Homeowners Fall Prey to the Con After the Storm
Like so many other homeowners whose properties were left in ruins by Hurricane Katrina, Wanda and William Mason wanted badly to get their house repaired so they could get on with their lives.
But after paying a $16,000 deposit to a contractor to begin work on their home in the Gentilly neighborhood, they got their second harsh blow in one year: Their contractor disappeared with their money after less than a week of work.
“I can’t figure out how I didn’t see this coming,” said Wanda Mason, 58. “I want to kick myself because I know better. But we were so desperate, trying to get home.”
Complaints against fraudulent contractors have skyrocketed since Hurricane Katrina, according to Louisiana state officials, city government and local attorneys.
“It’s a huge problem in the Greater New Orleans area, and outside,” said Cynthia Albert, a spokeswoman for the Better Business Bureau of New Orleans. “There are very good contractors, but also a lot of bad ones, more so than before. A lot of them are very, very new to this industry, but they see that this is a very lucrative opportunity and have taken advantage of it.”
Charles Marceaux, executive director of the Louisiana State Licensing Board for Contractors, said his agency was fielding 491 complaints against contractors, all generated since Katrina hit. Most of the grievances involve charges of shoddy or incomplete work, and are against out-of-state and unlicensed contractors.
Marceaux said that since Katrina, the licensing board has issued about 3,500 citations to contractors for lacking state licenses or for substandard work. Before the hurricane, between 1,500 and 1,800 such citations were issued a year.
The Louisiana attorney general’s office says it is pursuing criminal investigations of 183 cases of alleged contractor fraud, and another 48 are being reviewed for criminal activity. There have been 20 related arrests. And 135 other cases are being investigated as civil matters by the Consumer Protection Section of the state attorney general’s office.
“It’s awful,” said Bradley Elizabeth Black, a staff attorney at the Loyola University School of Law, which has established a Katrina law clinic to help residents tackle post-storm legal issues, including contractor fraud. “People have been waiting for a year. They finally get their insurance money. They get a contractor. And then they get screwed.”
The bilking of victims by dishonest service providers in the aftermath of a natural disaster is not unusual, lawyers and building industry officials said. But the scale of the destruction caused last year by hurricanes Katrina and Rita -- more than 200,000 homes and 81,000 businesses in Louisiana were damaged, according to state statistics -- has made the problem in New Orleans exponentially worse.
“Those who are unlicensed and uninsured and are not complying with the rules here in Louisiana, and are doing shoddy work ... will set the stage for tarnishing the reputation of all those who are licensed and insured and [working] with integrity,” said Jon W. Luther, executive vice president of the Home Builders Assn. of Greater New Orleans, which has 1,000 members, including building contractors and industry suppliers.
The Masons’ yellow wood-paneled, two-story home had a foot of floodwater in the front part of it, and 5 feet of water in the rear.
Keith and Shy Perique, relatives of the Masons, referred the couple to a Houston-based contractor, who drew up an agreement that included gutting the home, installing sheet rock, doing plumbing and electrical wiring and restoring a new kitchen and the property’s downstairs master bedroom. At the time, the contractor had already started work on the Periques’ house, less than a mile away, and that boosted the Masons’ confidence in him. In addition, the company had a website, professional-looking business cards, and the lead contractor presented the appropriate Louisiana license.
So the Masons acquired a city permit to allow the repairs to begin and handed over a $10,000 check, a deposit for the job that was expected to cost $65,250.
According to the Masons, the main builder showed up with a team of laborers, worked for less than a week laying, but not connecting, some electrical wires. But after the Masons made another $6,000 payment, the contractor disappeared.
“We kept calling and calling,” Wanda Mason said one recent morning as she sat on the porch of her home flipping through a file folder that included copies of the contract and deposit checks.
The last time the Masons saw the contractor was in April. Shy Perique said she was racked with guilt for referring the Masons to the contractor. And since doing so, she has been stiffed by the same company, to whom she and her husband paid $56,000 for the remodeling of their home. The Masons have been forced to live in a stuffy upstairs room of their house. Their bed is a sheet on the carpeted floor; their dining table, a piece of wood siding, or a cooler. Since they have no kitchen, all meals are takeout.
The couple said they had reported their case to the state licensing board and to the attorney general and they planned to file a civil lawsuit against the contractor.
Nedra Wilson has had similar troubles.
She said she paid a contractor $43,000 with loan money. The builder, who came highly recommended, started the job in April, Wilson said. By August, he was demanding an additional $12,000, although hardly any of the work had been completed. When Wilson refused to pay, saying she owed him only $8,000 more, the contractor refused to continue the job. She hasn’t been able to reach him since.
“All I wanted was for me and my children to get back to some kind of normalcy,” a distraught Wilson said. “This is so stressful. I’ve lost everything I ever owned. Now you have this devastation with contractors just stealing your money, and no one is doing anything about it. I feel that the system has failed me.”
Wilson said she had reported her grievance to the New Orleans police, the sheriff’s office, the FBI, the district attorney, the state licensing board and the attorney general’s office. She said she can’t sleep or eat; a property management specialist, she feels humiliated that such a fate could have befallen her.
Isabel Wingerter, director of the attorney general’s Consumer Protection Section, said that “sadly, the majority of [cases] seem to be a dispute between the homeowner and the contractor over the quality and timeliness of the work, or the cost of the work.” And this is something homeowners have to pursue privately, because the attorney general lacks the manpower and resources to follow up on every incident.
Ellen Barrett Artopoeus, a senior staff attorney with the Pro Bono Project in New Orleans, which provides free legal aid to low-income people, said that in many cases homeowners had not authenticated certain vital documents, such as the indemnity insurance and licenses presented to them by a contractor.
“Just because someone hands you a piece of paper, that piece of paper doesn’t mean anything” unless the details on it are proved valid, Artopoeus said.
Marceaux, the licensing board executive, said that sometimes homeowners fell prey to unscrupulous contractors because they independently acquired the necessary permits to allow work to begin. Legitimate licensed contractors are supposed to obtain that permit, he said.
“It is desperation” on the homeowner’s part, Marceaux said. “It is trying to save money. But they all fall victim to their own stupidity.”
In addition to never acquiring a building permit on behalf of a contractor, property owners can avoid scams by taking other precautions, officials said. For example, one should never pay more than 10% or $1,000 as a down payment for a job; never pay in cash; verify that the contractor has proper insurance, including a lien and performance clause in the contract; and put the start date and approximate finish date in the contract.
“If someone is demanding upfront payment in cash, this is a sure sign that this is probably a scam,” said Jennifer Cluck in the attorney general’s office. “A legitimate contractor would be happy to wait.”
Albert, of the New Orleans Better Business Bureau, said she didn’t see contractor fraud subsiding anytime soon. “I really don’t see any light at the end of the tunnel right now. I see this going on for a long time.”