News Roundup

Legal Eagles on Lookout for Fraudulent Contractors

The Times-Picayune
October 28, 2006
By Greg Thomas

NEW ORLEANS (AP) — Fraudulent contractors, unlicensed contractors and the bilking of homeowners are reaching epidemic proportions, prompting federal and state agencies to beef up regulatory and criminal enforcement against unscrupulous businesses.

The problems may have not hit their peak, with Road Home money still to be handed out, state and federal agencies said.

The law and license enforcement agencies are coordinating efforts to fine or jail bad contractors.

“The FBI and the U.S. attorney are fundamentally committed to ensure (the use of) recovery (money) is free of fraud, and we are cooperating to include contractors who engage in fraudulent activity,” said James Bernazzani, FBI special agent in charge of Louisiana.

Bernazzani said that the disbursement of Road Home loans — federal money— gives the FBI jurisdiction, and any contractor stealing or fraudulently taking the money will be high on the FBI’s radar.

“If you are a contractor fraudulently (taking) recovery money from homeowners, the FBI will take a very, very hard look at it,” he said.

As Road Home money through the Louisiana Recovery Authority begins to be disbursed, the FBI and the Louisiana attorney general’s office doubt complaints against contractors have approached the peak.

“I think eventually our active complaints will exceed 1,000 any given month,” said Charles Marceaux, executive director of the Louisiana State Licensing Board for Contractors.

Marceaux said he expects that by the end of the year, his board will have held more than 800 administrative hearings since hurricanes Katrina and Rita. In past years, citation hearings have been about 300 to 400 a year, he added.

The citations are for being unlicensed, failing to perform as contracted or performing shoddy work. If egregious enough, the contractor’s actions are forwarded to the attorney general’s enforcement division, which will decided whether criminal action should be taken.

Isabel Wingerter, director of the general consumer protection section for the attorney general, said she would have expected a handful of consumer complaints in years past.

“We’ve never seen anything like this,” Wingerter said.

Most of the criminal cases involve misappropriations of funds and theft by fraud, she said.

As of Oct. 16, 194 cases had been referred to the attorney general’s criminal division for investigation, 65 arrest warrants for theft or fraud had been issued and there were 140 ongoing criminal investigations against contractors. Additionally, 10 civil unfair trade practice investigations involving 140 contractors were pending, Jennifer Cluck, a spokeswoman for the attorney general, said.

Between contractors seeking licenses and consumers making complaints or seeking information, the contractor’s board is fielding 80,000 calls a month.

Before Katrina, there had been about 15,000 licensed residential or commercial contractors or registered home-improvement contractors. Now, there are more than 20,000. Marceaux said that since Katrina, 5,397 new applications have been received.

Commercial licenses are the largest category at 2,648. Before last year’s storms, there were 47 licensed mold remediating contractors. There have been 256 applications and licenses issued for mold contracts since the storms.

Marceaux said he’s seeking support for legislation to stiffen the fines the board can levy and make it more difficult for a contractor to abandon a project.

Cluck urged consumers to use the attorney general’s hotline, 1-800-351-4889, to make complaints. The phone bank is staffed from Monday through Friday, 8:30 a.m. to 5 p.m., but messages can be left anytime for a staffer to return a consumer’s call.

The FBI’s top agent said reports of potential criminal activity can also be reported by calling 1-800-CALLFBI. He was adamant, however, that the hotline is not for generic consumer complaints.

“Please don’t call because you’re peeved at your contractor,” he said, but rather when there is obvious criminal activity.

Marceaux asked that consumers file complaints through the licensing board’s Web site.