Court orders clampdown on Southers Construction amid $500K ‘Ponzi scheme’ claims

Southers Construction of Epping is facing a civil complaint by the state attorney general’s office for allegedly bilking customers out of more than $500,000 by accepting payments and not completing their jobs

A judge has temporarily prohibited a local construction firm from accepting payments for unfinished work in a civil case over the company’s alleged “Ponzi scheme.”

Southers Construction of Epping will now need written notice from customers stating work has been completed before any payment can be received, according to a preliminary injunction ordered Tuesday, May 28, in Rockingham Superior Court. The company is facing a civil complaint by the state attorney general’s office for allegedly bilking customers out of more than $500,000 by accepting payments and not completing their jobs.

The civil action accuses Southers Construction and its owner Ricky Southers of “unfair or deceptive practices.” The attorney general claims Southers entered contracts with customers for home improvement work on 17 different occasions, collected deposits, and then performed little or no work.

The injunction is in place until the case is adjudicated or until further order of the court, according to a press release from the attorney general. Assistant Attorney General Zach Frish said the preliminary injunction was agreed upon by both parties.

“We are confident that the agreed upon preliminary injunction is sufficient to protect the public from harm for the duration of this case,” Frish said, “and (we) will continue to evaluate whether additional or different injunctive relief may be necessary as the case proceeds.”

AG details alleged ‘Ponzi scheme’ in complaint

Southers, according to the attorney general’s complaint, relied on new customer deposits to finance other projects “to stave off financial collapse.” They described the operation as “something akin to a Ponzi scheme.”

According to the complaint, Southers adopted a new business model in 2020, similar to Roofing & Reconstruction Contractors of America, which operates in the Gulf Coast. Southers, the complaint stated, wanted to transform his company from a small, independent contracting outfit into a multi-tier corporation styled after RRCA.

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 home improvements, according to the complaint.

The attorney general alleges those salespersons misrepresented to customers what was going on with jobs, the company’s ability to perform the work, and what their deposits were used for. The sales team under-bid jobs, neglecting to include costs like plumbing, electrical work and permitting.

Meanwhile, the complaint states Southers was spending money with no one “tracking or managing its finances.”

While Southers took more than $200,000 annually for his pay, his company was cut off from multiple materials suppliers for non-payment, the attorney general states, and failed to track the “hundreds of new jobs they became responsible for.”

The complaint states Southers also allegedly 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.

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.

Preliminary hearing canceled as deal reached between AG and Southers

The attorney general filed their civil action against Southers in April. Parties were scheduled to meet Tuesday for a preliminary hearing in Rockingham Superior Court to discuss an immediate injunction. The hearing was canceled after the order was handed down by Judge David Ruoff with the agreed-upon terms.

Southers and his company are prohibited from soliciting, accepting, receiving or keeping any deposit or prepayment for any trade or commerce. They are not prohibited from ordering materials for use in connection with a customer’s contracted work.

Southers will also have to maintain documents that show the scope of any work in a project, the customer’s name and information, the total cost, and when those costs will become due. All receipts and invoices or other documents to show materials purchased will be necessary, as well as to show which employees or subcontractors performed any labor. Copies of all correspondence with customers must be kept as well.

For any new projects Southers enters into a contract for, Southers is prohibited from soliciting or receiving payment from customers without receiving a signed attestation that the work required has been completed.

When the attorney general’s office first announced the civil action, it said in a statement they were looking to enjoin Southers and his company from taking customer deposits, as well as Southers ability to own or operate any construction business in New Hampshire. In their press release this week, they said they will be seeking restitution for all affected customers and $170,000 in civil penalties.

Frish said Thursday it was unclear what terms would result from the civil action in the end.

“At this preliminary phase of the case, no decisions have been made regarding what permanent injunctive relief will be necessary to protect the public from future harm,” Frish said.

Frish said the civil action taken against Southers for violating the New Hampshire Consumer Protection Act was the best course of action the attorney general’s office believed it could take to prevent further harm.

“We brought the civil action because the attorney general believes it puts us in the best position to swiftly prevent any additional harm, hold Southers accountable for their conduct, and obtain restitution for the affected customers,” Frish said.

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