Saturday, July 11, 2015

AG's first undercover sting targeted 15 home contractor scofflaws in Bucks

Posted: Sunday, June 28, 2015
He was a homeowner interested in a complete kitchen overhaul and a new roof for his homes in Middletown and Doylestown. They were home improvement contractors eager for his business.
Over four days in December, the homeowner met with a number of contractors, who took measurements, wrote estimates and discussed renovation and repair plans. Some contractors immediately started filling out written contracts. Others told the homeowner they worked only with handshake deals.
Not one admitted not being registered with the Pennsylvania Attorney General’s Office, a requirement under the six-year-old Pennsylvania Home Improvement Consumer Protection Act. But it didn’t matter. The “homeowner” already knew.
That’s because he works for the state’s Bureau of Consumer Protection, which investigates consumer complaints — including those involving home improvement contractors.
The 15 businesses that the bureau called about the job in this pilot sting program weren’t picked by accident. They were targeted as part of the AG office’s first sting operation on unregistered home improvement contractors. The same kind of undercover operation is being conducted in four other counties across the state and more stings are planned as part of the new crackdown on suspected contractor scofflaws.
“We really want them to know the next phone call they receive could be from the Attorney General,” said Sadie Martin, a spokeswoman for AG Kathleen Kane.
That hasn't always been the case.
Despite the fact the 2009 law established new regulations and civil and criminal penalties for home improvement crimes, complaints have persisted among consumer advocates, consumers and registered contractors about loopholes and lackluster enforcement.
The law requires that contractors performing at least $5,000 worth of home improvements a year in Pennsylvania register their company with the state attorney general’s office. They also must carry at least $50,000 in insurance coverage, give customers written contracts following specific requirements and provide the state with information such as prior bankruptcies, criminal convictions and civil judgments. The public can access the contractor registration information online through the attorney general’s website.
Among the complaints about the law has been it relies on the honor system for the more than 70,500 contractors that are currently registered. That means — until recently — no one at the state level checked the information contractors provided for accuracy until a consumer complained. As a result, officials admit, circumventing the law has been as simple as lying or leaving out information on a registration application.
The Legislature has collected $5.4 million in contractor registration fees since 2011 when it created the Home Improvement Account, but none of the money goes directly to the AG’s office for enforcement of the law. Instead, the agency has to file a funding request each year.
Enter Chief Deputy Attorney General Basil Merenda, who took over as director of the AG’s Bureau of Consumer Protection in April 2014.
One of the first things he did was create a new regulatory consumer compliance unit that includes five agents, two attorneys and three administrative staff members to handle regulatory compliance and enforcement matters. The office pursues civil actions, such as fines and restitution agreements, against contractors when an offense doesn’t meet the threshold for criminal prosecution. Criminal offenses are handled at the county court level.
Over the last year, the revitalized unit has initiated random audits of contractor registrations for accuracy, Merenda said. And the office is gearing up for the first wave of new registrations and renewals since a change in the law that requires contractors to update registration information, such as address changes or civil judgments, within 30 days of a change. Previously, there were no requirements to update information until the two-year registration expired and was renewed.
“That is a big change,” said Bucks County Consumer Protection Director Michael Bannon, whose office worked closely with Merenda on the pilot sting operation.
Merenda came up with the idea of undercover stings, an investigatory method he used when he was a prosecutor for the New Jersey Attorney General’s Office.
Two homes owned by Bucks County served as the settings and consumer protection agent John Gaskill, who grew up working in his dad’s construction business, played the role of the homeowner.
The contractors targeted were based in Philadelphia, Bucks and Montgomery counties. All either had expired registrations or were suspected of being unregistered, based on business ads that didn’t include the company’s Home Improvement Contractor (HIC) registration number, which the law requires, Gaskill said.
Some of the contractors also had consumer complaints filed against them at the state level, but none of the alleged issues rose to the level of criminal action, Gaskill said.
Prospective contractors were told Gaskill wanted either a complete kitchen overhaul or a new roof. He provided details of what he wanted and requested an estimate. Then he let the contractors make their pitches.
Once a contractor agreed to do the work and they settled on a start date, Gaskill excused himself to call his fiancée, who he said was on her way to the house. But the person who showed up was another state consumer protection agent.
Then came the big reveal.
Contractor reactions were mixed, Gaskill said. Some immediately understood what was happening, and why; some appeared indifferent. “Others were a little more agitated,” he added.
There were plenty of excuses for why they weren’t registered, he said. Some claimed they didn’t know about the law. Others said they didn’t know they had to renew their registration. And others said they didn’t know the registration had expired.
After announcing themselves, the agents gave the contractors copies of the home improvement contractor law, a registration form and a subpoena for documents related to their business. They were given 30 days to turn over the data to the AG’s office. Fewer than half the businesses complied before they were required to appear at a civil hearing — similar to a deposition — where they were questioned about their businesses, Gaskill said.
Nine contractors, including three from Bucks County, were fined at least $500 and signed an Assurance of Voluntary Compliance, similar to a plea agreement. In it, they agreed to follow the law, maintain state registration and use proper contract forms.
Plus, a Philadelphia business was ordered to pay $2,150 in restitution to two customers who filed complaints. Another four contractors received warning notices. One business owner — an undocumented immigrant — was reported to the U.S. Department of Homeland Security.
A Montgomery County contractor has refused to provide his business records, so the bureau plans to bring him before a judge to enforce the subpoena. He could face potential jail time for contempt, said Margarita Tulman, a deputy attorney general who oversaw the Bucks County sting.
Bannon said he was happy to help when Merenda contacted him with the undercover sting idea. For years, Bannon and his office have warned consumers about fraudulent contractors. The office has developed educational information about hiring a contractor and about the 2009 law and has sought increased enforcement of the law.
“I thought it could be a new and different way for the attorney general to do business. I thought it would work,” Bannon said. “It sends a good message. It’s an important part of the recipe. This contractor law enforcement is more than just signing up and giving your name. This part sends a key message to the many good contractors that have complied with the law.”


  1. Ah, the dreaded home inspection. For the seller, it can be suspenseful as they wait for the report to come back with any items that need to be fixed.
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