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Who should I contact if I find misappropriation of construction loan funds?

I am an owner who has a contract and a construction loan with a GC/Architect (GC is also the Architect), in which there is possible evidence of misappropriation of my construction loan funds for the amount of $40,000 to date. Not only are funds possibly missing, but we have not received itemized invoices for material and labor cost, our subcontractor has explicitly stated he has not been paid in full for work/labor/material by the GC, and the GC/Architect is refusing to redraw and submit architectural Plans (due to GC/Architect code compliance’s mistake and sheer architectural knowledge negligence) to all appropriate parties (client, subs, bank, city permits). The house is in framing with a roof, but is not weathered in to prevent further weather damage. Construction loan total is $500,000. And $285,000 is what is left in loan. We feel funds have been misappropriated, and how would intent of fraud be found?

1 reply

May 12, 2020

A tortfeasor's Intent to defraud another party is hardly ever proven outright via direct evidence. It is instead most often proven via circumstantial evidence based upon the actions actually taken by the offending party. Now, what action you should take depends on what outcome you want to achieve. This is a public forum, so I won't get too specific, but it seems your options are to terminate the contractor or try to continue working with the contractor. The first option is fairly straightforward. To prove breach of contract, and potentially fraud, and to attempt to recover the money paid plus additional damages available, you could potentially terminate the contractor for material breach and file suit. Alternatively, via the second option, you could use whatever contractual rights of review you may have to audit the project documents, or hire a separate firm to do so, while the project remains ongoing. Where the GC/Architect refuses to provide you the necessary documents, you may have no choice but to proceed with option one. This discussion is extremely generalized, but I wanted you to have an idea of what pursuing this claim would look like. What I am sure of, is that you are already at the point where you need a law firm involved to review the situation and provide you specific advice regarding how to move forward. Don't hesitate to contact me at my office directly if you would like to discuss this matter in greater detail.

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