The state attorney general’s office has filed a civil action to permanently shut down a local construction firm for allegedly bilking customers out of more than $500,000 and “operating as something akin to a Ponzi scheme.”
Southers Construction and its owner Ricky Southers are accused of “unfair or deceptive practices” in violation of the New Hampshire Consumer Protection Act.
The state is seeking to stop Southers from taking customer deposits as well as gain restitution for affected customers. They are seeking civil penalties and a court order to prohibit Southers from owning or managing any construction enterprise in New Hampshire.
The complaint filed in Rockingham Superior Court details 17 different occasions, where the construction firm allegedly entered into contracts with homeowners for home improvement work and collected deposits but performed little or no work.
“(Southers Construction) did not refund the customers, and consistently misled them about the status of their projects and refunds,” the attorney general stated in a press release.
The company is alleged to have collectively deprived customers located in New Hampshire, Maine and Massachusetts of more than $500,000.
Southers, according to the complaint, relied on new customer deposits to finance other projects “to stave off financial collapse.”
The company did not immediately respond to a request for comment.
According to the complaint, Southers adopted a new business model in 2020, similar to Roofing & Reconstruction Contractors of America (RRCA).
Southers, the complaint stated, wanted to transform his company from a small, independent contracting outfit into a multi-tier corporation styled after RRCA.
As part of the new business model, Southers spent hundreds of thousands of dollars on marketing and advertising and hired salespersons to go door-to-door soliciting homeowners to see if they wanted any home improvements, the complaint states.
While the new salespersons generated hundreds of new home improvement contracts with customers, the complaint alleges they received “limited training” except on how to make a sale.
“Salespersons would receive a partial commission upon the sale of a job, but would only receive the full commission once the job was completed and paid for,” the complaint states. “... As a result, salespersons routinely mispresented to customers what was going on with their jobs, what their deposits had been used for, and the company’s ability to perform under their contracts.”
Adding to the company’s financial woes, according to the complaint, was Southers spending and lack of anyone “tracking and managing its finances.”
The company, according to the complaint, was cut off from multiple materials suppliers for non-payment and failed to track the “hundreds of new jobs they became responsible for.”
Southers and two executives were paid annual salaries equivalent to approximately one-third of the company’s payroll, with Southers paying himself over $200,000 annually.
He also spent tens of thousands of company funds on purchases like custom engraved knives, a $7,000 golf simulator, down payments on employees’ personal vehicles and a company trip to Florida, the complaint alleges.
The complaint alleges that rather than hire a financial manager, he brought in coaches like motivational speaker Eric Spofford to help reveal the secret knowledge to “generate insane cash flow.”
In attempts to dig the company out of the hole, the complaint alleges that he took out “millions of dollars in cash advances tied to the company’s receivables,” for which he is now in default.
He also secured a $374,000 short-term loan from RRCA, which stipulates that, in the event of a default by Southers, RRCA would have the right to assume control of the company.
“After Southers Construction received a financial lifeboat from RRCA, the company opted instead to use RRCA’s funds to perpetuate its Ponzi-style scheme, using the new money to pay down existing debts,” the complaint states.
“Southers’ plan is to refund customers from new jobs,” the complaint states. “It is apparently lost on him that his plan relies on the same concepts that caused Southers Construction to teeter on the verge of collapse, which in turn has caused the company to deprive its customers of hundreds of thousands of dollars, sometimes leading to devastating consequences for them.”
The state is seeking a court order to shut the company down as it continues to operate and take deposits for new customer jobs.
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