream, your biggest thing. Man, mine’s been like a nightmare and I lost a good friend, too,” Allen said, then he thought for a moment, cradling his guitar. “Boy, that sounds like a blues song – or is it country?”

He strummed the instrument and sang softly, “I got the contractor blues…” Although Allen, 50, maintains a sense of humor, the ordeal of building his home and the legal disputes that ensued left him financially drained and physically ill in the aftermath of the house’s construction, almost five years ago.

And Allen is not alone. While no state agency keeps statistics on contractor fraud, investigators assigned to study such crimes – from the Better Business Bureau to the Kalispell Police Department – agree it is increasing in the Flathead, where construction is booming and few laws exist to regulate and punish offenders.

“You have got the opportunity for construction fraud in the state of Montana, specifically in the fast growing counties,” said Detective Sgt. Brian Fulford of the Kalispell Police Department, a specialist in economic crime. “I think the trend will continue as long as the construction boom continues.”

Allen said his contractor – a friend and fellow musician at the church he attended – double-charged both Allen and his mortgage bank for building materials (including pavement for a driveway Allen doesn’t have), and performed shoddy plumbing work without a license (he now uses his downstairs shower as a closet). As soon as a more profitable job came along, the contractor left before Allen’s house was complete. In the end, Allen estimates he paid his contractor about $10,000 more than the $75,281 agreed upon in the contract – a sum he’ll be paying off in his mortgage for the next 30 years.

“The house isn’t worth the value that I’m paying for it,” Allen said. “It was a scam; he kind of manipulated me in my opinion.”

Allen’s contractor was issued a cease and desist order March 20 by the office of consumer protection, a division of the Montana Department of Justice, for contracting without registering with the state. At the time he was issued the order, he had five complaints against him, according to Michelle Truex of the consumer protection division.

The contractor did not return calls for comment. As of last week, a recording at his local phone number identified it as Tru-Cut Builders of Kalispell. In a letter from the contractor to the consumer protection division following the cease and desist order, which the division provided to Allen, he denied any allegations and wrote that Allen was “solely responsible for the budget overruns in every case!!!”

The consumer protection division registered 65 complaints statewide last year regarding new construction and home remodels, most of which, Truex said, the state can’t prosecute because contractor fraud often exists in a legal gray area. The Department of Justice can field complaints, issue notices to contractors and mediate disputes, but that’s about it. In many cases, it’s up to the victim to hire an attorney and pursue a lawsuit.

“There isn’t a heck of a lot that we can do,” she said. “As long as they are doing a job, and they do something, there is no law against poor workmanship.” In Flathead County, Truex added, there are “particularly bad actors.”

A roving band of “travelers” made news in the valley a few months ago, with a scam that became well known after a number of senior citizens fell victim to “drive-by paving.”

Alyce Eastman of Somers was one of those victims. In what has become a familiar pattern to law enforcement, a group knocked on Eastman’s door one evening in May offering to pave her driveway for a reduced rate – saying they had some asphalt left over from another job. Eastman, 77, cut them a check for $3,000 and the men paved most of the driveway, saying they would return to finish the job the following morning. After Eastman paid the men $1,800 more, providing her credit card number, the pavers laid an inch-thick layer of asphalt down and left.

Eastman notified police, but she is left with a narrow, bumpy driveway that has stones and grass jutting out of it. After reporting the incident, she managed to get reimbursed by her credit card company for the fraud. But a reputable asphalt paver quoted her $9,580 to tear up the existing driveway and replace it, which she can’t afford. “It’s going to fall apart, no question of that,” Eastman said of her current driveway.

Authorities interviewed said the circumstances of the frauds perpetrated against Eastman and Allen are relatively common: A contractor lacks a license or documentation, is hard to reach and not listed in the phone book, and uses a vague contract to describe the services provided – or no contract at all. Then, when things go bad, they vanish.

“People need to understand that they are capable of looking up a business,” said Zan Deery, an investigator with the Better Business Bureau. “You really need to make sure that these guys are on the up and up.” Too often, Deery said, prospective clients are reluctant to bring a construction contract to an attorney, out of fear of appearing ignorant. Or they may feel, as Allen did, that because the contractor is someone they know, it’s someone they can trust. But a clear, detailed contract is really the only way to document the expectations for the work, its cost and schedule for completion. “If anything’s verbalized, make sure that it’s put into writing,” Deery added. “Your contract is your word, that’s basically what it comes down to.”

Fulford, of the Kalispell police, said most contractors in the Flathead are honest and reputable, but the demand for construction work far outstrips the supply – so lesser known or out-of-state contractors step in to fill the void. And with them come scam artists.

“We’ve been discovered by a lot of wealthy people around the country,” Fulford said. “You bring in the big money, you bring in the big fraudsters.”

Compounding the problem, Fulford said, is that fraud cases were typically handled by federal attorneys prior to 9/11 – but emphasis has now shifted to investigating terrorism. Montana local law enforcement is often ill equipped and too overburdened to tackle complicated economic fraud cases that may involve layers of civil paperwork and assets hidden in offshore accounts.

“Fraud, in itself, is a very difficult crime to try and prosecute,” he added. “In Montana, most city attorneys don’t have the expertise to prosecute fraud.”

Meanwhile, people like Allen, who said he can not afford to hire an attorney, has received little from his dispute beyond some wisdom. “It doesn’t matter if your dad says he’s going to do something for you, get it in writing,” Allen said, “signed in blood and carved in stone.”