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Tue. Jul 23rd, 2024

Court orders put pressure on Epping builder over ‘Ponzi fraud’ claims

By Vaseline May30,2024
Court orders put pressure on Epping builder over ‘Ponzi fraud’ claims

EPPING – A judge has temporarily banned a local construction company from accepting payments for unfinished work in a civil case over the company’s alleged “Ponzi scheme.”

Southers Construction of Epping now requires written notice from customers stating that work has been completed before any payment can be received, according to a preliminary injunction granted Tuesday in Rockingham Superior Court. The company is facing a civil complaint from the attorney general’s office alleging it cheated its clients out of more than $500,000 by accepting payments and not completing their work.

The civil suit accuses Southers Construction and its owner Ricky Southers of “unfair or deceptive practices.” The attorney general alleges that on 17 separate occasions, Southers contracted with clients for home improvement work, collected deposits and then performed little or no work.

According to a press release from the Attorney General, the ban is in effect until the case is adjudicated or until further order from the court. Assistant Attorney General Zach Frish said the preliminary injunction was agreed to by both parties.

“We are confident that the agreed preliminary injunction is sufficient to protect the public from harm for the duration of this case,” Frish said, “and (we) will continue to evaluate whether additional or different interim measures may be necessary depending of the case. yield.”

Previous story: Construction Company Accused by AG of Deceiving Homeowners and Receiving $500,000 in ‘Ponzi Fraud’

AG describes alleged ‘Ponzi scheme’ in complaint

According to the attorney general’s complaint, Southers relied on deposits from new customers to finance other projects “to avoid a financial collapse.” They describe the operation as “something akin to a Ponzi scheme.”

According to the complaint, Southers adopted a new business model in 2020, similar to Roofing & Reconstruction Contractors of America, which operates on the Gulf Coast. Southers, the complaint said, wanted to transform his company from a small, independent contractor organization to a multi-level, RRCA-style enterprise.

Southerners spent hundreds of thousands of dollars on marketing and advertising and hired salespeople to go door to door asking homeowners if they wanted improvements to their homes, the complaint said.

The attorney general alleges that these salespeople misrepresented to customers what was going on with the jobs, the company’s ability to perform the work and what their deposits were used for. The sales team underbid and neglected costs such as plumbing, electrical work and permits.

Meanwhile, the complaint states that Southers spent money without anyone “maintaining or managing the finances.”

While Southers received more than $200,000 annually in wages, his company was cut off from multiple material suppliers for nonpayment, the attorney general alleges, and failed to track the “hundreds of new jobs they became responsible for.”

The complaint states that Southers also allegedly spent tens of thousands of company funds on purchases such as custom engraved knives, a $7,000 golf simulator, down payments on employees’ personal vehicles and a company trip to Florida.

In efforts to dig the company out of the hole, the complaint alleges he “withdrew millions of dollars in cash advances related to the company’s claims,” ​​for which he is now in default. He also obtained a short-term loan of $374,000 from RRCA, which stipulates that in the event of default by Southers, RRCA would have the right to take control of the company.

“After Southers Construction received a financial bailout from RRCA, the company chose to use RRCA’s funds to continue its Ponzi-like scheme, using the new money to pay off existing debts,” said the complaint.

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The preliminary hearing was canceled because an agreement had been reached between AG and Southers

The attorney general filed a civil suit against the Southers in April. The parties were scheduled to meet Tuesday for a preliminary hearing in Rockingham Superior Court to discuss an immediate injunction. The hearing was canceled after Judge David Ruoff issued the order with the agreed terms.

Southers and its company are prohibited from soliciting, accepting, receiving or retaining any deposit or advance payment for any form of trade or commerce. They are not prohibited from ordering materials for use in connection with a customer’s contracted work.

Southerners will also be required to maintain records showing the scope of work on a project, the client’s name and information, the total costs and when these costs will be due. All receipts and invoices or other documents to prove materials purchased are required, as well as to show which employees or subcontractors performed work. Copies of all customer correspondence should also be retained.

For new projects contracted by Southers, Southers is prohibited from requesting or receiving payments from customers without receiving a signed statement that the required work has been completed.

When the attorney general’s office first announced the civil suit, it said in a statement that they wanted to ban Southers and his company from taking customer deposits, as well as Southers’ ability to own or own a construction company in New Hampshire to exploit. In their press release this week, they said they will seek restitution for all affected customers and $170,000 in civil penalties.

Frish said Thursday that it was unclear what terms would ultimately result from the civil suit.

“At this preliminary stage of the case, no decisions have been made as to what permanent injunctive relief will be necessary to protect the public from future harm,” Frish said.

Frish said the civil action against Southers for violating the New Hampshire Consumer Protection Act was the best course of action the attorney general’s office felt it could take to prevent further harm.

“We have filed a civil lawsuit because the Attorney General believes this puts us in the best position to quickly prevent further harm, hold Southerners accountable for their conduct, and obtain restitution for affected customers,” Frish said.

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