June 25, 2024

EPPING — A court case has been initiated by the state attorney general’s office to put a permanent end to the operations of a local construction firm. The company is alleged to have swindled customers out of over $500,000 and replicated the structure of a Ponzi scheme.

Southers Construction, together with its owner Ricky Southers, are facing charges of violating the New Hampshire Consumer Protection Act through “deceptive or unfair practices”.

The state is pushing for Southers to stop accepting customer deposits and provide restitution for those affected by their activities. Furthermore, they are seeking civil penalties and a court order barring Southers from owning or managing any construction business in New Hampshire.

The filed complaint in Rockingham Superior Court notes 17 instances where Southers Construction allegedly entered contracts with homeowners for improvement works and collected deposits without carrying out any significant work. 

Southers Construction failed to offer refunds to the customers, constantly misleading them regarding the status of their projects and refunds,” the attorney general’s public statement reveals. 

It is alleged that the company collectively defrauded customers in New Hampshire, Maine, and Massachusetts of over $500,000. 

 

Southers apparently relied on new customer deposits to offset the cost of other projects to avoid financial ruin, as per the complaint.

At the time of writing, the company had not provided a response to requests for comment.

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Detailed account of Alleged ‘Ponzi Scheme’

The filed complaint suggests that Southers implemented a new business approach in 2020, much like that of Roofing & Reconstruction Contractors of America, which have operations in the Gulf Coast.

  

Stated in the complaint is Southers’ ambition to transform his company from a small, independent contractor business to a layered corporation modeled after RRCA.

Under the new operation model, Southers spent substantial amounts on marketing and advertising and hired salespersons to conduct door-to-door solicitation of homeowners for potential home improvements, as per the complaint.

While the new sales team managed to secure hundreds of new contracts for home improvement works with customers, the complaint alleges that they didn’t receive proper training, apart from learning how to make a sale.

 

“Salespersons would get a partial commission after closing a deal but could only receive the full commission once the job was done and fully paid for,” the complaint details. “…Consequently, salespersons frequently misrepresented to customers the progress of their jobs, their deposit usage, and the company’s ability to fulfill their contracts.” 

The complaint adds that the sales team habitually underpriced potential jobs for customers, including a situation where a salesperson sold an addition to a customer and neglected to include the costs for plumbing, electrical work, foundational installation, and permits. 

“Because salespersons often sold jobs without correctly pricing materials and labor, production managers were left to scramble to figure out the necessary materials for the job and which subcontracts were needed to install the materials,” the complaint describes.

Adding to the company’s financial predicament, according to the complaint, was Southers’ spending and lack of anyone “monitoring and managing the finances.” 

The company was severed from multiple materials suppliers due to non-payment and failed to track the “many new job responsibilities they had,” according to the complaint.

Southers and two executives, who were paid annual salaries amounting to roughly one-third of the company’s payroll, with Southers pocketing over $200,000 each year. 

He also made numerous company expenditures on items such as custom-engraved knives, a $7,000 golf simulator, down payments on employees’ personal vehicles, and a company trip to Florida, as alleged by the complaint.

Instead of recruiting a financial manager, the complaint alleges that he engaged coaches like motivational speaker Eric Spofford to divulge secret knowledge for generating remarkable cash flow.

In an attempt to resuscitate the company, the complaint alleges that he borrowed “millions of dollars in cash advances backed by the company’s receivables,” for which he has now defaulted.

He also obtained a $374,000 short-term loan from RRCA, which states that in the event of a default by Southers, RRCA would be entitled to assume control of the company.

“After Southers Construction secured a financial lifeline from RRCA, the company chose to use RRCA’s funds to perpetuate their Ponzi-style scheme by using the new money to pay off existing debts,” the complaint reveals.

The complaint mentions, “Southers’ strategy is to refund customers using funds from new jobs.” “The fact that his plan depends on the same principles that led to Southers Construction’s near collapse, causing customers to lose hundreds of thousands of dollars, sometimes resulting in devastating consequences for them, seems to escape him.” 

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Southers Construction Continues Operations in Epping

As the company continues its operations and accepts new job deposits, the state is pushing for a court order to halt its activities.

On April 15, the company made a post on its Facebook page about a “Southers Construction Hiring Blitz” aiming to recruit more sales team members.

With two branches, one at 363 Calef Highway in Epping and another at 94 Auburn St. in Portland, Southers Construction, as per their website, was still accepting job calls at the Epping location.

Southers Construction is also facing five other civil lawsuits filed in superior court within the past year, including those filed by Lansing Building Products and Jackson Lumber & Millwork Co, according to court records. In these cases, Southers is represented by attorney Michael Hurley Darling, who did not immediately return calls requesting comments.

The complaint highlights, “Based on information and belief, it continues to use new customer funds to meet its mountain of debts and obligations rather than allocate it to customer jobs.” “…It is almost certain that more customers will become victims of Southers Construction under this strategy.”

The case was investigated by Investigator Tom Rees from the Department of Justice’s Consumer Protection and Antitrust Bureau. The litigation is being handled by Assistant Attorney Zach Frish from the same bureau.