Monday, March 9, 2015

Does Pennsylvania home improvement law have cracks in its foundation?

Posted: Sunday, March 8, 2015

First of two parts

A two-story addition completed in four months — tops — is what was promised to Jeffrey Goldstein in 2009. Before long, though, he suspected that promise would be broken.
A couple of months into construction, subcontractors claimed they weren’t paid. And the contractor, John Succi, routinely arrived at the Richboro home without building materials and supplies, then asked Goldstein’s wife to buy them. Succi also kept asking for more than the $80,000 price in the contract the Goldsteins signed.
Still, Goldstein said he wasn’t worried at the time. He knew that months earlier, the Legislature had adopted the Pennsylvania Home Improvement Consumer Protection Act, which was designed to regulate the home improvement and repair industry. After he found strong evidence that Succi had violated virtually every aspect of the new law, Goldstein figured prosecuting him would be easy.
“I felt completely protected,” he said. “I felt like it would be righted if I went to the authorities and told them what was going on.”
He was wrong.


As it turns out, enforcement of the 6-year-old law is lackluster and relies on contractors to provide accurate information, according to consumer advocates and others.
Jeffrey Goldstein
Even the trade group for the state’s home improvement industry calls the law’s enforcement lax, despite changes the Pennsylvania Attorney General’s Office, which administers the law, implemented last year to address complaints. Those changes include a new regulatory compliance unit, random checks of applications and devoting more resources to investigating complaints.
“There are really no teeth (in the law)," said Peter Gallagher, president of the Pennsylvania Builders Association, which represents 5,400 companies. “There is a number at the Attorney General’s Office that you can call and complain, and if you complain, they’ll put it on their list, but that doesn’t mean it (investigation) will get done in a timely fashion.”
In 2010, when Goldstein said he first complained to the Attorney General’s Office and the Bucks County Office of Consumer Protection, he was told other complaints would be necessary before they’d investigate Succi’s business.
Last year — four years after Goldstein first brought his fraud suspicions to authorities — Succi went on trial for home improvement fraud. A jury found the Lower Makefield resident guilty of bilking 14 customers out of $2.5 million over at least eight years, in the largest home improvement contractor fraud case in recent memory.
CHANGES AND LOOPHOLES
Among the biggest complaints about the contractor law is its reliance on the honor system.
Contractors who perform at least $5,000 worth of home improvements a year are required by law to register their name, insurance coverage and other information with the Attorney General’s Office. But the information supplied, including records of prior bankruptcy filings, criminal convictions and civil judgments, isn't routinely checked for accuracy, according to the AG's Office.
“There was no way to verify the information early on, when registration first started,” said Bucks County assistant district attorney A.J. Garabedian, who prosecuted Succi.
That's still true, according to consumers and consumer advocates. As a result, circumventing the law is as simple as lying on an application, something Succi did repeatedly, authorities say. Contractors caught lying on their registrations — or failing to register — can face fines of up to $1,000 to $3,000 per violation, but no criminal penalties.
Registrations must be renewed every two years, but contractors frequently don't do so, Gallagher said.
“From a contractor’s standpoint, no one is concerned about registering. We’d really like to see the enforcement," he added. "I’m in the Poconos and had a few scandals up here and it was primarily three or four builders who put a black eye on every builder in the place. As a builder, you live and die by your reputation.”
Gallagher believes the lack of compliance is reflected in the numbers. After the law took effect, as many as 86,000 contractors were on the registry, he said. Now 67,000 are registered, including 10,165 and 2,377 in Bucks and Montgomery counties, respectively.
Other weaknesses in the law cited by consumer advocates and others:
John Succi

John Succi 
• Anyone with $51, a Social Security number and proof of at least $50,000 of insurance coverage can register as a contractor in Pennsylvania, according to contractors. No experience, education or training is required.
• The Attorney General’s Office can deactivate a registration if it contains inaccurate information, but a contractor can have it reinstated once the correct information is submitted.
• Prior criminal convictions alone, including home improvement-related crimes, won’t keep someone off the registry without a court order. And a court-barred contractor can petition to be reinstated five years after being taken off the list, according to the AG’s office.
“That is really what it comes down to — there is nothing to this law,” said Chester County kitchen and bath contractor George W. Edwards, a member of the National Association of the Remodeling Industry.
Since 2009, at least two Bucks County contractors with criminal theft and fraud convictions continued working in home repairs and construction with valid state registrations until they were arrested a second time on home improvement fraud charges.
One of those convicted contractors — John Salvatico, of Doylestown — was able to continue working in the construction field despite a court-ordered ban after his first 2008 conviction. His business — Eastern Construction & Roofing LLC — was registered under his wife’s name. Salvatico also used phony names when dealing with potential customers and local building and licensing officials.
When Goldstein, who now lives in Warminster, started digging into Succi’s background in 2010, he found prior successful civil suits and bankruptcy filings that the contractor had failed to disclose on his state registration. He also tracked down other people who claimed they were ripped off by Succi.
But it took three years before Bucks County detectives started to investigate Succi, who was then charged with 27 counts of felony fraud in February 2014. Succi remained a registered contractor until the AG's Office took him off the list a month before he was arrested.
Such loopholes are the reason Robin McNaughton believes her elderly parents were victimized by Bristol Township father-and-son contractors.
Her parents are among 10 property owners — many older adults — who allegedly were swindled out of $771,165 by Ryan and John “Jack” Thayer Jr. between March 2011 and April. The pair’s trial is expected to start Monday in Bucks County Court in Doylestown.
Ryan Thayer and John Thayer Jr.
Ryan (Left) and John Thayer Jr.
McNaughton alleges her parents paid the Thayers, of Hammertime Construction, $60,167 of the $157,531 cost to rebuild their fire-damaged home in 2013. They were promised the work would be finished in October of that year, according to McNaughton, who said the Thayers walked off the job in August. The family hired another contractor and spent $35,000 to get the job finished last year, she said.
“This licensing is a joke,” McNaughton added. “They are so good at preying on people in the most vulnerable situation. They’re like vultures coming down for the prey. It gives contractors a bad name.”
RED FLAGS MISSED
Before hiring Charles R. Gorman Custom Carpentry, of Horsham, to renovate a room in his Warminster home in 2013, George Coleman confirmed that Gordon's company was on the state’s Home Improvement Contractor Registry.
Charles Gorman
Charles Gorman
Coleman also noticed Gorman had answered “yes” to a registry question asking if he'd been sued in the last decade for home improvement work. Gorman told him it involved a $250 disagreement, Coleman said.
What Gorman didn’t reveal was that he had been successfully sued four times between 2007 and 2010, with judgments against him totaling $10,237, according to online court records.
Since 2012, Gorman has been successfully sued six more times, racking up another $31,394 in judgments, court records show. Among the more recent awards is one for $4,718 for Coleman, who said he has yet to see a penny of restitution.
“This is better than robbing a 7-Eleven,” Coleman said. “When you rob a 7-Eleven, you know you go to jail. When you’re a contractor, it’s 50-50 if it’s going to be considered a contractor’s dispute or outright theft.”
Consumer advocates believe customers, such as Goldstein and Coleman, might believe that contractors who appear on the state registry have been vetted even though they're not. Even the AG’s website, where individuals can check a registration status, warns consumers that just because a contractor’s name appears on the registry, that shouldn't be interpreted as an endorsement of workmanship or honesty. The website also encourages individuals to do further background checks.
Of the nearly two dozen contractors accused or convicted of home improvement-related crimes in Bucks and Montgomery counties since 2009, a little more than half were registered, as required, including Succi, Gorman and the Thayers.
Succi first registered JS Contractors and Builders Inc. with the state, but he lied about his insurance coverage, as well as providing a false birth date, according to authorities. When his registration expired in 2011 and again in 2013, he renewed it under a different birth date and listed himself as the company’s vice president, according to state records.
Consumer advocates emphasize that one of the main purposes for establishing the state registry was to get contractors to carry insurance and to make it easier for authorities to find them if complaints were filed.
Before the 2009 law, each municipality issued home improvement contractor licenses and there was no easy way to find out if a license had been revoked, Bucks County Consumer Protection Director Michael Bannon said. As a result, a contractor banned in one town could change his company’s name and set up shop elsewhere virtually undetected.
What brought the issue to the breaking point in Pennsylvania was New Jersey's adoption of stricter contractors law in 2005, Bannon said. When that went into effect, unscrupulous contractors began to cross the Delaware and set up shop in Pennsylvania. Complaints spiked as a result, he said.
“We didn’t know who anyone was,” Bannon said. “I do believe what was passed in 2009 may not be perfect, but it has helped us track down some of the really bad offenders.”
Since 2009, at least 17 contractors have been convicted of home improvement-related crimes in Bucks and Montgomery counties, and at least four others are accused or awaiting trial.
Upper Southampton police arrested Gorman in July, alleging that he accepted more than $36,000 over three years and performed shoddy or incomplete work, according to a probable cause affidavit. He recently pleaded guilty in county court to felony home improvement fraud-related charges involving 10 property owners — including Coleman.
Succi was recently sentenced to 15 to 30 years in state prison, the longest prison sentence for a convicted home improvement contractor in recent memory.
But there's no guarantee that convicted contractors will get prison time.
A review of court records showed that half of the 10 contractors convicted and sentenced in Bucks County for home improvement-related crimes since 2009 were not sentenced to prison.
Steven Dunner, of Doylestown Roofing and Siding, was sentenced to two years of probation in 2011 after pleading guilty to contractor-related theft. Less than a year later, he was arrested a second time, for taking $28,000 from three Bucks County homeowners and then stopping work after he cashed the checks.
That's when authorities realized Dunner had lied on his registration application about his previous conviction. After pleading guilty the second time, Dunner was sentenced to two to 10 years in state prison. He appealed and lost, but disappeared while he was free on unsecured bail.
Steve Dunner
Steven Dunner
While the law has made it easier to find alleged crooked contractors and provided more tools for prosecuting them, it can still be challenging, according to Marc Furber, chief of economic crimes for the Bucks County District Attorney’s Office.
Cases in which a contractor allegedly accepts a deposit and fails to perform work are easier to prove, but once work starts, it can be harder to prove criminal intent — a necessary factor, Furber said.
“Is it a bad businessman or someone who specifically went in there to defraud?” Furber said. “That is always one of the things we face.”
Investigating alleged contractor fraud is a long, tedious exercise that requires showing a pattern of behavior, Bannon explained.
“Fraud is hard to prove. You have to prove their intent was to steal from the beginning of the job,” Bannon added. “When you get someone who knows how to play the system, it complicates things.”
Pennsylvania Attorney General spokeswoman Carolyn Myers said multiple complaints greatly assist the investigation into contractors who are accused of ripping off clients by not performing or finishing contracted-for work or by doing shoddy work.
And a distinct line exists between civil and criminal breach of contract, Upper Southampton Detective James Schirmer said. A contractor who does poor quality work is a civil case, but one who takes money and performs no work is more likely a criminal case. Schirmer added that he believes the contractor law is sufficient, as long as people are vigilant and educated about it.
“No matter how tight the law is,” he added, “there will always be someone willing to find a weakness."
Jo Ciavaglia: 215-949-4181; email: jciavaglia@calkins.com; Twitter: @jociavaglia

What the Pennsylvania Home Improvement Law says:

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