State Contractors Board Falls Into Disrepair

When the paint began to peel off the sides of her house in the San Bernardino Mountains, Patricia West protested to the board that regulates California’s contractors.

A board-appointed examiner concluded that the work by Steve Kanallakan’s construction company was substandard.

Also, a small claims court judge faulted the contractor over a bathroom make-over in Dara Elizondo’s Laguna Hills house. The judge awarded her $4,075.

But it was not until July, nine months after complaints were filed, that the Contractors State License Board alleged that Kanallakan’s firm had violated 13 construction laws. When the case will be resolved is unknown; until then, the company can continue to do business.

“It just amazes me,” Elizondo said. “They took too long. They lost my trust in them to protect me. In my opinion, there’s no reason to have a contractors board at this point.”

Gov. Arnold Schwarzenegger’s California Performance Review task force agrees. Earlier this month, the group -- charged with reconfiguring state government -- called for eliminating the board and letting a consumer affairs department with “ ‘chain of command’ accountability” to the governor investigate incompetent and unscrupulous contractors.

But the difficulties at the contractors board provide a telling example of how the task force’s emphasis on the architecture of state government obscures a more pressing problem for many state regulators: their dearth of resources.

After losing a fifth of its investigators since 1999, the contractors board has been forced to curtail much of its enforcement activity.

While residential building permits have skyrocketed by 40% in the last five years, the board has opened about 20% fewer investigations. Routine complaints of shoddy workmanship can languish until multiple grievances pile up.

The cases the board does examine take 169 days on average to conclude -- 49 days longer than board guidelines recommend. And the board has gutted some of its most innovative efforts to catch unlicensed contractors before they rip off homeowners.

Though the state has been in a fiscal crisis, much of this was avoidable. Like other regulators, the board receives its money from fees paid by the licensed professionals. That should have made it impervious to dips in the state’s tax coffers.

But then-Gov. Gray Davis included the board in a blanket hiring freeze imposed on state agencies in 2001. Each year, vacated positions were abolished automatically.

Schwarzenegger lifted the hiring freeze in May, but his administration has not yet restored any investigative positions.

“We have largely dropped the ball for the California consumer,” said Thomas A. Papageorge, who was an administration-appointed monitor of the board until last year. “We have the enormously ironic situation of important agencies having the money to protect consumers but not being allowed to spend it.”

The contractors board oversees about 280,000 contractors, carpenters, cabinetmakers, landscapers, pool installers, plumbers and others in California’s construction industry. It receives about 25,000 complaints a year.

Though the enforcement staff has dropped from 259 to 201 people, board officials say they still aggressively pursue the worst cases, especially those that involve health and safety, elderly victims and repeat offenders.

“It’s one thing to receive a complaint, to have a good-faith dispute, but to commit the same mistake over and over again, that’s not going to be tolerated,” said David Fogt, the board’s enforcement chief. “We’ve just redirected resources so we can go after those bad contractors quickly.”

The board initiates fewer sting investigations, in which staffers pose as homeowners and answer ads to catch unlicensed contractors, a burgeoning problem during California’s building boom in recent years. Industry officials say those illegal workers typically underbid legitimate contractors because they do not pay workers compensation for employees and do not carry a bond or liability insurance as protection for botched jobs and injuries.

Even more disturbing to outside monitors, the board has not been able to repair some of its documented areas of weakness in protecting the public from crooked contractors.

Consider the case of San Diego contractor Lee Mark Ross.

Despite a conviction for ripping off owners of homes he had pledged to repair, Ross secured a new license in 1992 by simply swapping two digits in his Social Security number. Over the next decade, his company racked up 70 more victims. One lost $93,750, court records alleged.

In response, Sacramento lawmakers mandated in 2002 that all new contractors be fingerprinted. But the board has yet to begin the program, which it now hopes will be running by January at the earliest.

Board officials blame the attorney general’s office for the delay, but the attorney general’s office says it has told the board it can begin vetting fingerprints any time.

But at the same time lawmakers were expanding the board’s responsibilities, the board was cutting back on the types of cases it investigates.

The board now refers property owners with disputes under $5,000 to small claims court, and arranges arbitration for other cases.

Kristi Gonzalez opted for arbitration after filing a complaint in January 2003 against Art Nouveau Builders of Chula Vista, which she had hired to construct a 500-square-foot addition to her San Diego home.

“The roof was put on defectively, which I found out after it leaked,” Gonzalez said. “The heating and air conditioning has never worked since they were there, and now it doesn’t work in the rest of the house.”

In the bathroom, hot and cold water taps were reversed, and there were two dozen other problems she documented in writing at the time.

In February, a year after she complained, she won $6,919 in arbitration. But the board did not move to pull the company’s license until after it received complaints from two other homeowners that Art Nouveau had abandoned work before finishing.

One homeowner had paid the company $66,556; the other had paid $18,700, according to the board’s accusation, which charges the firm with violating the state’s building laws, departing from trade standards and abandoning construction without a legal excuse.

Tracey Weatherby, a contractors board spokeswoman, declined to discuss pending cases. But she noted that the board issued two disciplinary citations against Art Nouveau last year. Citations are orders to remedy problems, but do not affect a contractor’s license.

Neither Arnulfo Orozco Jimenez nor Jose Luis Molina, who are identified in board documents as partners in Art Nouveau, responded to requests for interviews.

A hearing is scheduled for December. If the charges are upheld, the board can suspend or revoke the company’s license. By this point, the matter is somewhat academic, because Art Nouveau’s license was automatically suspended in September 2003 after its performance bond was terminated by its private surety company.

Contractors who maintain their bonds, however, can continue to operate for months and even years before the board pulls their licenses. During that time, they can amass far more claims than their $10,000 bonds can pay off.

Last year, Patricia West filed a claim against the bond of Kanallakan General Building Contractor of Cedar Glen after she paid $15,453 for the contractor to paint her Lake Arrowhead house, replace two windows and install a coating on top of the deck, none of which she said were done correctly. “The paint started peeling off immediately,” she said.

Three other customers also filed claims that far exceeded Kanallakan’s bond, his surety company said in a court filing. One of the clients, the Smiley Park Country Club, a homeowners association in the San Bernardino Mountains, said it hired Kanallakan’s company to demolish and replace two concrete decks at a cost of more than $40,000.

Judith Amtmann, the group’s president at the time, said the new concrete installed by Kanallakan’s worker had large gaps in it and was marked by “cracking, puddling and pooling.”

“We wound up with a pool that was unusable all last summer,” she said.

But in May, after the claims were filed, Kanallakan switched bond companies, state records show, and his license is still active.

The contractors board is trying to discipline Kanallakan’s company for departing from trade standards, exceeding a contract amount, performing repairs it was not licensed to do and receiving payment that exceeded the value of the work.

Kanallakan did not respond to several requests for an interview, but he defended himself in letters to his original bond company obtained by The Times.

“My company was expanding in work and workers, so I am not disputing the workmanship” with Elizondo’s Laguna Hills bathroom, he wrote in one letter, adding that he had offered to come back to repair it but she had refused.

Kanallakan blamed the poor condition of the wood on West’s house for the peeling paint. He returned to her house to repair cracks in the deck, which she said have since recurred.

The verdict on the contractors board is mixed. Amtmann praised the inspector who came out to her club, saying “he pointed out parts of the contract that did not add up that we did not even notice.” She added, “We felt we had been more than amply served.”

But West, like Elizondo, panned the board’s responses. “We have found out that the license board is there to protect the contractor, certainly not the consumer,” West said.

Weatherby, the board spokeswoman, said: “While the wheels of justice may not turn as quickly as everyone, including the board, might like, CSLB has taken the maximum discipline under its jurisdiction in these cases and is requesting suspension or revocation of the licenses.”

Both the contractors board and Schwarzenegger’s administration agree that the board needs more investigators. But progress thus far has been slow. The administration has been mainly concerned with eliminating backlogs in processing licenses for contractors.

“As far as solving problems with the consumer, I don’t see that happening,” said Jody Costellos, who started a website, www.contractorsfromhell.com, after her own negative experience in San Diego.

Since the hiring freeze was lifted in May, the board has hired people for 11 of 18 vacant jobs. Four of the new hires are in enforcement.

The governor’s administration says it will not authorize adding any jobs for the board until all its vacancies are filled.

Larry Booth, chairman of the 15-member contractors board, said the governor’s finance department has been “tight-fisted,” though he says “there’s a dawning awakening” that the board should not be treated like agencies that rely on general tax revenues.

“Although we take in more money than we are allowed to spend, we don’t have discretion to spend it,” Booth said. “There are a lot of areas that we should be investigating, and because we are not able to staff those levels fully, we’re not able to do it at the levels the consumer would like to see.”

Sen. Liz Figueroa (D-Fremont), who heads the legislative panel that oversees boards, has proposed legislation to allow boards to increase their staff without administration approval so long as they can afford it, but Schwarzenegger’s finance department does not support the measure.

Julianne D’Angelo Fellmeth, who worked on the contractors board enforcement monitoring program and now is the monitor for the Medical Board, said: “It’s consumer fraud to create these agencies and encourage consumers and other law enforcement agencies to rely on them, and then to turn around and strip them of the funds and the staff that they need to do their job effectively.”