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Contractor's indictment for theft shines light on a ‘rampant’ problem

By Jordan Bailey | Aug 08, 2016
Courtesy of: Dana Strout Robert Garrison's business checking account statement and cancelled checks from December 2009 shows personal expenditures in red and expenditures on other clients' projects in blue.

Rockland — Do you know how your contractor is spending your money?

After Seth and Jennifer Upham of Rockport paid a contractor nearly $200,000 of a $235,000 contract in 2010 and their home was only 65 percent complete long after they expected to be able to move in, they decided to find out. They filed a civil suit against this contractor and subpoenaed his bank records.

What they discovered shocked them. Bank statements show that at times when only the Uphams’ money was in his business account, Owls Head contractor Robert Garrison was using it to pay personal expenses and outstanding expenses on former construction projects, and making transfers to his personal account. Whenever he’d run out of money, he’d send another invoice.

Garrison was not even paying some of his suppliers for the materials used in the Uphams' house. Two of those suppliers then put more than $30,000 in mechanics liens on the Upham's property.

The Uphams won their civil case in 2014, and Garrison was ordered to pay them more than $125,000.

At the Uphams' urging, District Attorney Chris Fernald recently charged Garrison with criminal theft. A grand jury indicted him on two counts of theft by misapplication of property June 8.

Jennifer Upham said Thursday, Aug. 4, she was "ecstatic" that he was indicted, adding, "but he'll never say he did anything wrong."

Rockport attorney Dana Strout, who represented the Uphams said the indictment was a "big deal."

"I see contractors taking advantage of homeowners all the time. It's rampant. But it is very difficult to get DAs to prosecute this, because you have to show criminal intent," he said. "In this case there’s tons and tons and tons of documents that show that. "

Strout added that the larger construction companies in the area are generally safe to work with, and several smaller residential contractors he knows of are "scrupulously honest," but it is hard to know which ones are not. Many contractors don't have bookkeepers or good accounting practices, he said. And Garrison testified that he keeps track of his own and his subcontractors' hours in his head or on receipts.

"If you’re dealing with a guy in a pickup truck, you need to be sure when you’re giving him money he’s spending it on your house," he said. "It's very common to be behind on job 1 and when you get money for job 2, you use it to pay for things in job 1."

Attempts to contact the Maine Contractors and Builder's Alliance for that organization's perspective on how widespread the problem is were unsuccessful. But Strout said he has one or two cases involving billing problems with residential contractors "at all times." Another case he is working on now involves a home contracted to be built for $585,000. The owners, who live in California, paid $500,000 but the house was not even one-third complete and now that contractor is off the job, he said.

In the Uphams' case, Garrison's subpoenaed bank records told the whole story.

According to the June 8, 2014, decision on the civil suit by Knox Superior Court Justice Jeffrey Hjelm, Garrison's invoices to the Uphams misrepresented where the money would go. For example, the first invoice he sent them in December 2009 was for $13,500. Of that, $10,000 was listed as covering a deposit for windows, but the window supplier, E.L. Spear, did not require deposits, nor did Garrison set that money aside for windows. Instead, $3,000 of the $13,500 payment was paid to a subcontractor for the Upham project, and over the next 15 days Garrison spent remaining $10,500 on ways unrelated to the project: $4,350 was transferred to his personal account; $975 was taken out as cash; $2,300 went to a previous construction project; and other personal expenses were paid directly from his business account.

This pattern was repeated throughout the duration of the project. According to a defense exhibit summarizing the misappropriations, of the approximately $197,000 the Uphams paid Garrison, only $122,389 went into the house construction. More than $6,000 went into his daughter’s house, $16,000 went to paying off debts for a house he had built for another client; nearly $15,000 was transferred to his personal account, $12,855 in personal expenses were paid from the business account, and more than $6,000 was taken out as cash.

The icing on the cake was the $31,535 in mechanic's liens that material suppliers E.L. Spear Inc. and Alliance Plumbing and Heating Inc. placed on the Uphams' property for the materials used on their house.

In 2010, shortly after the Uphams stopped paying Garrison’s invoices, Garrison began work on another house in Owls Head for David and Beverly Gravison of Sutton, Mass. They, too were left with mechanic's liens totaling more than $60,000. Garrison was ordered to pay the supplier holding the lien the full amount in a separate civil suit. Garrison's wife, Brenda, testified at a hearing that she had used some of the Gravison's money to go Christmas shopping.

Hjelm found Garrison’s misappropriation of the Uphams' money to pay for another client’s project to be clearly fraudulent.

“Payments made by a client is to be held as in trust, to be used for the benefit of the payor client and not for some other client,” Hjelm wrote in his decision.

That court also found his misrepresentation of what he would do with the money, which Garrison admitted to at trial, to be fraudulent.

“Because Garrison obtained money from the Uphams for a designated purpose and then promptly used it without their knowledge or consent for expenses that were wholly unrelated to them, Garrison acted fraudulently,” Hjelm wrote.

But a contractor can pay himself, can he not?

Against Garrison’s argument that he could keep some of the money as income, Hjelm wrote that in a fixed-price contract, which the Uphams' was, a contractor does not know what kind of margin he will have until the close of the project, so how much will be available for income cannot be determined until then. Furthermore, in December 2009, when the Garrisons spent most of the Uphams' payment on personal expenses, Garrison had done little or no work that could be covered by that month’s invoice.

The court determined that the Uphams received $158,033 of value from Garrison, and had overpaid him $39,755 and that Garrison had obtained this amount through fraud and conversion. He was ordered to pay that back. The Uphams were also awarded $49,870, covering the work left undone when the contract was terminated and that which needed to be repaired.

The court also awarded the Uphams $20,000 in punitive damages for implied malice, where "deliberate conduct by the defendant, although motivated by something other than ill-will toward any particular party, is so outrageous that malice … can be implied."

And Garrison’s wife, Brenda, was ordered to pay back $12,715 for the amounts she had transferred to the family’s personal account. In total, the court awarded the Uphams $125,340, plus interest and court fees.

Though Garrison filed for bankruptcy protection shortly after the Uphams filed their suit, U.S. Bankruptcy Court Judge Louis Kornreich ruled the awards to the Uphams not forgivable in a summary judgment granted in January 2015.

"Bankruptcy Court is not a place where the dishonest go to wash their hands of their sins or to escape the consequences of their dishonest acts," the decision states. "It is especially true in the circumstance where a prior court has not only determined them to have committed fraud, but has also found that they acted maliciously and thus, awarded punitive damages."

Jennifer Upham said Aug. 4 that as of July 8, she had received $7,420 from the Garrisons and that they still owe more than $153,652.46, including interest and court fees. The combined interest for Brenda and Robert Garrison’s debt is more than $350 per month, she said.

Unsecured bail for the theft charges against Garrison was set at $5,000 on July 18. He will next appear in court for a disposition conference Oct. 13.

Calls to Garrison and his lawyer were not returned by press time.

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Comments (1)
Posted by: Holly Ann Tracy | Aug 09, 2016 16:41

For shame....



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