[co-author: Stephanie Kozol]*
On August 20, New Hampshire Attorney General (AG) John Formella announced the arrest of Ricky Southers, the owner of Southers Construction, Inc., for allegedly violating the terms of an injunction issued under the state’s Consumer Protection Act (CPA). Earlier this year, Formella filed a civil complaint against Southers and his construction company, alleging numerous and repeated violations of the CPA. The court ordered a temporary restraining order, followed by an injunction, which imposed strict requirements on how Southers can operate his business in the state. Southers has been charged with criminal violations after allegedly failing to comply with the temporary restraining order and injunction.
The complaint, filed April 18, alleged several “unfair and deceptive practices” related involving the company’s failure or partial failure to provide contracted-for services after taking customer deposits for work; failure or partial failure to refund customers for work not performed; and using deceptive representations and tactics to avoid doing the contracted work and dissuade customers from seeking refunds. The AG alleged that the company deprived customers located in New Hampshire, Maine, and Massachusetts of more than $500,000 in what was described as “something akin to a Ponzi scheme.” The AG alleged that the company relied on new customer deposits to finance earlier projects to cover funding gaps created when the company spent hundreds of thousands of dollars on marketing and advertising in efforts to achieve rapid growth. The AG also alleged that the company’s commission structure led salespersons to routinely mislead customers with respect to the status of their projects and the company’s ability to perform the contracted work.
After a temporary restraining order went into effect on April 19 and an injunction was entered on May 29, the company was prohibited from soliciting, accepting, receiving, or keeping any customer deposits or prepayments. The AG alleges in the latest filing that Southers violated the terms of the temporary restraining order on at least two occasions, and then violated the injunction on three separate occasions.
Why It Matters
Although criminal charges for violating state CPA laws are rare, this case serves as a warning to companies and their ownership/management that AGs take their responsibility to protect consumers seriously and will use all tools at their disposal to achieve the desired outcome. In some states, those tools include criminal charges and onerous civil penalties. The risk for criminal penalties is particularly acute when conduct is expressly prohibited by court order.
*Senior Government Relations Manager
