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Fraud builds with slowing economy

Construction fraud increases with slowing economy

BY ELLEN BILTZ

Date published: 3/23/2008

BY ELLEN BILTZ

Kevin Dunn was sold a dream: a nice deck for his kids to play on and a place where he could enjoy the fresh air.

"The bottom line is, I was gullible," Dunn said.

Last year, Dunn hired Charity Brown to add a large deck onto his home at Lees Hill.

But three days later, after she had cashed his $21,000 advance, he realized he had been duped.

Brown was convicted earlier this year of construction fraud and contracting without a license for her fraud against Dunn. She was sentenced to five years in prison and ordered to pay restitution.

While Dunn said he's happy Brown was prosecuted, he still doesn't have a deck and he's still paying on the home equity loan he took out to pay for the deck.

"I'm doing that instead of taking my kids to Chuck E Cheese," he said.

It's unlikely that Dunn will see any restitution any time soon.

CONSUMER CAUTION

"It's always important to know the company you're doing business with, but it's even more important now," said Tom Gallagher, president of the central Virginia office of the Better Business Bureau.

As fewer Virginians are buying homes and the ability to sell them is diminishing, additions, such as a deck or garage, are becoming popular, he said.

In his 40 years with the Better Business Bureau, Gallagher said, he has noticed that construction fraud--and fraud in general--will spike with a slowing economy.

"When money starts drying up, they start cutting corners," he said of fraudulent contractors.

He said it's more likely for fraud to occur when the project is a home addition, because there aren't as many hoops to jump through or as many permits to get as when you build a house.

He also said that small contractors are more likely to be under-financed and unsophisticated.

"Maybe they worked as a subcontractor for a home builder, but now that the market is slowing, the subcontractor is out doing their own business," he said.

The phrase "robbing Peter to pay Paul" has been used by law enforcement officials and prosecutors who deal with construction fraud.

Spotsylvania County's Deputy Commonwealth's Attorney Tom Shaia is one of those.

"Usually they get half the money up front," Shaia said.

That's what Dunn experienced.

Ask to see a license, said Tom Gallagher, president of the central Virginia office of the Better Business Bureau. It means the contractor has at least attempted to do business in a legal way. Beware of very low bids, Gallagher said. "If it costs $5,000 and someone says they'll do it for $3,800, they can't. It doesn't work like that." Be specific in the contract and spell out each element so it will be easier to prove later, said Trisha Henshaw, licensing and education administrator for the Virginia Board of Contractors. If you are asked to obtain your own permits, beware: That's the builder's responsibility, Henshaw said. Hire a contractor who is a member of a professional builders organization to be sure he is reputable locally, said Harvey Gold, director of government and public affairs for the Fredericksburg Area Builders Association. The organization has a code of ethics that members agree to follow, he said.

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Date published: 3/23/2008