NBC2 investigates state agency responsible for regulating contractor fraud

Posted: Aug 24, 2018 4:19 PM -04:00 Updated:

Contractor Complaint Goes Nowhere

Eight homeowners on Marco Island are wondering what they did wrong.

They all hired the same contractor to build their new home or perform major renovations on an existing home.

Up until that point, the contractor had a stellar reputation and was recommended by numerous people around the island.

But one by one they all ran into nearly the same issue.

"He paid none of the subcontractors. Zero," Joe Rocco said.

Rocco hired Steve Henell for a housing renovation.

He and the other homeowners all kept records showing they were making timely payments to Henell but eventually subcontractors started complaining about the lack of funds and many of them blamed the homeowners.

"We have $115,000 worth of liens on our home today and then another $52,000 worth of subcontractors that weren’t paid," Bob Madaio said.

"So they’re still knocking on the door every once in a while."

David Korte hired Henell for a renovation project.

"We started getting follow-ups from a couple of the subs letting us know that they had not been paid even though we had (paid Henell)," Korte said.

More than $500,000 in liens were filed against properties Henell was contracted to work.

All of the liens can easily be found through the Collier County Clerk of Court website.

But when confronted, Henell denied that he was aware of any liens.

"The thing we keep coming around to is you say you’re not aware of any liens, but we both know there are," reporter David Hodges told Henell.

"I’m not aware of any liens. There are none as we speak (NOTE: a check of court records show there are still some liens on properties) and if you think I’m doing something criminal then you know they would have to prove that. Someone is innocent until proven guilty and I’m not even charged with any of that," Henell said.

We continued to push Henell on what happened to the money.

"I don’t have the money," Henell said.

"Is the money not there because you’re doing something different with it?" Hodges asked.

"No. All the money was allocated to business. None of it went in my pocket."

"Was it allocated to the jobs from the people who paid it?"

"Yes," Henell replied.

"You know if it’s not its potentially illegal," Hodges said.

"Yes," Henell said again.

In an email, the Collier County Sheriff's Office confirmed they have received complaints on Henell and are subpoenaing records and investigating.

The Marco Island homeowners believe this is a clear case of theft and they wanted something to be done about it.

But despite their efforts to report Henell, he is still licensed and still capable of performing work for new customers.

"We want to make sure nobody else gets hurt by this person," Rocco said.

"Take his license."

Rocco and Korte are both licensed in their home states.

Rocco is an accountant in New York, and Korte is an attorney in Ohio.

"We all have licenses that would have been revoked if we had done anything close to what this person did," Rocco said.

Henell is a licensed Certified General Contractor in the state of Florida.

The Department of Business and Professional Regulation (DBPR) is responsible for issuing and enforcing discipline on licensed professionals in Florida.

Various boards filled with volunteers and appointees oversee licensing for everything from hairdressers to veterinarians to contractors.

For contractors its called the Construction Industry Licensing Board (CILB).

Korte, Rocco, Madaio and Peter Troyan filed complaints with DBPR against Henell.

They provided copies of their complaints to us alleging that Henell failed to pay subcontractors and ended up costing them thousands of dollars.

While investigators with DBPR would occasionally email or text the homeowners asking for more details about their situation, eventually all four received a letter stating that DBPR had closed the case because there was not enough evidence to find a violation.

To the homeowners, the denial felt like a bolt from the blue.

"Here the analysis is 'oh did he hammer a nail? Sorry. I can’t help you anymore,'" Korte said.

"It’s amazing to me that there’s nothing more than that that the state of Florida has set into operation or established as a method of controlling these things."

The CILB has an additional voluntary board called the probable cause panel that looks into consumer complaints.

DBPR attorneys present the cases. But what happens in front of the probably cause panel is confidential, and Henell's customers were never given a chance to make their case in front of the panel.

They have no idea what evidence Henell presented or whether it was even truthful.

"The process is frustrating," Rocco said.

"Basically you get a letter saying there’s no probable cause. Steve Henell gets to reply to our comments and our complaint. We don’t see what his rebuttal is."

Henell directed all questions about the DBPR process to his attorney.

We asked Henell's attorney for a copy of the information that was sent to DBPR on Henell's behalf, but he refused.

All the case material stays completely confidential and inaccessible to records requests unless Henell decides otherwise.

Rocco wouldn't be stopped so easily. He appealed his denial and requested it be looked into by the DBPR Office of the Inspector General.

He also exchanged emails with the Deputy General Counsel of DBPR Tom Thomas.

We obtained a copy of those emails and had them verified by one of the recipients.

"When the facts are in dispute, and the issues revolve around contractual agreements and conflicting statements - who paid whom, who owes whom, who has a legal right of lien - we are unable to sort those out. The civil courts are the appropriate venue for the resolution of those matters," Thomas wrote in the email.

Henell's customers feel that their situation should fall under DBPR's responsibilities.

"We’ve all been taken on a long ride to nowhere and ultimately told after the entire process was over that agency did not have jurisdiction to consider this case," Korte said.

Law is Law

The response from Thomas is a familiar one to people who have been in this situation. Both law enforcement and regulators will often tell homeowners that disputes over money are handled in civil court.

But homeowners often balk at the thought of hiring an attorney when they feel they've already flushed enough money away.

"The only way to get anything legally is to sue him which you could spend 50 or 60 thousand dollars suing him. I’d rather spend the money paying the contractors that didn’t get paid," Madaio said.

The DBPR denial letter even said as much.

We went to work checking whether Thomas' claim and the information in the denial letter are legitimate.

Several stories have featured contractors who lost their license after subcontractors filed liens against homeowners.

But in those cases, the CILB often found the contractor was guilty of "abandonment" because they had discontinued work for more than 90 consecutive days.

In Henell's case, tens of thousands of dollars of liens were filed against the property as he continued to hold the permits.

Eventually, the homeowners fired him and found different contractors to perform the work.

Contrary to Thomas' statements, Florida State Statute does give DBPR jurisdiction to investigate these claims. It falls under the same subsection that includes abandonment cases.

(g) Committing mismanagement or misconduct in the practice of contracting that causes financial harm to a customer. Financial mismanagement or misconduct occurs when:
1. Valid liens have been recorded against the property of a contractor’s customer for supplies or services ordered by the contractor for the customer’s job; the contractor has received funds from the customer to pay for the supplies or services; and the contractor has not had the liens removed from the property, by payment or by bond, within 75 days after the date of such liens;

Read the full statute here.

The statute allows DBPR to investigate, fine and even revoke the license of a contractor determined responsible for committing violations.

While Rocco and Korte were under the impression that DBPR did not have jurisdiction they reached out to Florida State Senator Kathleen Passidomo, who represents much of Collier County.

In an interview, Passidomo said the law is clear.

"I think the process is in place I think it’s just how it’s being implemented," Passidomo said.

Enforcement Issue

We started digging into the records to see how many contractors are held accountable for financial mismanagement.

DBPR provided records showing that 19 contractors had their license revoked or voluntarily relinquished over the past two years in Lee, Collier, and Charlotte Counties.

However, it's unclear how many were related to financial mismanagement.

The DBPR license search page allows visitors to see whether a license is revoked, relinquished or suspended but it does not indicate the reason.

Even searching the minutes of CILB meetings does not reveal the reason why a license was lost only when we requested case files for three different contractors but was quoted more than $400 to pull the files.

If a licensed contractor is criminally charged for violating Florida's lien law, DBPR regulations require prosecutors to submit that information to DBPR.

In the past three years, only one case in Florida has been forwarded to the department.

"As far as you know is there an issue with enforcement of what’s currently on the books and could it be looked at harder?" Hodges asked.

"I don’t know the answer to that I’ve just gotten into this with my constituents, but I do know there are pockets of this around the state right now," Passidomo said.

We requested an on-camera interview with DBPR officials several times.

Specifically, we asked to speak with DBPR Secretary Jonathan Zachem or CILB Executive Director Dan Biggins.

Communications staff denied our request multiple times saying that on-camera interviews were not granted "for the purpose of recordkeeping and to ensure a timely and accurate response."

We tracked down Biggins at a CILB board meeting in Miami.

He refused to answer our questions multiple times and directed all questions to be sent through the communications office.

As Hodges kept following Biggins, he eventually threatened to call security.

After the encounter, the DBPR Communications team sent a statement.

“Protecting the public and assisting eligible recovering consumers is a top priority of the Department,” said DBPR’s Secretary Jonathan Zachem.

While at the board meeting in Miami, CILB Chairman Rick Kane answered some of our questions and praised the DBPR complaint process.

"In my opinion, we make it extraordinarily easy for somebody to file a complaint and get restitution," Kane said.

Why Not?

The DBPR complaint process is often successful if consumers stick to it.

Michael Steinke, Tina Halm and two other customers of Sand Dollar Pool and Spa filed complaints against the company's licensed contractor, Anthony Marth.

Marth relinquished his license.

Lisa Johnson filed a complaint against Southern Premiere owner Chris Cheney after she put down a $15,000 deposit on a house but work never commenced.

"You trust these people to fulfill things, and they have a contract in place, and you think all of these things are going to work out. It’s just very unfortunate," Johnson said.

But Steinke, Halm, and Johnson say they are some of the only customers who went through the DBPR complaint process because of its complexity.

"It's been a very difficult process from the standpoint of waiting and waiting and waiting," Johnson said.

"We have to have somebody to help us through this process," Halm said.

"We’ve got nothing. It’s almost like the laws and the statutes are there to protect the contractors."

Rolandas Girdvainis lost about $40,000 after his experience with Southern Premier. He says his attorney advised him not to file a complaint with DBPR.

"He said definitely you’ll lose more money than you’ll get back."

One of the main reason consumers who have been ripped off file with DBPR is to for a chance to get reimbursed by the Homeowner's Construction Recovery Fund.

The fund is overseen by DBPR, and yet another board made up of CILB members.

Money for the recoveries come from permit fees assessed to contractors.

Homeowners who have won a civil or criminal judgment against their contractor or have a final order from DBPR ordering their contractor pay restitution can apply for the fund.

The maximum a homeowner can receive is $50,000 from a Div 1 contractor (home builder, certified general contractor) and $15,000 from a Div 2 contractor (pool, roof, etc.). DBPR will cap awards per contractor at $500,000 for a Div 1 and $150,000 for a Div 2.

Johnson was reimbursed all $15,000 in her case.

Both Steinke and Halm are filing after receiving restitution orders from DBPR greater than $20,0000.

But they are concerned about their claims because of liens filed against their homes.

The recovery fund rules state liens have to be paid off in order to receive reimbursement, but both of them think there's a chance the liens will expire or were filed improperly in the first place.

Now they're stuck with the dilemma of paying off liens in order to apply for money they might not even be awarded.

"We can’t wait until this is satisfied or until whatever is going to happen with this lien happens, we have to move forward and just hope they don’t hold it against us," Halm said.

We wanted to check how Florida compared to other states that have a similar recovery fund. Ten states in total have a system like this, but most have different rules on maximum payouts.

Florida ranked third in total dollars awarded in FY 2017 with $1,066,797.91 awarded to 55 claimants.

Minnesota ranked second with $1.4 million to 47 claimants and Arizona first with $1.8 million to 240 claimants.

But in comparison to these other states Florida has more than double the population of the closest state with a recovery fund (North Carolina) and more than triple the population of the states ahead of it on the list (Minnesota and Arizona).

Florida maximized its payouts in 2014-2015 as it caught up with claims from the Great Recession paying out more than $7 million.

At that time it had less than $100,000 left in the fund. Now the state has more than $7 million in the fund.

Over the past two years, 109 claims have been awarded, and only 17 were denied.

The question we asked Kane was whether the hurdles to apply for the recovery fund are too great for most consumers.

"We have streamlined that process to the point where somebody wants to get into the recovery fund it’s one of the easiest things in the world. We even provide them with the attorneys," Kane said.

Former CILB member Christopher Cobb told us he also thought the recovery process gives consumers a good chance to get their cases heard.

However, he said most people would likely need to hire an attorney to navigate the process.

"The average person needs an attorney to go through this. They may not know they need to ask the board for an order of restitution," Cobb said.

“The Recovery Fund’s staff works very diligently to ensure that claims are processed quickly and efficiently. Since 2016, the Florida Homeowners Recovery Fund has processed 265 claims totaling over $2,835,970 to eligible homeowners," DBPR Secretary Jonathan Zachem wrote in an email.

It's unclear where the 265 total claims number came from since other records requests show fewer claims during that time frame.

The DBPR communications staff went on to write, "Florida statutes establish the requirements that eligible homeowners must follow to file a claim. As a precursor to eligibility, homeowners must first obtain a civil or criminal judgment, an award in arbitration, or a final order of discipline from the Florida Construction Industry Licensing Board based upon specific statutory violations. The time that it takes to obtain a civil or criminal judgment or an administrative order is dependent on the specific facts of each case as well as other factors outside of the Department’s control."

Hold Accountable

At this point, none of Henell's customers are able to apply for the recovery fund because their DBPR complaints were denied.

While they could sue him and attempt to receive a judgment, none of them are inclined to do so. But recovering their money isn't even their main goal.

"We just wanted his licensed revoked. We want him to be out of business," Joyce Madaio said.

Many of them believe DBPR punted on their case and they feel cheated that the complaint process isn't more transparent.

Sen. Passidomo said she plans on addressing the issue of confidentiality with DBPR to see if consumers can take part in the probable cause panel hearing.

"I don’t see why they couldn’t be a little more lenient with allowing the property owners to testify or to at least provide information," Passidomo said.

"And I certainly don’t understand why the subcontractors were not contacted (by DBPR investigators). Particularly with one of licensing requirements you don’t allow liens on the property and liens were put on these properties."

Passidomo also said she's learned that each complaint is considered individually.

In her opinion, DBPR should be picking up on patterns in complaints submitted against an individual contractor.

"Internally at DBPR you think they would say 'there are a number of complaints about this one contractor perhaps we should look at it differently,'" Passidmo said.

Henell's customers want to see some of these changes take place.

Their frustration grows as they see their former contractor around the island, picking up new clients and working on more projects.

"At this point, he’s not being held accountable," Rocco said.

"He’s out there working, he’s got a valid license, and he’s harmed eight families, and there’s 20 subcontractors in Marco Island and Naples that are owed a ton of money."

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We've told you the obvious ways to protect yourself like checking a builder's license and always signing a contract.

But we also wanted to tell you the not-so-obvious ways to protect yourself, so we asked Cape Coral builder, Jeremy Sposato, to tell us what questions he would ask a builder if he was building a new home.

In addition to asking for customer references, he said you're also going to want to ask for subcontractor references. And you're going to want to talk with the subcontractors who provide the bigger ticket items in a house build -- like the framers, the dry wallers, the flooring company or the concrete company.

“When you're talking to those subcontractors, ask them how often they're paid? Are the payments consistent? A lot of builders pay bi weekly, monthly, or every 60 days. You don't want to work with a builder who stretches out their payments for services because that's riskier for you. We pay every two weeks so it keep the money flowing to the subcontractors,” said Jeremy Sposato, Managing Partner of Sposen Signature Homes. “Also ask the subcontractors how long have they been working with that builder? If they're a new subcontractor, that may be an indicator they didn't pay the last one they were working with.”

DBPR released the following statement, 

“Protecting homeowners is the Department’s top priority. Florida’s Construction Industry Licensing Board licenses over 80,000 contractors throughout the state. Unquestionably, the vast majority of the Department’s licensees abide by the law. 

Last year, the Department prosecuted approximately 1,000 construction cases throughout the state. Numerous homeowners received restitution orders, which have allowed them to submit claims to the Construction Industry Recovery Fund. Although confidentiality laws prevent us from discussing some of the cases at issue in the story, the Department can verify that it has done everything within its power to hold the relevant contractors accountable. This includes the investigation and prosecution of dozens of cases that lead to the loss of licensure, and the assessment of over $280,000 in fines. As with any legal proceeding, obtaining payment from the fund is governed by procedural laws and evidentiary proof and it may take time to completely adjudicate the claims.”

 

Click here to watch Part 1 of our series.

Click here to watch Part 2 of our series.

If you're having issues with a Southwest Florida contractor, we want to know about it.

Email us at investigators@nbc-2.com.

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