June 15, 2024

A construction company based in Epping, Southers Construction, has encountered a hiccup after a judge issued a temporary order preventing it from accepting payments for yet to be completed work as per a civil court case levelling charges of a purported ‘ponzi scheme’ against the company.

The court order requires customers to provide a written confirmation that work was completed before Southers Construction can receive any payment. This ruling is connected to a civil complaint spearheaded by the state attorney general’s office, accusing the company of taking payments exceeding $500,000 without finishing the jobs.

The accusation tags Southers Construction and its owner, Ricky Southers, with engaging in “unfair or deceptive practices”. As per the attorney general’s office, on 17 separate instances, Southers signed home improvement contracts, collected deposits, and then barely got any work done.

The ban shall remain in place until the court case concludes or any further orders from the court, as outlined in a press release from the attorney general. Assistant Attorney General Zach Frish shared that both involved parties agreed to the temporary ban.

Frish states they are confident the agreed upon preliminary injunction will shield the public from harm during the case. They will also continue to evaluate if additional or different injunctive relief may be necessary as the case advances.

Details of the ‘Ponzi Scheme’ Revealed in Complaint

As per the attorney general’s complaint, Southers relied on deposits from new customers to fund other projects, an operation described as ‘akin to a Ponzi scheme’. In 2020, Southers updated his business model, drawing inspiration from Roofing & Reconstruction Contractors of America, a Gulf Coast-based operation.

Southers spent a substantial sum on marketing and advertising and went door-to-door hiring salespeople to ask homeowners if they need home improvements. It is suggested these sales representatives gave customers false information about the state of the jobs, the company’s capacity to do the work, and what their deposits would be used for.

The attorney general also accused Southers of spending excessively without tracking the finances. Additionally, it emerged Southers was earning over $200,000 annually, neglecting supplier payments and failing to keep up with new job accounts, leading to multiple cut-offs from suppliers.

A significant portion of the company’s funds were used to pay for personal items and lavish company trips. As the company got into financial difficulties, Southers attempted to resolve the issue by securing millions of dollars in cash advances and loans based on the company’s receivables.

Hearing Put Off After AG and Southers Reach Agreement

A lawsuit was filed by the attorney general against Southers in April. A hearing was scheduled for Tuesday to discuss an immediate injunction at Rockingham Superior Court but as both agreed to the terms proposed by Judge David Ruoff, the hearing was called off.

Southers is now barred from accepting or retaining deposits or prepayments for trade or commerce. The company is also required to maintain a detailed record of the work scope for every project, customer information, costs and due dates. Documenting purchases and proof of work done by employees and subcontractors is also a requirement.

In future contracts, Southers cannot solicit or accept payments without a signed confirmation from customers that work is complete. The attorney general’s office also announced they will be seeking penalties plus restitution for all the affected customers. The final terms will, however, depend on the outcome of the case.

Frish emphasized that the attorney general’s best course of action in protecting the public was this civil action against Southers, in accordance with the New Hampshire Consumer Protection Act. The civil action is a way to prevent any more harm, hold Southers accountable for their actions, and ensure the affected customers receive their restitution.

FAQ

1. What exactly is Southers Construction’s ‘Ponzi scheme’?

As per the attorney general’s complaint, the ‘Ponzi scheme’ involved Southers Construction and its owner basing their operation on collecting deposits from new clients to finance older projects, all the while barely getting any work done.

2. What does the preliminary injunction from the court entail?

In the preliminary injunction issued by the court, Southers Construction is prohibited from accepting payments for unfinished work. Payments can only be received after customers provide written confirmation that the contracted work was fully completed.

3. What are the measures in place to prevent similar incidents in the future?

Going forward, Southers Construction has to maintain comprehensive project documents, including the project’s scope, cost details and due dates. The company cannot solicit or collect payments without a signed confirmation from customers verifying completion of work. This should not only protect future customers but also prevent Southers from repeating such unscrupulous practices.