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Subcontractor deposits joint check into their own account and does not pay supplier

CaliforniaJoint ChecksPayment Disputes

Paid subcontractor joint check to him and the material supplier for a custom siding order. He stated he would give it to the supplier that day. Instead he deposited the check into his own account (not sure why his bank did not flag it). Contacted supplier and found out that not only did he not place the material order, the conditional release he gave us from them was falsified. He used a release from a different project of ours a couple years ago and changed the names and amount. We caught it because he missed changing the date and signature and the suppler confirmed that they were never given the order and therefore did not submit a release.

1 reply

Jan 14, 2019
I'm very sorry to hear that. Like you'd alluded to above - this is the exact situation that joint checks intend to prevent. Where a subcontractor has gone rogue, it's probably a good idea to first try and reach out to them and attempt to set the situation straight (or at least figure out what's going on). Obviously, that won't always lead to the resolution of the issue - but it's still usually a strong place to start. It's also likely worth reaching out to the bank who accepted the joint check without the endorsement of both parties to determine what happened there, as well as to see what can be done to return the payment deposited. Ultimately, though, it sounds like this subcontractor has committed fraud - and these actions could likely serve as the basis for termination of the subcontract. Further, payments made under the guise of a fraudulently provided lien waiver may also be recoverable. For more clarity on what to do next, gathering all relevant communications and documentation and consulting with a local construction attorney is probably a wise move - they'll be able to review that information and determine the best way to move forward.
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