The WORST contractor SCAM I've seen!

The General Contractor (GC) scammed the customer, The Excavator, the Concrete Contractor, the lumber yard and BANK all at ONCE.

[actionsportster]

Stan, I stopped listening at about the 12 minute mark, so if you covered this in your video I apologize in advance. I work in the construction industry, but on the commercial side. In describing the scenario you and other contractors experienced, you mentioned that you signed what I would call a "conditional" lien release ... a document which waives your lien rights in exchange for payment, but which is also conditioned upon the check clearing the bank upon which it is drawn. So if the check doesn't clear the bank, your right to lien the property is not released or waived. Since the G.C. in this case was receiving funds to pay subs/suppliers from a bank, I assume the homeowner had a mortgage with that bank. So the bank would be the first secured lien holder, and as such, the bank should have insisted upon "unconditional" lien releases from you and any other sub/supplier supposedly being paid with the funds coming from the bank BEFORE ever remitting any payment to the G.C. An unconditional release differs from a conditional release in that is includes an acknowledgement from the party signing it (you and any other sub/supplier) of payment (it says you've received payment for your work ... typically with a statement like " In consideration of payment in the sum of receipt of which is hereby acknowledged, ..."). So you never sign an unconditional release unless and until you've actually been paid, and by that I don't mean you've received a check from the G.C. ... payment has not been "made" unless and until the check clears the bank upon which it is drawn. Until then, use a conditional release form only. In this case, since the bank released funds without first obtaining unconditional releases from the subs/suppliers furnishing labor and/or materials to the project, the bank screwed up. But as you pointed out, your lien rights were not waived by the conditional release form you signed, unless and until the check cleared the bank, and at that point, you and the other subs/suppliers still had a right to pursue a legal remedy (file a lien against the property) to recover payment for your work. I don't know if you did so (sounds like you didn't), but as soon as you learned that the G.C.'s check bounced you should have gone down to the County recorders office and recorded a lien against the property. You don't need to be an attorney to do so and it's not expensive. You just have to make sure the format is correct and that you haven't missed a filing deadline (in Minnesota, the statute of limitations period for recording a lien is 120 days from the date of your last furnishing of labor and/or materials to the project). There are also prerequisite notices (such as a preliminary notice) that must be served by certain parties on the property owner and or the lender if applicable with a certain period of time (generally in Minnesota, this applies to 2nd-tier subs/suppliers, and must be given to the Owner and Lender with 45 days of your first furnishing of labor/materials to the project). Bottom line, if you do your due diligence, you won't be left holding the bag. In this case, had you filed a lien, you would have likely forced the bank to pay twice (not the homeowner) because it was the bank that failed to get unconditional releases from the subs/suppliers on this job. The lesson here is to know your rights and exercise them if you have no other recourse ... and don't give up your rights until you've actually been paid for your work.

[duelette]

As a contractor and built several homes in my town. In the early 90s I had a problem with the IRS. I was injured on a job and could barely move for over 6 months and it took over a year before I could actually try start to work again. Had to sub out my framing trim work siding etc. The IRS accused me of cheating on my taxes because my profit went way down. I went round and round with them through legal letters the way you're supposed to trying to work this out. One day after I received a draw and put it in my business checking account I went around and paid all the contractors I owed and the yellow sign waivers just like we did all the time. We all trusted each other and I never had a problem after over 150 homes built. Most of us ate breakfast at the same place for years. When they went to cash the checks there was no money in the account! The IRS waited for a draw and then cleaned out my bank account which I found out after I went to the bank. The bank didn't even know what happened they had to look it up! All the subs knew what happened and were sympathetic and knew I would take care of it somehow. Except one a new heating and cooling business that just started in town I used because my regular guy was too busy. They file lawsuit and started a whole legal mess! That prevented me from getting any more money from the banks to pay off my subcontractors. I had to make a quick sale on my home that housed my wife and three boys to pay off the subs. Thinking that in a few years I'll build another one and I'll get back on track. Well that never happened. The damage was done and the word was out in the small town. But I completed the house I was building at the time and the people were happy and moved into it all out of my pocket. After writing a scathing letter to the federal judge the house I was renting was surrounded in the middle of the night and they took me away. I did not threaten anybody in the letter I just told him about the IRS and the corruption! I spent one night in jail and paid $125 fine. I am 64 years old now and still a carpenter but that Old situation left me the bad taste in my mouth the rest of my life. So when I hear about contractors doing this on purpose it just makes me sick to my stomach! Sorry for the long talk here but needed to get it off my chest. Thanks for sharing your video.

[pedronorman]

I've got a scam you guys will love. About 20 years ago, my ex was living in Georgia, an hour north of Atlanta. She hired a guy named Henry Talbot Burns, a well known GC, to build a million-plus dollar home. The guy was building a number of homes in a very affluent sub-division. Unfortunately, he was both an alcoholic and a gambling addict who owed the mob a bunch of money. She says the home was about half constructed and she'd paid him over $250K when he just disappeared. He had like 7 other clients who'd paid him at least as much, with one couple into him for upwards of $500K. Apparently he used a lot of the payments to pay off his gambling debts and as a result, a number of things about the actual construction were sub-par. He disappeared because he went into hiding from the mob. He was eventually found and arrested and spent a few years in prison. When he got out, he moved to Lousisana and opened up shop as a GC, building houses again. I'm told that all those clients lost their homes because they couldn't find another contractor willing to take over and finish the job - nobody wanted to risk putting thier name on potentially negligent work. He's court ordered to make restitution payments to my ex of about 10% of the amount she lost to him. I just googled him and apparently he's moved to North Carolina.
To be perffectly honest, I'm really surprised someone didn't kill him.
His name is Henry T Burns. True Story.

[larrysacks]

Great advice and every project I have had built for me I did not need a construction loan but I did have an attorney engaged to help protect against these types of issues. Key is having a GC that has been around a long time and had roots that run deep….

[dlgrayskibum]

Thank you for this video warning others of contractor scams. I was a victim of a dishonest contractor several years ago when we added an additional room onto our house in WA state. A general contractor was recommended to us by friends of ours who were unaware that the guy they were recommending was a scammer. Toward the end of your video, I was listening to your tips and you are right on. The one tip in particular that you mentioned about making sure a contractor actually has a physical place of business is so important, and the lesson we learned too late. Our contractor had his business name and contractor license on his pickup truck, but he was a one-man operation with no physical office. I did the usual due diligence in checking his contractor license and name of his business with the state licensing website and found no problems. But, we learned too late after this guy disappeared that he had gone to the length of using another legitimate contractor's license number as well as the letterhead for their business, so despite checking on his business to see if it was a legit company (the one he misrepresented was legit), and checking with the state on the contractor license number to verify no documented issues, we were scammed anyway. This guy started the work, did a fairly good job doing the demo work and started the framing for the new addition above our garage, then he took money from us for materials and disappeared, never to be seen again. We took him to court and obtained a default judgement against him, but never found him and have never collected on our court judgement. And you know what is even more difficult than finding a contractor to do a remodel in the first place? Finding a good contractor that is willing to come in an fix a poor remodel left halfway done by a scam contractor. We thought we had done what was necessary to check out a contractor before signing the paperwork, but we were scammed anyway and ended up learning a hard lesson and now I am much more aware of the warning signs to look for before agreeing to hire an unknown contractor.

[rustysmith]

Im a contractors son, my grandad was a contractor, Im a retired contractor. We were in the same location 102 years. We worked mostly on reputation. That came from honesty, quality and integrity.
My grandad also owned 2 sawmills and 4 lumber yards.You treat one customer bad in a small town, youll HAVE to leave or be lynched.Im retired and my boys are carrying on.

[yourdatingchannel]

As a General Contractor, this video gives me a few different reactions... First, it goes BOTH ways. I've been ripped off by clients, I've been ripped off by sub-contractors, I've been ripped off by investors, and I've also been ripped off by larger GC's who hired me as a 2nd or 3rd tier sub... I've also had people accuse me of ripping THEM off, which has NEVER happened. I have one guy that I built a house for in 2018 who still owes me $50K, but sometimes it's just easier to move on and forget about stuff like that. It sucks when these things happen, but it is part of the game. The thing that bothers me about this video is your advice about using well known highly established GC's, cause that's a bunch of BS... In fact, it's usually going to be the younger (less established) companies who are going to do a BETTER job because they are trying to build their reputation. Again, I've been ripped off by HUGE GC's who have been around for 100 years, but I have NEVER been ripped off by someone who was just getting their foot in the door. So yeah, your advice here is CRAP, and it makes me question if YOU would have been able to start your business if people didn't give you a chance? That doesn't mean that people shouldn't do their research, but just because a GC is well established, bigger, and older doesn't mean anything. IF they're in trouble, they will rip someone off just as fast as anyone else...

[ratlips]

I purchased a house that had cracks in the master bathroom's shower tile. Funds were set aside from the purchase to cover the repairs. I had three local contractors bid the job. I did my homework (or so I thought) with all three with the State Contractor's Licensing Board. I selected the middle contractor. My alert flags went up when they had to borrow our vacuum cleaner on the first day of demo. As things proceeded, I was told by one of the carpenters that the Contractor had gotten into a physical altercation with an elderly customer a few weeks ago.

During the build, the contractor came to me and told me that the reason I was experiencing cracks was that my bathroom was rotating, and it needed to be stabilized. He proposed sinking a hole below the bathroom and installing a 12"x12" beam with arms reaching out to "grab" the bathroom to prevent it from rotating. Then I found that the new ceiling fan's vent was just thrown into the attic without venting to the outside.

I'm making the story short here, but he eventually showed up at my doorstep demanding money. He attempted to enter my house uninvited and when I threw him out physically, he tried to reenter holding a framing hammer head high. As they say, "Don't come to a gun fight with a hammer". He was arrested. He eventually sued me three times. First for the mechanic's lien of $1400, second for Breach of Contract for $25, 000 as I would not allow him in to finish the job, and third for $800, 000 as he claimed I colluded with other customers to prevent him from working in the county. He lost on all three accounts. But it was a very traumatic experience for my wife and myself.

After doing some research on this contractor, it was apparent that what he did with me was typical for his M.O. This is why I suggest to people that are considering a contractor to check the local Superior Court records to see if they have either been sued or have, they sued. This guy has over 60 suits to his name

[sterlingspencer]

He wasn't a general contractor . He was a con artist that belongs in prison!

[travisyayes]

Poor Carl. He's a fan and the first thing he hears is "I'm doing a video on the biggest scam". I can just imagine what was going through his mind lmao.

[richardfoglerjr]

Here in central Kentucky I am a general contractor and there is no license requirements. Literally anyone can call themselves a contractor.
When looking for a contractor or specific trade I always recommend going to the supplier for the job and asking them for recommendations. They will only recommend contractors who pay their bills and have done business there for a long time.

[markashley]

Straight up scam I live in Ks and we have a lot of scams after tornadoes or floods. Roofing companies and remodeling contractors come from out of state and pull all kinds of scams. Shame how just one person can ruin things for so many. I wish more contractors used this platform to show off their work like yourself. Thanks for your information and sharing.

[JR-lxnn]

I am a retired lawyer who prosecuted many cases like this. Best protection is title insurance, performance bonds, and the use of escrow accounts to be sure all payments to sub-contractors are actually paid and cleared before the main contractor receives payment from the home owner or lender - better yet, have the home owner or lender pay the sub-contractors directly and have both main contractor and sub-contractors execute lien wavers, and did I mention title insurance and require a performance bond? The performance bond will protect against contractor fraud. This was easily foreseen and could have been prevented. I made a career out of chasing these problems - bankruptcy, debt collection, lien management, and contract enforcement suits - any way you look at it, I made money ... so be careful and hire a qualified attorney before you build - yes, pay more to protect yourself from this sort of mistake. All easily avoided. Just my take. Your mileage may differ. JT

[keithmalmberg]

The "brick and morter" location is proportional with the work the contractor is doing.
I did GC remodeling and used my home as my office. I started doing hone repairs and sales prep/final punch and expanded my services as I established a reputation.
Was booked out 2 years with kitchens and baths when I got hit as a pedestrian by a DD.
Finished every job with the help of my wife and the crew I had. Took months to do it. Every customer refused to change GCs. It was nice knowing I had a reputation that even the customer wanted to help me when life hit the fan.

[gerryconnell]

As a commercial construction inspector who had to advise major US banks on funding millions each month for draw requests my company's policy was never advise funding unless and until, the "work was completed and in place" per the AIA. Then and only then, and pending receipt of waivers would funding be advised. The only exception was for applications for stored materials, which we would "paper up to the nines" to include certificates of insurance covering the materials stored at a verifiable and insured warehouse, authorized right of entry to take possession in case of default prior to on-site delivery, inland/ Marine Ins. for shipment, etc. etc. nobody got a dime unless the paperwork was " a Lock".

[patryan]

I had a much similar situation in Colorado in 2018. My GC was a total scammer as it turned out. We weren't living in CO at the time we initiated our retirement home build with this guy. I checked with the bank that he used, the city inspector and other GC's that we also quoted. This simple background check revealed nothing out of the ordinary. This GC had build many homes in our valley including his own and had lived in our town for 17 yrs. However, his scam was not paying the contractors by claiming that they had non insured illegal immigrants on the job site. He would wait until they were almost finished with their jobs and then threaten the company owners that he was going to sue them and go to Homeland Security and get the illegals deported. As it turned out, the local banker was in his pocket as was the building inspector. He took my $$ but never paid the contractors. I hired a local attorney and found out he had been pulling this scam for the last 15 years. He would change the name of his company as he was sued and start over again. We ended settling out of court for about half of what we believed he owed us. Cost us about $50K in non recoverable charges. So here are my top five red flags fo hiring a GC:
1) Look at his business over the last 10-20 yrs. How many name changes? Why? Were they incorporated in different cities and counties? Why?
2)Get a complete list of the banks he has used over the past 5 years and do due diligence with them.
3)Contact various contractors and see if any inconsistencies arise over the GC.
4)Network in the city and ask the locals about this GC. Go to several restaurants and bars and ask. It's amazing how word travels.
5)Get a recent list of past customers and contact them if possible to get their take on the deliverables.

[tokencivilian]

The thing is, honest contractors that do a quality job for a price that delivers value to the customer will never, ever want for all the work they can handle. 1 scam can ruin your can make you rich.

[citticat]

The lesson I learned is make sure your contractor has valid license and Workmans comp insurance. If you can prove anything illegal you can put a claim out on the insurance bond and the insurance bond will cover the financial loss. Most of the liabilities have a limit of $15, 000. I hired a contractor who ended up wanting much more money for work that he didn't end up doing and when I refused to pay he threatened to walk out leaving the work in a dangerous setting. I went ahead and paid the amount he wanted because I was afraid the glass door would fall causing harm to my family. After I paid him I filled a claim against his insurance bond claiming coercion, fraud, and endangerment. The Insurance company told me to "name my price" and I offered to pay him for the actually work he did. The contractor ended up returning the rest of the money.

[GreenOne]

$120 grand was enough to make him leave the states? The guy must've already been in a pretty deep ditch... thanks for sharing this!

[JDseller]

I bought a pole style barn from a national name company. They used local dealers/contractors to do the actual building. So even though I called the building company directly they had me dealing through a semi local outfit. The only thing that saved me was I paid the national company for the building materials. Then the local contractor was paid in draws as he completed work. The trouble started as the building was under roof but not finished. I had to have the building complete before bad winter weather. So timing was important. The work crews started to not show up for weeks at a time and the building just set there. Contractor stopped answering calls. The national company was no help as they had been paid and could care less if it was built or not. I tracked down the crew doing the actual work and they told me they had not been paid for any of the work they had done on the barn. I worked out a deal with them to pay part of their back pay and all of the future work on a daily basis. They would work 8-10 hours and I would cut them a check. I got the barn done on time but lost around $7500 to the contractor. I will never deal with a multi layer setup like that again.