Sandy fraud payments top $5 million, hundreds of victims

LITTLE EGG HARBOR -- Millions of taxpayer dollars intended to help superstorm Sandy victims repair and elevate their homes has instead gone missing in a wave of contractor fraud.

Sandy victims whose properties were destroyed or badly damaged were often easy marks for scammers, who preyed on people desperate to return home, consumer advocates say.

A frequent complaint by Sandy homeowners and advocates: they did not receive enough guidance to help them make smart decisions during the rebuilding process. And the state did not move quickly enough to stop the flow of funds to contractors who had repeatedly done shoddy work or failed to complete storm-damaged homes.

So far, the state Division of Consumer Affairs has filed civil actions against eight home improvement contractors, claiming they defrauded Sandy victims of more than $5 million in federal rebuilding aid. 

And New Jersey has paid out about $5.4 million to homeowners in the state's biggest Sandy rebuilding programs whose grant money was taken by contractors who failed to complete home repair or elevation projects. 

Stiffer penalties are needed for builders who deliberately defrauded Sandy victims, advocates say.

More:The Asbury Park Press's complete coverage of Sandy at the Shore

The civil actions filed by Consumer Affairs typically seek restitution as well as fines from the home improvement contractors, but Sue Marticek, executive director of the Ocean County Long-Term Recovery Group in Toms River, says the builders often have declared bankruptcy or have little money available by the time they are charged.

"Somewhere along the line, they should make the penalties really heavy," Marticek said. "If you speed in a construction zone, you get double or triple the fines. If you defraud someone in a disaster zone, you should face tougher penalties."

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Marticek and others who work closely with Sandy victims say contractor fraud is one of the main reasons hundreds of storm survivors remain displaced. 

“Most people that are still struggling to get home going on five years have hit a significant challenge during or with the with the recovery process,” said Amanda Devecka-Rinear, director of the New Jersey Organizing Project, a Sandy advocacy group based in Ocean County. “For many who aren’t home yet that challenge is contractor fraud.”

Little Egg Harbor resident Edwin Byk, 61, is one victim.

For a year, Byk’s three-bedroom home on a lagoon in the township’s Mystic Island section has been perched precariously on weathered wooden cribbing.

Eight feet in the air, the house has been exposed to the elements for a year. Part of a front brick facade has cracked off; battered insulation hangs from interior walls.

Byk said he first hired contractor J&N Construction after noticing work the firm's owner, Jamie Lynn Lawson, was doing on a neighbor's Sandy-damaged home. Byk's house had been flooded with three feet of water while he and his daughter stayed dry on the second floor during the storm's surge.

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He repaired the 1,800-square-foot home himself, using about $50,000 in flood insurance proceeds. But when he heard that he could get money to elevate the house through the state's largest rebuilding program for homeowners, the Reconstruction, Rehabilitation, Elevation and Mitigation program, he jumped at the chance.

"I didn't want to go through that again," Byk said of the Sandy damage, "and I wanted to get lower flood insurance rates."

After talking to Lawson, whose firm was in Brick, Byk signed a contract with him. He eventually gave Lawson $97,000 in RREM funds to lift the house, but it took more than a year for the contractor to start the actual elevation.

Lawson lifted the house on cribbing over a weekend in July. But that was the last Byk said he saw of him. 

Two days after Lawson elevated the house, the township slapped a stop-work order on the property. Lawson had never applied for township permits to do the elevation, Byk said.

The Ocean County Prosecutor's Office has accused Lawson of taking $1.5 million from 34 homeowners and failing to properly complete, or even start work on their Sandy-damaged homes. 

“If DCA would do a background check, this would never have happened,” Byk said, referring to the state Department of Community Affairs. In December 2016, he said he was contacted by DCA and told not to use Lawson for his job.

Watch Byk talk about his issues with Lawson in the video above.

That was the same month that Lawson was indicted by the Ocean County Prosecutor's Office on charges of money laundering, six counts of second-degree theft by failure to make required disposition, third-degree tampering with public records — referring to omissions made in his contracting application with the state — and one count of fourth-degree unregistered home improvement contracting. Lawson has not entered a plea yet.

More:Contractor accused of scamming $1.5M arrested in South Carolina

Lawson had moved to New Jersey shortly after Sandy and registered his business in November 2012. At the time the state was awash with contractors who had come to New Jersey to help with the rebuilding effort.

The Division of Consumer Affairs, the agency that licenses numerous types of contractors, authorized Lawson's application to become a home improvement contractor, reportedly unaware he had criminal convictions in other states, according to the prosecutor's office.

Related: Complaint: Sandy scammer bilked $350k

Authorities said Lawson moved to various states following natural disasters. Records show Lawson lived in North Carolina, Texas and Oklahoma, among other places, and then moved to New Jersey shortly after Sandy decimated much of the shore. 

Authorities said Lawson became a fugitive shortly after he was indicted in Ocean County. Arrested by U.S. Marshals in South Carolina in mid-June, Lawson is being held in the Ocean County Jail after a first appearance in court earlier this month.

The prosecutor's office said Lawson, 42, used the money homeowners gave him for his personal expenses and to buy cars.

The Lawson case is one of more than 25 Sandy fraud cases currently being investigated by the Ocean County Prosecutor's Office, according to Sgt. Mark Malinowski, who heads the economic crimes unit.

"They range from one victim to 34, 35 victims," Malinowski said of the cases, adding the fraud cost runs into the millions of dollars. "A lot of these guys bounce from town to town, and we were able, through our networks and our police departments, to find where they had been operating."

More:5 accused of stealing Sandy aid

Malinowski noted that his office only looks into fraud cases of more than $75,000, or are multi-jurisdictional, so there are many more contractor investigations being handled by local police departments.

Malinowski estimated that Sandy fraud cases still represent about a third of his unit's caseload.

In 2014, two years after the superstorm struck, and the same year that Edwin Byk decided to raise his house, the state fundamentally changed how contractors were hired in the RREM program.

The video below explains how the program works.

That summer, the state turned over the rebuilding reins to individual homeowners. Instead of the state picking contractors for property owners, which it had done in the first phase of RREM, property owners were allowed to pick their own companies.

Department of Community Affairs spokeswoman Lisa Ryan has said homeowners were urged to call Consumer Affairs before hiring a contractor to learn if there were any complaints against the company.

DCA revised the RREM program after homeowners overwhelmingly told department officials that they wanted to be able to pick their own contractors, Ryan has said.

But most homeowners had never had to oversee such a large rebuilding project, or ever had as much cash to manage. RREM awarded a maximum of $150,000 for rebuilding and elevation projects. Overwhelmed, most just wanted to get back into their houses quickly.

Byk admits he shouldn't have given Lawson so much money up front.

"I didn't want to do it myself," Byk said of selecting a contractor. "I've never done anything like this before. I think the state should have kept doing it."

Ryan has said that RREM has worked well for the majority of homeowners who participated in the program, allowing thousands to replace, repair and elevate their homes.

Of the approximately 7,600 homeowners in RREM, 5,333 have completed construction, while about 700 more have returned home while they finish building, she said. 

"Nearly all of the remaining homeowners have started construction, with many of them anticipated to finish rebuilding by the end of the year," Ryan said.

But Byk is one of many fraud victims still caught in limbo.

New Jersey has created a process by which homeowners who were defrauded can receive an additional RREM award, up to as much as their original grant, if a government agency files a criminal or civil action against their contractor.

Related:NJ won't take back RREM money

The award is meant to pay for the work that still must be done to complete the initial project, Ryan said.

But Byk has not yet been able to apply for a revised grant award. He is still awaiting notice from the prosecutor's office that indicates Lawson has been charged in his case. It's needed for him to seek funds from DCA to complete his project.

Even after he receives the document, it may take awhile for him to get more money.

"The length of time it takes for us to disburse RREM funds to a defrauded homeowner varies, as each project is unique and depends on the complexity of the case," DCA's Ryan said.

More:5 charged with stealing Sandy aid

In the meantime, Byk has paid $7,000 for new architectural and engineering plans and to get all permits needed to complete the home elevation "and make it safe," he said.

Byk is renting a room in his next-door neighbor's house and is receiving rental assistance from the state.

"That's the only way I've been able to afford to stay here," said Byk, who works part-time for the Tall Timbers Homeowners Association in Little Egg Harbor. 

State Sen. Jennifer Beck said she believes the state should do more for homeowners in the RREM and Low and Moderate Income Homeowners Rebuilding program who are victims of fraud.

In 2015, Beck, R-Monmouth, first introduced the "Superstorm Sandy Homeowners Protection Act," which would allow DCA  to bar contractors who commit fraud from working in New Jersey and strip them of their licenses.

It also would allow the state Attorney General to sue on behalf of homeowners for contractor negligence. The law limits the attorney general's office to sue in criminal cases only.

More Sandy: Contractor bilked homeowners of $1.1 million

"It is the State of New Jersey's responsibility to defend our homeowners," Beck said. "It's our responsibility to take this to the mat for them."

Learn more about Beck's bill in the video above.

Beck's bill is awaiting action in the Senate Budget and Appropriations Committee but has not come up for a vote there.

"The travesty is, there were project managers assigned (by the state)," in RREM, Beck said. "Most homeowners assumed they were going to manage the project. But they didn't. The project managers were just there to make sure the money was spent according to HUD guidelines."

Byk, who once planned to spend his retirement years in Mystic Island, is so frustrated with his experiences that he's now thinking of moving away after he finally completes his elevation project.  

"For a year the house has been up," Byk said. "I never should have raised it. I should have left it like it was."

Jean Mikle: 732-643-4050, jmikle@gannettnj.com