Contractor loses appeal in $3M fraud case

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A California painting contractor recently lost an appeal to reduce an extended sentence for defrauding a client out of close to three million dollars. A state law – now expired due to a sunset clause – added prison time for embezzlement over a certain amount, and the painter argued that the law had been off the books by the time of the sentencing. The court responded that while the sentencing took place after the sunset clause had passed, the crime occurred during the time the law was in effect.

The contractor was convicted for a scheme he devised with a woman who served as property manager for a homeowners association. He had been hired for work since the 90s, so they were well acquainted with each other by the time the put their plan into effect years later. The two of them were discussing their financial difficulties; hers resulted from gambling, alcoholism, and later an opiate addiction that came about after some difficult surgeries. He was having tax issues and cash flow problems.

They developed a relatively simple plan where the already trusted painting company would bill the HOA for work the contractor didn’t do, or pad the bill for work he did. They used a similar, but fake, company name so the painter’s wife, who worked in the company office, wouldn’t find out. While the contractor first wanted two-thirds of the extra money, the two agreed eventually to split the check down the middle.

 This business model stayed in place for about six years until the woman was fired from her position. During this time, they racked up nearly $2.9 million in ill-gotten gains; bank account records showed that the property manager has spent well over a million of her share at a nearby casino. After she’d been fired, the HOA came to the realization that while some painting had been done, they certainly hadn’t received three million worth of services.

The HOA board president noticed invoices for advance payments which the board had not approved, and after looking through the bank statements found out that there were approximately 150 fraudulent invoices.

The contractor – who was licensed – received a seven-year term, which included a three-year enhancement under a former penal code for felonies involving losses exceeding $1.3 million. One reason the court declined the appeal was so that others in a similar situation wouldn’t try to delay judgement in a case in the hope of receiving a lesser post-sunset term.

It should be noted that APC has podcasts and articles designed to help painters learn about increasing cash flow – legally. Browse our selection of Paint Radio episodes, here (or anywhere you listen to podcasts).

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