Home construction turning into a money pit?

We watched dozens of arrests when we tagged along on five different sting operations set up by the California state licensing board.

What happens to those illegal contractors? Most of them simply get a citation like a traffic ticket. It’s a misdemeanor to work without a license.

But often that’s not enough to keep unlicensed contractors from working. Remember Thomas Pickering, the contractor with numerous complaints and a revoked license? He was charged with a felony for using someone else’s license. He never even bothered to show up for his court date. On that day, we found him loading up his truck with tools and heading off to work. 

Corderi (Dateline footage): Mr. Pickering, I’m wondering why you’re still working even though you no longer have a license?

(Pickering drives off)

The contractor who walked off his projects
And what about that contractor who did have a license and abandoned the projects of these homeowners?

You might be surprised to find out what the contractor is doing now.  He’s back on the job working on another multi-million dollar project just 20 minutes from those houses he abandoned.

We watched Covey Cowan for weeks managing the building of a $8 million 6,000 square foot home. As the first to arrive and last to go home, he seemed to be in charge again. We confronted Cowan on his business history.

Corderi: My name is Victoria Corderi and I’m with Dateline NBC and I had a couple of questions. I was wondering how you’re working on this project if you’ve abandoned other projects. Because there are families who are out hundreds of thousands of dollars.  And they’re wondering where that money is. Can you tell us?

Covey Cowan:  Uh... Uh...I don’t think I really need to have any conversation with you.

Corderi: Can you give them an explanation.  Do you think they deserve one?

Cowan:  Uhhh...  I’ve given my explanation to all those people.

Corderi:  No, you haven’t.  The last thing you said to them is you’ve going bankrupt and you walked away.

Corderi:  Doesn’t it behoove you to give them an explanation for that since you’re obviously working again? 

Cowan:  Well, yeah but I still got to put bread on the table don’t I?

Corderi:  So do they.

Cowan:  Yeah.  Uh. You know, I did the best I could and I ran into some tough breaks and I couldn’t keep the business going.

The contractor disputes homeowner Ed Shimmon’s version of what happened, including that he asked for a loan. To hear Cowan tell it, he says he’s a victim of circumstance.

But his former clients allege they’re the victims— that Cowan used their money to pay bills from other projects. That’s illegal in California. Cowan didn’t address that allegation, but did admit he didn’t run his business properly.

Cowan: You know, in this business, every now and then contractors are gonna find themselves upside down.

Corderi: By "upside down," do you mean taking money from one job and putting it into another job?

Cowan: I mean that we were on a negative cash flow basis.

Corderi:  So that meant you were asking for money and using it elsewhere.

Cowan: Uh-uh. Instead of paying the bills at 30 days, I was paying it at 60 days.

Corderi:  But it was worse than that. What these people feel like is that they’ve been defrauded. How do you see it?   I’m just trying to understand..

Cowan:  Cost overruns.

Corderi:  That you don’t account for. That’s so bad you have to leave families in the hole?

Cowan:  (nods in agreement)  I wish...

Corderi:  Cost overruns are a normal part of contracting right?

Cowan nods yes.

Corderi: How did it become a runaway train?  Were you just incompetent?

Cowan:  There was just a lot of them at the same time.  A lot of things that were difficult to foresee.

And what does he have to say to the homeowners he abandoned?

Corderi:  So what? So it’s over now for you? You’ve declared bankruptcy, these people owe hundreds of thousands of dollars, end of story?

Cowan: If there was something I could do to make it right, I would do it. I’m not in a position to make it right.

Cowan says he’s no longer the contractor on the construction job where we found, and that the owners are paying him a salary just to manage the project.

Corderi: Do these people know everything that happened?

Cowan:  Oh yeah. 

Corderi: And that hasn’t affected your business relationship with them?

Cowan:  We did the best we could with the situation.  You know.?  By me staying on here.  It helps to mitigate their loss.

We spoke to the owners of the house and they say although Cowan cost them hundreds of thousands of dollars, they felt they had little choice but to pay him to finish.

They agreed to sit down for an interview but cancelled when they say Cowan said he would walk off the job if they cooperated with Dateline. 

As for Ed Shimmon and his family, an 18-month project stretched into 3 years and they say the contractor’s mismanagement forced them to spend $1.5 million dollars more than they’d planned.  Their house still isn’t finished. And neither is Mimi Chang’s home.

Learning from costly mistakes
All of these people learned some tough and costly lessons about the contracting business. There are some measures you can take to avoid repeating their mistakes:

• Check the contractor’s license and business history for red flags such as bankruptcy. Ed Shimmon did almost no homework. "I didn’t even check the guy had a business license or a contractor’s license.  I mean, stupid, it’s triple stupid," he says.
• Also, never give more than 10 percent as a down payment and only make payments in scheduled increments.  Some experts even recommend paying subcontractors directly to make sure they get paid.
• Finally, consider requiring the contractor to furnish a bond—a kind of insurance policy.  If the job isn’t finished, you’re covered.

In the end, taking precautions may prevent a dream home from morphing into a money pit... or worse.

"Everyone talks about the money. Not that the money is not important," says Ed Shimmon. "It’s the time and the energy and the stress that it puts on the family."

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