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Exclusive: Sandy, homebuilders and broken promise

18 Oct 2016

Exclusive: Sandy, homebuilders and broken promise

Posted by with - in 2016, Latest News

First it was the insurers, then the government and now it’s the contractors that are frustrating Sandy victims

Five months and you’ll be back home. That was the promise Price Home Group made in a contract with Patricia Bollman and Maureen Molz, a Brick couple among the thousands at the Shore who lost their home to superstorm Sandy.

Now three years later, after making $187,000 in payments and enduring months of delays, unreturned calls, and what she claimed as shoddy workmanship, Bollman is convinced Price Home Group was only looking after itself.

The rebuilding experience was filled with “tremendous emotional pain and heartache,” Bollman told the Asbury Park Press. “It is my opinion, PHG didn’t care if it was (disaster aid) money, my money, another customer’s money or insurance money. To PHG, it was all their money.”

At the end of August, a state Superior Court jury in Ocean County sided with Bollman and Molz in their breach-of-contract claim against Price Home Group, awarding the couple $300,000 in compensative damages. It marked the first such victory at trial in New Jersey for a Sandy-affected homeowner against a contractor.

The landmark proceeding is part of what many regard as the next wave in the Shore’s post-Sandy rebuild — the filing of lawsuits targeted at contractors who disappointed customers in sundry ways — from failing to complete projects to performing second-rate work, or never showing up after accepting payment.

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The New Jersey Office of the Attorney General has cited 135 violations for unregistered or non-compliant contractors in Monmouth, Ocean and Atlantic counties since January 2013, and sought nearly $1.3 million in restitution for customers, according to the office.

Sue Marticek, executive director of the Ocean County Long-Term Recovery Group, said she has seen more homeowners at the group’s workshops who have been victims of contractor fraud. Others are involved in disputes with contractors who have not completed work or performed poorly.

Price Home Group alone is involved in at least 15 lawsuits alleging breach of contracts with customers. A pending civil action by the state alleges fraud, among other claims.

For Sandy victims, the new legal tangles follow years of squabbling with insurers, unscrupulous engineers, and the exasperation that accompanies glacially paced government recovery programs.

But lawsuits, while usually the last resort for settling disputes, may provide only a Pyrrhic victory to some property owners.

Marticek notes that it is difficult for homeowners to recover money from a builder through the legal system, even if the builder has been charged with fraud.

Many builders — including all three founders of Price Home Group — have declared bankruptcy or are otherwise insolvent.

“There is really no leverage for the homeowner in these cases, and that’s become a problem,” Marticek said.

The collapse of Price Home Group, which denied any wrongdoing in court papers, revives long-running questions about the state’s oversight and vetting of builders.

The now-defunct company was one of the original contractors approved by the state to serve homeowners in New Jersey’s primary rebuilding program, the Reconstruction, Rehabilitation, Elevation, and Mitigation (RREM) program — an initiative paid for with your tax dollars.

Internal financial reports filed in court show the partners of the Stafford-based builder pulled hundreds of thousands of dollars out of the operation as profit — while they were buying expensive cars and taking international trips — even as the company’s financial situation was deteriorating.

Fifty-one homeowners selected Price Home Group, which trumpeted its state-approved status on the company’s website, as their RREM contractor. Of those projects, fewer than half — just 22 — were seen through to completion, according to the New Jersey Department of Community Affairs.

The RREM program evolved to give homeowners more freedom — and responsibility — regarding the selection of their contractors, instead of having the state acting as the matchmaker.

With such responsibility has come headaches.

Sandy recedes, but a surge of money follows

Price Home Group was formed on Feb. 6, 2013 — 100 days after Sandy made landfall. The venture was a three-man partnership: brothers Jeremy and Jonathan Price, an attorney and contractor, respectively, and Scott Cowan, a Newark pawnshop owner.

Cowan and Jonathan Price each kicked in $5,000 while Jeremy Price pledged his equity in the form of legal work, according to depositions and bankruptcy filings. From that $10,000 initial investment, the start-up would go on to amass more than $25 million in home sales and contracted work, some of it paid for with federal disaster grants, according to Cowan’s attorney.

The venture was lucrative while it lasted.

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Internal documents entered into Jonathan Price’s bankruptcy case show he and Cowan drew up to $32,000 a month each out of the business, with the outflow beginning just weeks after the business was formed.

A transactions sheet shows Jonathan Price taking $405,338 out of Price Home Group’s coffers, most of it labeled as a partner distribution or member’s draw, from April 2013 through the end of 2014.

Cowan was making similar withdrawals, including one for $5,000 – equal to his initial investment – within five weeks of the company’s birth.

A customer’s deposit was supposed to reserve their modular home with the Price Home Group’s supplier. Evidence presented during the Bollman-Molz trial showed that money from new projects often went to paying for materials and work on older contracts that had been neglected for months.

Once the Bollman-Molz’s declined to make any more payments, the Price Home Group left the project, according to court documents.

The work at the home remained incomplete and required the couple to hire other workers so the reconstruction could pass inspections, which it did in October 2014 — about eight months after the Price Home Group contract said the couple would be able to move home.

“If they told my clients upfront that we’re going to use your money for something else, like salary or trips, that we’re going to wait for another sale to come in to order your house, my clients would have said no,” said the Brick couple’s attorney, Mark Molz. “Anybody with common sense would say no. They took advantage of bright people, but people who were already victimized by the hurricane.”

Bankruptcy records also show the principals buying a new Mercedes-Benz and a $35,000 Toyota Tacoma while the money was still rolling in. They traveled to Italy, Indonesia and Las Vegas.

“They had no ability to put up the homes that they were selling. They had no thought they could complete all those homes,” said attorney Molz, who is also Maureen Molz’s brother. “They claimed more of a capacity and experience than they actually had and, in my opinion, were strictly about getting the money without any thoughts to producing a quality home in a timely fashion.”

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Price Home Group folded while still owing homes to 19 customers.

Christopher Adams, attorney to Cowan, one of the principals, blamed the business’s failure on rule changes, slow state payments and poor work by some subcontractors, which Price Home later sued. Jonathan Price declined to comment.

The company, according to its owners, completed 70 homes in less than two years. They also elevated 20 homes, although the state says Price Home Group was never licensed to lift houses.

The bankruptcy filings reveal Cowan and Jonathan Price racked up thousands in credit card debt after a key supplier pulled out. They sold waterfront land in Stafford and poured the sale’s proceeds back into the business, the bankruptcy documents show.

Adams said that the two partners put $600,000 back into the company, reducing their annual salary to an average of $111,000 in each of the three years.

Jeremy Price, who says he has since severed ties with the company that bears his family name, reiterated the defense’s courtroom claim: the Ballman-Molz were inflexible and wanted to ruin the Price Home Group in court.

“This was a bad decision at the conclusion of a bad trial and we are very confident that it will be overturned on appeal,” Price said. “PHG built and completed approximately 70 homes in New Jersey in a very short time and these plaintiffs like to pretend that is not a reality. These plaintiffs were after dollar signs and headlines and it appears they have succeeded in that for now.”

The state Attorney General’s Office has filed civil suits alleging consumer fraud against five contractors since July, including Price Home Group.

In that lawsuit, which names Jonathan Price and Scott Cowan individually, the Price Home Group is accused of taking $1.1 million in payments and failing to deliver on the contracted work. About $900,000 of that total was disaster grants paid for with federal tax dollars.

Who’s protecting our money?

Before the first homeowners signed up with Price Home Group, the state of New Jersey welcomed the company into the fold.

Price Home Group was approved to join RREM’s pool of “qualified builders” in 2013, a fact touted in company marketing materials.

Initially, the task of hiring homebuilders was handled within the RREM program, using only those companies identified as qualified builders. Later, the state got out of that part of the rebuilding business entirely — directing all homeowners entering the program to choose their own contractors.

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To participate in RREM, the state checks that a company has the proper licenses, is registered to do business in New Jersey and hasn’t been debarred from doing business with the government, according to Lisa Ryan, spokeswoman for the state Department of Community Affairs. The office oversees RREM, the $1.1-billion housing recovery program covered by anybody who pays federal taxes.

Testimony made in depositions shows that Jonathan Price and Cowan lied about their educational attainment in their RREM applications. Both claimed to be university graduates, but Price said he had only a few months in community college and Cowan acknowledged that he dropped out of high school.

Nonetheless, the company would be assigned five home construction projects by the state.

In April and May 2015, all of those projects were transferred to other builders to complete — at Price Home Group’s request, Ryan said, and not as a result of any performance issues. It continued to be the general contractor of record for at least 20 of the ongoing projects — rebuilds where it had been selected by the  homeowner.

“Everybody was trying”

The death knell for Price Home Group came when Ritz-Craft, the manufacturer that supplied the builder’s modular homes, terminated the relationship at the end of September 2015. It cited Price Home Group’s “bleak and dire financial situation” as the basis for severing ties, according to the lawsuit.

In a lawsuit  that followed, Ritz-Craft acknowledges it had received a grand jury subpoena from “New Jersey state court” seeking paperwork related to Price Home Group.

The Office of the New Jersey Attorney General and the Ocean County Prosecutor’s Office declined to comment.

Price Home Group should be judged on the circumstances at the time, Joyce Bartlett, the Price Home Group’s accountant, told the Press.

“Everybody was trying,” she said of the rebuilding climate. “The builders, the construction departments … but when you have a 300-year storm come in and literally destroys thousands of homes at once you had chaos — you have chaos.”

, Asbury Park Press

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