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$50,000 vanishes, along with their contractor
Sunday, 29 April 2007

Remodeled - A Damascus couple get heartache and a pile of fixtures instead of a master suite and studio
Half a year later, their money and their contractor have disappeared and they have learned a heartbreaking lesson. Although Oregon homeowners now have more access than ever to contractors' license and dispute histories, the state provides little remedy and no guarantees... An investigation by The Oregonian in 2005 revealed that weak state laws and passive enforcement by the state Construction Contractors Board have allowed unscrupulous or financially troubled contractors to remain in business and avoid paying penalties levied by the state agency.

The Oregonian
$50,000 vanishes, along with their contractor

Remodeled - A Damascus couple get heartache and a pile of fixtures instead of a master suite and studio
Sunday, April 29, 2007
SARAH HUNSBERGER

Jane and Mel O'Brien were so excited about adding a master bedroom suite and studio to their Damascus home last year that, even before the work began, they bought leather recliners and a bathroom sink embossed with a floating goldfish.

They felt confident in their selection of a Lake Oswego company to do the $100,000 job.

They had checked references and verified, through the state board that regulates Oregon's 42,000 contractors, that the company was licensed and bonded. Last
fall they signed a contract, took out a home-equity loan and paid the contractor $50,000.

Half a year later, their money and their contractor have disappeared and they have learned a heartbreaking lesson. Although Oregon homeowners now have more access than ever to contractors' license and dispute histories, the state provides little remedy and no guarantees.

"I just cried," said Jane O'Brien, who believed she took adequate precautions.
"You think you're being protected."

As home improvement season gets under way and families gear up to make big investments this spring and summer, the O'Briens' misfortune offers a reminder that even though Oregon regulates contractors, consumers still carry the burden to protect themselves.

An investigation by The Oregonian in 2005 revealed that weak state laws and passive enforcement by the state Construction Contractors Board have allowed unscrupulous or financially troubled contractors to remain in business and avoid paying penalties levied by the state agency.

As the board's own Web site warns, state protections "are limited and do not provide a comprehensive safety net for consumers."

More than 99 percent of contractors ordered to pay their clients in disputes do end up paying, but by the time the state puts the worst offenders out of business, the contractors' assets are often gone.

One reason victims such as the O'Briens suffer such large financial losses is that the state requires up to $15,000 in bond coverage -- increased from $10,000 in 2000 -- when contractors usually have much larger business volumes. Some states have smaller requirements, while California requires as much as $100,000
in coverage.

Craig Smith, administrator of the contractors board, said the bonds aren't meant to be an insurance policy, but are an incentive for contractors to follow through on obligations.

The O'Briens say two current Oregon House bills that would increase contractors' required bond coverage to as much as $25,000 don't go nearly far enough. They say coverage should be equal to a contractor's total outstanding obligations. "That would be the only way to protect the consumer," Jane O'Brien said.

Bill Boyd, who heads the state board's dispute resolution section, said insurance companies would refuse that much coverage to most contractors, and such a state requirement would put many out of business.

"It all does come down to making sure you know where the money is going," Boyd said.

Few warning signs
The O'Briens couldn't tell it when they hired their contractor last fall, but his company was about to fall apart.

The Jemm Corp. was based in Lake Oswego and doing 200-plus jobs a year as Northwest Home Source. The O'Briens liked the charismatic owner, Jimmy Ray "Jay" Kelly, who visited their house and talked about plans with enthusiasm.

Kelly could not be reached for this article. His business phone is disconnected,
and no one returned a recorded message left at a second listing. He has not responded in writing to the O'Briens' civil lawsuit and has not had contact with
the contractors board since January.

When the O'Briens checked Kelly's state history last year, they found a valid license with a handful of disputes that had been closed by the state or settled voluntarily -- a good sign in the O'Briens' minds.

But soon, employees' paychecks were bouncing, workers were quitting, and
angry clients were calling to complain about unfinished work, according to employee statements to Lake Oswego Police, who investigated a December burglary at the business.

Within a month after the O'Briens paid Kelly, the contractors board enforcement section suspended his license.

Kelly insisted in e-mails that the license suspension was temporary.

"I will get in touch with you this week so we can move forward," he wrote to
the O'Briens on Jan. 7.

They never heard from him again.

Ordered to pay up
By that time, formal complaints were rolling into the state alleging shoddy work
or fraud. So far, the contractors board has ordered the Jemm Corp. to pay $24,527.47 in five disputes. Additional penalties are proposed in other disputes
for fraud and dishonest conduct. Fourteen other complaints, including one filed
by the O'Briens, are pending or awaiting investigation.

It's unlikely that Kelly will be able to do business in Oregon again, state officials said, but regulators might have a hard time tracking his history across state lines. The Jemm Corp. dissolved in March, according to state attorney general's office records, and Kelly's customers have little hope of getting their money back.

As it stands, the O'Briens learned from the contractors board this week that if they win their lawsuit against the Jemm Corp., they will be first in line to benefit from its $15,000 in bond coverage.

In the meantime, the O'Briens have refinanced their house. Mel O'Brien -- a full-time nurse -- has dropped prices for his weekend wedding photography business
in hopes of picking up extra jobs.

Boxes of light fixtures, mirrors and faucets are stashed in a spare bedroom and in a closet beneath the O'Briens' stairway.

"I hate looking at this," Jane O'Brien said last week as she studied an interior design plan for the couple's master suite. "It's so sad."

Sarah Hunsberger: 503-294-5922; This e-mail address is being protected from spam bots, you need JavaScript enabled to view it http://www.oregonlive.com/news/oregonian/index.ssf?/base/news/1177734337267850.xml&coll=7&thispage=1

 
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