Upstate NY Developer Faces Felonies For Allegedly Using Buyers' Deposits For Costs Unrelated To Building Their Homes

In Saratoga Springs, New York, the Schenectady Gazette reports on once-thriving homebuilder James McLagan who, once the real estate market tanked, now finds himself facing six felony grand larceny counts and a misdemeanor charge of scheming to fraud along with a number of civil lawsuits:

• [P]ublic records show that McLagan’s mortgage company and other creditors say he stopped paying his bills sometime last year, after he had already racked up hundreds of thousands of dollars in mechanic’s liens from contractors and creditors.

• That may mean he used housing deposits from customers to pay other bills rather than for supplies and contractor labor costs for their houses, which is illegal, [Saratoga County District Attorney James Murphy III] said.

• “In these particular criminal charges, we’re alleging that he intentionally stole money and didn’t use the money he was given by the homeowner for materials or products that were to be used specifically in the home that was being built,” he said.

• [DA Investigator Rich] Martin noted that state law requires builders who take money up front to put it into an escrow account and only draw on it for expenses for that home.

For more, see Boom times over for arrested developer.

For other posts on homeowners left in the lurch due to actions by builders/contractors, go here, go here, go here, and go here. StiffingContractorsZeta

Maryland Builder Charged With Pocketing $1M+ Of Customer Money & Failing To Construct Homes

In Prince George's County, Maryland, The Gazette reports:

• Three people were indicted Thursday on charges of accepting more than $1 million for homes in Upper Marlboro that were never built, according to the Office of the State's Attorney for Prince George's County.

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• [Leon and Emma Coleman, who ran a company called Opportunity Investment Group] face 57 counts of theft over $500 and charges of violating the state's Homebuilder Act, [...]. Kathy Ridley of Ellicott City, who allegedly vouched for the Colemans' reliability and helped their clients secure bank loans, faces 13 counts of theft and conspiracy [...].

***

• The Homebuilder Act requires builders to keep clients' payments in escrow accounts that are separate from their personal accounts and to hold the funds in trust for their clients. "This is our first foray into the homebuilder stuff from the criminal side," said [Assistant State's Attorney Doyle] Niemann. "We prosecute somebody who mugs somebody on the street for $50. Here these people lost a million."

For more, see Homebuilders, broker indicted for not developing Upper Marlboro lots (Duped homebuyers left with thousands in debt and no house to show for it).

For other posts on homeowners left in the lurch due to actions by builders/contractors, go here, go here, go here, and go here. StiffingContractorsZeta

Stiffing Subs In Wisconsin Can Land Builders In Jail, State High Court Holds

In June of this year, the Office of the Wisconsin Attorney General announced the decision of the state Supreme Court in a case involving the state's "theft by contractor" law.

• State v. Angela and Matthew Keyes [2008 WI 54] involves the interpretation of Wisconsin’s theft by contractor law. Under the law, money paid to a prime contractor by an owner for work on a building contract is held “in trust” by the prime contractor until all “claims” by subcontractors have been paid. If the funds held in trust by the prime contractor are insufficient to satisfy the subcontractors’ claims, he must satisfy those claims proportionally. Any “use” of the trust fund by the prime contractor before all claims have been paid in full or proportionally in cases of deficiency is considered “theft” by the prime contractor under Wisconsin law.

• “The Keyes decision reiterates the basic principle that both owners and subcontractors are to be protected by the occasional self-dealing of unscrupulous prime contractors,” said Wisconsin Attorney General J.B. Van Hollen.

For the Wisconsin AG's press release, see Prime Contractor Commits Theft By Contractor If Payments Made By The Project Owner Not Used To Satisy Subcontractors First, Wisconsin Supreme Court Holds. StiffingContractorsZeta

"Prove It" Say Florida Builders Accused Of Grand Theft; Allegedly Pocketed $475K In Customer Deposits While Failing To Deliver Completed Homes

In Vero Beach, Florida, TC Palm reports:

• Two developers of a unfinished subdivision north of Vero Beach pleaded not guilty to criminal charges of first degree grand theft of $475,000 in deposits from customers, according to court records. Construction of Eagle Trace Phase II was stopped last year, leaving empty lots and unfinished concrete block walls.

• And developers Richard Rendina, 60, of Palm Beach Gardens, and Stephen Siegel, 72, of Boca Raton, are out of jail — under $500,000 bail each. Prosecutors allege they improperly took deposits from 11 customers who paid on homes, according to court files.

For more, see Two developers plead not guilty to theft charges in Eagle Trace case (Prosecutors claim Richard Rendina, Stephen Siegel took $475,000 in construction deposits).

For other posts on homeowners left in the lurch due to actions by builders/contractors, go here, go here, go here, and go here. StiffingContractorsZeta

26 Buyers Sue Attorney/Escrow Agent For Unrefunded Deposits In Failed Condo Project

In West Palm Beach, Florida, The Palm Beach Post reports:

• More than two dozen buyers trying to recover deposits on the failed Palladio Terrace condo have filed a $2.5 million lawsuit against the Gunster Yoakley law firm, claiming the firm failed to properly guard their cash when it served as the condo's escrow agent.

• Merco Group of the Palm Beaches, Palladio Terrace's developer, abandoned plans to build the West Palm Beach luxury condo two years ago, but it has not returned all $10 million in deposits it obtained from would-be buyers. These and other buyers have lobbed lawsuits against Merco, seeking the return of their money. Some judgments have been reached but not paid by Miami-based Merco.

• Now, 26 would-be Palladio Terrace buyers are pointing the finger at Gunster Yoakley, saying the firm was negligent in releasing their money to Merco in the first place.

For more, see 26 sue law firm over West Palm Beach condo money.

For other posts on homeowners left in the lurch due to actions by builders/contractors, go here, go here, go here, and go here. StiffingContractorsZeta

Utah Builder Gets Three Months In Jail For Stiffing Subs, Resulting In Construction Liens Being Slapped On Customers' New Homes

In Salt Lake County, Utah KUTV Channel 2 reports:

• The Salt Lake County developer who was accused of jilting both homeowners and a contractor is spending 3 months in jail. The sentence brings to an end our investigation after calls to Get-Gephardt from home buyers. [...] Calls came from people who had closed on mortgages to move into their brand new homes on South Mountain...only to find out contractors were charging them again because construction bills were not paid.

For the rest of the story (video only), see Jail for a contractor accused of bilking homeowners.

See also, Utah Attorney General press release: Home Developer Sentenced To Jail:

• [J]udge [Judith] Atherton ordered [developer Brian K.] Brady to send $3,000 each month to the Attorney General's Office until the victims are made whole. The largest amount----$262,745---will go to the [Utah Residence] Lien Recovery Fund, a fund set up by the state to pay subcontractors and material providers when a general contractor fails to make payments for services and material for a home. Brady also must pay $61,506 to three subcontractors who could not recover from the Lien Recovery Fund.

For other posts on homeowners left in the lurch due to actions by builders/contractors, go here, go here, go here, and go here. StiffingContractorsZeta