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How to process a contractor who appears to have penetrated / embezzled from our client trust funds held.

Michigan

Client funded initial funding ($15,000). Contractor started work, after submitting plans (including city workpapers) to city; however, before a permit was issued. Contractor "inspected" south wall (prior to permit) - city immediate placed Stop Work Order. Client engaged contractor for a small ($1,000 +/-) interior project to assist our team in the removal of an internal roof, for safety concerns. Client obtained city approval for the internal roof removal. Client staff, tools and all know direct cost for the small roof project have been paid directly by client - e.g., dumpsters, saw blades, etc. Last week the city approved revised plans - contractor was contacted....contractor has submitted spreadsheet indicating 284 hours of labor for a few days labor and material cost. We requested a current statement of our funds held in trust; however, contractor indicated that all funds have been withdrawn. We have requested supporting material, which the contractor is unwilling to provide.

1 reply

Jan 25, 2021

I don't think I fully understand the situation based on the above information. Sitting down with an attorney and explaining what happened would be useful for determining what your next steps should be. Of course, before hiring an attorney, threatening to take legal action if the contractor isn't more transparent could be a good first step. If they understand that you won't be toyed with, they might be more inclined to be transparent and communicative. Further, requesting a sworn affidavit that they've actually worked those 284 hours and that all billing has been above-board could be another good initial step. If they've been doing things by the book, providing such an affidavit shouldn't be a problem for them.

With that being said, if you believe your contractor has stolen from you, then you may be entitled to claims against the contractor. Civil claims (like breach of contract, conversion, embezzlement, fraud, etc.) could be on the table, as well as criminal claims (like fraud, theft, and others). A Michigan construction lawyer would be useful for identifying what options make the most sense. If you need help finding a lawyer, this might be a good place to start: Top Rated Michigan Construction Lawyers.

What's more, making a consumer complaint with the attorney general's office could be fruitful, and simply threatenng to make a complaint with the AG could get the contractor to be more transparent. Further, making a complaint with the Department of Licensing and Regulatory Affairs could be useful, too. And, again, simply threatening to report a contractor could lead to better transparency and communication.

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