In the wake of Hurricane Ida, massive amounts of building and repairs will be undertaken in south Louisiana. This means the influx of large numbers of contractors, builders, constructions workers, and supporting industries and their employees. Unfortunately, this will also mean the inevitable rise in contractor fraud as well. There will be many unscrupulous individuals, both from Louisiana and elsewhere, attempting to take advantage of desperate property owners and families just looking to get back into their homes as quickly, and cheaply, as possible.

Below are some tips to make sure you do not become a victim of contractor fraud.

WHAT IS CONTRACTOR FRAUD?

In the simplest terms, you can think of contractor fraud as a type of theft committed by someone who is supposed to build or repair a structure for you. Under Louisiana’s criminal statutes, there are two general crimes defined as contractor fraud. The first is under La. R.S. 14:202, which criminalizes the misapplication of payments by a contractor, subcontractor, or agent of either, after having received funds for building or repair.

The second is La. R.S. 14:202.1, which deals with residential contractor fraud—the crime that will likely be most prevalent after widespread damage. This statute again criminalizes the misapplication of payments, but provides further definitions for the misappropriation or intentional taking of funds. These definitions include:

  • failure to perform work within 45 days or longer after receiving payment (unless a contract specified otherwise).
  • using deception or lies to cause someone to enter into a residential contract.
  • making a material misrepresentation of fact in an application for a permit.
  • failing to possess the required license and/or knowingly employing a subcontractor who fails to produce the required license, among other specifics in the definitions.

While we would hope that neither of these statutes would be violated in the wake of Ida, inevitable cases will pop up. In selecting workmen and managing your storm repairs, you must be vigilant and protect yourself.

HOW DO YOU PROTECT YOURSELF FROM CONTRACTOR FRAUD?

While there can be no exhaustive list of ways to protect yourself from being taken advantage of by a cheat promising to restore your home to its pre-storm condition, there are several things you can do to make sure you do not become a victim.

First and foremost, do your due diligence and homework when selecting a contractor or repairman. You should only hire a licensed contractor. You can search for licensed contractors through the Louisiana State Licensing Board for Contractors. That website contains an easily searchable database that will show licensing status, contact numbers/addresses, and other information. You can also check Louisiana authorized business entities at the Louisiana Secretary of State’s website.

Inevitably, someone will hire a non-licensed repairman or contractor, especially as licensed ones load up with more work than they can handle. While this is not recommended, you can still do your homework, whether your chosen repairman is licensed or not. Get a copy of multiple forms of identification (license; passport; social security card; etc) to make sure you know who you are dealing with. Also obtain multiple means of contact, including cell phone numbers, addresses, and the like. Search online, such as at yp.com, to see if you can locate the listing for the contractor or individual. Other resources such as online review sites, the Better Business Bureau, and the like are also good resources.

You may also want to request a voided check for the contractor’s bank account(s) where your funds will be deposited. This not only makes sure the person is telling the truth to you, but also gives you an avenue of recourse in having identified the individual at the outset and letting any attorneys or prosecutors know where to first look for evidence that your money was misapplied. If a contractor is trying to rush you into agreeing to let him work before you have time to do your research, that is a big red flag.

Obtain multiple bids for your work. Do not just pick the lowest bid automatically, especially if your own investigations into the person’s background is less than reassuring. If the price seems too good to be true…it probably is.

A CONTRACT WITH YOUR CONTRACTOR IS CRUCIAL

Once you have decided on a contractor, GET A CONTRACT IN WRITING WITH AS MUCH SPECIFICITY AS POSSIBLE. Have estimates for building materials, labor, overhead, general contractors cut/profit, etc. Also, have a completion date and benchmarks for partial work completion. Schedule payments with these benchmarks—usually called a “draw” by contractors. There may be extenuating circumstances that will require additional payments and/or rises in cost. However, a general roadmap will keep you and your contractor on target and help you demonstrate later that your contractor did not use funds as he was supposed to.

You may also want to put in a provision that any disputes will be handled in the jurisdiction where you live…to keep you from having to drive across the state or country to sue him later on.

HANDLING CONTRACTOR PAYMENTS

Along those lines, require your contractor to provide you with receipts for materials, unless you are buying materials yourself. Be sure the receipts match what is delivered on site and/or used in the building/repair. If you have doled out many thousands of dollars, yet have no materials or work to show for it, that is an immediate sign that something might be wrong. Similarly, a long stall in work might also be a sign of coming trouble.

Take multiple, dated pictures as work progresses that can be compared with the receipts for materials and your signed contract. That way, you will be able to show any major discrepancies between your payments and the work actually performed/materials purchased.

As you pay your contractor, which should never be in cash and should always include a signed receipt, check with your bank to be sure he is depositing funds into the account(s) he previously disclosed. This is traceable and secure. This will also make sure he is not siphoning funds off immediately and may show how those funds were applied later on—even if thereafter transferred to other accounts. If he is a cheat, you may not be the first person he has taken payments from, just to turn around and blow the money at some area or Gulf Coast casino. His banking records might later prove that.

HAVING ISSUES? ADDRESS THEM IN WRITING

If you are noticing discrepancies or having issues in having work completed, address those with your contractor in writing. You may wish to send a letter via certified mail so it can be tracked, rather than just relying on the date at the top of your letter and handing the letter to your contractor. You can always give him a copy in person and also send an e-mail. For any major issues, request that he also provide an explanation or plan in writing. If you are to change the provisions of your contract due to any issues, also have that done in writing and signed/dated.

Furthermore, if any delays in building/repair are incurring you costs (additional food, lodging, etc.), keep a log/receipts of those costs as well, in case you need to claim those delay-incurred costs as damages. This might include costs between your “firing” this swindler and getting a new contractor to work.

If you are terminating your contractor for failure to perform, also do so in writing and be specific as to the issues leading to your decision to consider the contract dissolved. Be sure that your contractor has violated your contract, as you have entered into a binding agreement with him unless he has failed to perform as required. You may wish to speak with an attorney before doing so.

CONTRACTOR FRAUD REMEDIES

Well, you went through all of this and maybe more, and still your contractor took advantage of you. So what to do next?  Well, gather your evidence, and get ready for the long haul…

Civil Recourse

You can demand that your contractor return funds for work not completed or the immediate performance of his duties under the contract. When you obtain no response, you can retain an attorney to file suit against the contractor. That identifying information you obtained earlier, updated now that you are having issues, will come in very handy right now.

Your attorney will have this contractor served with the lawsuit in the appropriate jurisdiction. The lawsuit will set forth your claimed injuries and demand to be made whole. If this is a route you wish to go, you should speak with an attorney as soon as possible, to be sure you dot your i’s, cross your t’s, and have your Petition filed before your time to do so runs out.

If you were to take this case to trial and obtain a judgment in your favor, the contractor will owe you the amount awarded by the court/jury. If he does not pay, knowing where he lives, where he owns property or equipment, etc., will come in handy when trying to seize items to pay off your judgment. You’ll be glad you did your homework on day one.

You can handle a lawsuit for yourself—in legal terms, this is called being a pro se party. In the instance of contractor fraud, you might want to think twice before taking on this task without assistance. On the Friday before Ida hit, I was sitting outside of a courtroom and speaking with a pro se party to a lawsuit. After a bit of conversation, I learned this lady was representing herself in a suit related to Hurricane Katrina contractor litigation—which was still ongoing all these years after the storm’s passing. After listening to her for some time, it was clear to me that so many of her issues might have been resolved much sooner had she been represented by an attorney. The choice is yours, so make it carefully.  The legal system is complex.

Criminal Recourse

If you’ve been seriously defrauded, you might be thinking of going to law enforcement. Check with your local Sheriff, police department, or District Attorney’s office to find the best organization and division to speak with. Many will have an economic crimes unit to handle cases such as these. You will meet with a detective or prosecutor who will review your evidence, take a statement from you, and may even come out to see your property.

If any arrest warrants are issued or arrests made, it will be up to the prosecuting attorney whether or not to accept any charges. Remember that prosecutors represent the State, not you individually. Do not be surprised if the defrauder is charged with theft rather than contractor fraud—that may just be an easier option for the prosecutor based on your circumstances. Also, do not plan to be in court at every hearing in the criminal matter. It is sometimes better for the case that you not be present until needed. The choice is yours, but speak with the prosecutor before appearing in court if you are not required to be there.

The contractor fraud statutes require reimbursement to the victims, including costs of repair. Under the general rules in Louisiana’s Code of Criminal Procedure, the Court is also given the tools to make any crime victim whole for damages. Make sure you discuss this with the prosecuting attorney to be sure this restitution is ordered, especially if a plea agreement is reached. You will need proof of your damages, so your receipts/payments to this contractor and any others repairing/completing the unfinished work will be crucial proof, just as in any civil case.

The execution of a money judgment in your favor in exchange for a plea to a lesser crime would be a good thing to ask for from the prosecutor. That can save you many years and many dollars in civil litigation, or at least get you enough money in the short term to move on with repairs while your civil suit moves on before another judge. The civil and criminal remedies are not exclusive and can go on concurrently.

CONCLUSION

Do your homework. Supervise your contractor. Hoard as much information as you can, in writing, in photographs, via e-mail and snail mail. Hopefully, this will mean you will not become a victim. But if you are defrauded, at least you will have already made the case that you are owed your due, and this cheat should not get away with it. This is true in both the civil and the criminal arena.

If anyone reading this blog post believes they are the victim of contractor fraud, please feel free to contact me for some advice on where to turn and who to contact.