Thoughts on construction law from Christopher G. Hill, Virginia construction lawyer, LEED AP, mediator, and member of the Virginia Legal Elite in Construction Law

Be Careful With Construction Fraud Allegations

Originally posted 2013-03-29 09:00:55. Republished by Blog Post Promoter

Criminal Construction FraudHere at Construction Law Musings we have discussed the intersection of contracts, construction and fraud on several occasions. We’ve even discussed how such fraud can bleed over from the civil to the criminal.

Recently, the Virginia Supreme Court weighed in again on the question of construction fraud and criminal allegations. In O’Connor v. Tice, the Court discussed a malicious prosecution action brought by a contractor against owners of a commercial building. In O’Connor, the owners and the contractor got into a disagreement over alleged damage to the roof of the owners’ building and who was responsible. In response to this disagreement, the owners contacted the local sheriff’s office, accusing the contractor of construction fraud, and then wrote a “15 day letter” to the contractor outlining the criminal consequences should he fail to pay the damages sought in the owners civil lawsuit. Subsequently, a criminal warrant was issued against the contractor based solely upon the word of the owners. This last occurred at the insistence of the owners (who did not inform the sheriff’s deputy or the Commonwealth Attorney that they’d had this conversation or that the contractor had partially performed) after they discussed the matter with the contractor’s attorney and were informed that any claim that they may have had was civil in nature.

Based upon these facts, the Circuit Court of Northumberland County entered judgment for the contractor in his malicious prosecution action and the Supreme Court affirmed. The Supreme Court held that by threatening criminal action to collect a civil debt and concealing certain facts, the jury could properly find that the owners instituted a criminal action without probable cause and did so maliciously.

The takeaway? From a contractor’s perspective, you do not need to take actions like those outlined in this case lying down. Should you be in the unfortunate position of facing such allegations from an owner, contact an experienced construction attorney to help determine your rights and how to respond.

As a building owner, the lesson here is to take a deep breath, talk with an attorney, and think long and hard about whether you want to escalate a civil claim for damages into a criminal case. If you decide to take such action, make sure that you share everything with the authorities before moving forward. Failure to do so can be disastrous.

Image via Stock.xchng.

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2 Responses to Be Careful With Construction Fraud Allegations

  1. For some years I have taught courses related to fraud; my colleague Richard Townsend has taught our courses related to control and audit of construction costs, presented primarily from the perspective of owners rather than contractors.

    Although not an attorney, as an auditor I was taught the dangers of mishandling investigative activity providing the other side with the basis for litigation. This case demonstrates malicious prosecution that I have been describing more in theory. Thank you.

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