New Jersey Attorney General Commemorates Two Years of Post-Sandy Fraud Enforcement, Continues Watch for Storm Recovery Scams
NEWARK - Acting Attorney General John J. Hoffman, the Division of Consumer Affairs, and the Division of Criminal Justice this week commemorated two years of investigating and prosecuting alleged fraud related to the aftermath of Superstorm Sandy, and noted that the Attorney General's Statewide Sandy Fraud Working Group continues to watch for financial exploitation related to ongoing post-storm recovery efforts.
"Immediately upon Sandy's landfall, including the first two days while the Division of Consumer Affairs headquarters was without electricity or phone service – our investigation and legal teams immediately jumped into action in response to unprecedented numbers of consumer complaints about illegal price-gouging," Acting Attorney General Hoffman said. "Today our focus has expanded to all aspects of fraud, especially financial and home improvement fraud, where shameless individuals have attempted to take advantage of those made so vulnerable by this tragic event and have forced us to divert resources away from those most deserving of aid to track down conscienceless thieves and fraudsters."
The Division of Criminal Justice continues to chair the Attorney General's Statewide Sandy Fraud Working Group, which coordinates investigations and prosecutions statewide among the Division of Criminal Justice itself as well as the Division of Consumer Affairs, the New Jersey State Police, the Monmouth, Ocean, Atlantic, and Middlesex County Prosecutors, and other law enforcement agencies. The Division of Criminal Justice has filed criminal charges in 20 fraud cases related to Superstorm Sandy, and has coordinated charges with other agencies in more than 75 cases statewide. Its criminal investigations remain active and ongoing.
The Division of Consumer Affairs has filed 28 lawsuits against businesses accused of price gouging, and has settled 27 of those cases, obtaining more than $1 million in civil penalties, consumer restitution, and reimbursement of the Division's costs. So far this year, the Division of Consumer Affairs has issued Notices of Violation to a total of 95 home improvement contractors seeking, among other things, more than $1.2 million in restitution to consumers, many of whom are in Sandy-affected areas.
Acting Director Steve Lee of the Division of Consumer Affairs said, "Just as we have been unflagging in our prosecution of alleged price-gougers, the Division of Consumer Affairs remains focused on preventing and investigating home improvement fraud and other scams while New Jersey continues its recovery."
Director Elie Honig of the Division of Criminal Justice said, "We will continue to investigate fraud against Sandy relief programs and fraud against individuals who suffered losses due to Superstorm Sandy. Those who defraud relief programs are essentially stealing funds from those in need, even while they drain the time and resources of relief administrators who must focus on the demanding job of helping those in need."
Sandy-related cases pursued by the Division of Consumer Affairs and Division of Criminal Justice include but are not limited to:
Sandy Recovery Fraud:
The Division of Criminal Justice has filed criminal charges against 16 individuals after they allegedly filed for relief funds to which they were not entitled.
In one case, two individuals allegedly filed fraudulent Federal Emergency Management Agency (FEMA) applications for rental assistance. The defendants claimed they were forced to relocate to a rental home because their primary residence was damaged following Tropical Storm Irene and Superstorm Sandy. In another application they allegedly applied using the name of a relative, whom they falsely claimed was forced to relocate due to Sandy. In reality, the couple and the relative were never forced to relocate. Fraudulent leases and rental receipts were submitted to support their allegedly bogus claims. The two individuals obtained more than $33,000 in rental assistance from FEMA.
In another case, a man allegedly claimed his Ortley Beach home as his primary residence when in fact it was his vacation home and thus not eligible for relief assistance. This individual obtained $116,900 in federal and state funding.
In addition, the Division of Criminal Justice in October 2013 obtained a guilty plea from a Metuchen con artist who preyed on victims of Superstorm Sandy. David Scott Ruddy, 33, promised victims low-cost housing or cars and instead stole their money, defrauding them and others of approximately $55,000. An investigation by the Woodbridge Police Department, the Middlesex County Prosecutor's Office, and the Division of Criminal Justice revealed that Ruddy visited temporary shelters after Sandy, impersonating a Red Cross worker or law enforcement officer who was there to help. After gaining the trust of Sandy victims, he offered to rent or sell them low-cost apartments, condos or houses that he claimed to own or control. He also offered low-cost cars he said he bought at police auctions. Ruddy fraudulently collected payments from the victims but did not deliver the promised housing or cars. In November 2013, Ruddy was sentenced to five years in state prison and ordered to pay restitution to all of his victims.
Home Improvement Contractors:
So far this year, the Division of Consumer Affairs has issued Notices of Violation to a total of 95 allegedly unregistered and/or otherwise non-compliant home improvement contractors, seeking $1.2 million in consumer restitution and $374,000 in civil penalties. Several of the contractors worked in Sandy-affected areas. The restitution represents amounts allegedly owed to consumers due to the performance of shoddy work, or the failure to start and/or finish work for which consumers had pre-paid. The contractors also were cited for allegedly having failed to register with the Division, as required by law, or for other violations of the Contractors' Registration Act.
In addition, the Division of Consumer Affairs has reached out to home elevation contractors as well as to organizations such as the New Jersey League of Municipalities, New Jersey Builders Association, Builders League of South Jersey, and National Association of the Remodeling Industry, to educate the public about new registration, insurance, and experience requirements for home elevation contractors. The new requirements are established pursuant to P.L.2014, c.34 which Governor Christie signed into law on August 15, 2014.
During the 2013 home improvement season, the Division of Consumer Affairs, Division of Criminal Justice, Monmouth County Prosecutor's Office, and Monmouth County Office of Consumer Affairs used a Sandy-damaged home in Highlands as the staging area for an "undercover house" operation to identify unregistered home improvement contractors. The Division of Criminal Justice and Monmouth County Prosecutor's Office charged four contractors with the fourth degree crime of engaging in home improvement contracting without being registered. The Division of Consumer Affairs issued Notices of Violation against four additional, unregistered contractors.
When the post-Sandy home repair season began in January 2013, the Division of Consumer Affairs assigned investigators to storm-affected areas in Atlantic, Ocean, and Monmouth counties, to identify unregistered home improvement contractors operating or advertising in those areas. The investigators directly engaged with more than 1,000 registered and unregistered contractors to inform them about New Jersey's registration and consumer protection requirements. The majority of the unregistered contractors ultimately applied to the Division for registration. The Division issued 17 Notices of Violation, seeking $42,500 in civil penalties, to firms that allegedly continued to perform as unregistered contractors.
The Division of Consumer Affairs received more than 1,000 complaints about alleged price gouging during the immediate aftermath of Sandy, and immediately assembled a team of investigators to serve subpoenas, demand business records, and to determine which cases appeared to represent unlawful price gouging as defined by New Jersey statute.
The Division of Consumer Affairs, represented by the Division of Law, has filed a total of 28 lawsuits against hotels, gas stations, and other businesses, alleging they violated New Jersey's price gouging law by imposing excessive price increases for critical merchandise during the state of emergency.
For example, the Division alleged in one lawsuit that a Clifton hotel charged as much as $449.99 per room night during the state of emergency, an increase of 151 percent above the highest rate charged prior to the state of emergency, which was $179 per room night. In another matter, the Division alleged that a Paterson gas station raised the price of regular fuel from $3.45 to $5.50 per gallon, an increase of 59 percent, during the state of emergency.
To date, the Division has resolved 27 of the post-Sandy price gouging lawsuits it filed, recovering more than $1 million in civil penalties, consumer restitution, and cost reimbursements to the State.
In August 2014, the Division of Criminal Justice obtained guilty pleas from the operator of a Middlesex County used car dealership and from a suspended Motor Vehicle Commission technician, for their roles in using fraudulent vehicle titles to sell flood-damaged cars to unsuspecting customers. The dealership allegedly acquired the eight Sandy-damaged vehicles at auction between February and July 2013. Each of the vehicles was insured by the same company, which paid claims on them as total losses. The insurance company had the vehicles auctioned without titles under "bills of sale," designating them as to be used "for parts only." The two defendants allegedly conspired to obtain false "clean" titles for the vehicles through the MVC computer system and forgery of the prior owners' signatures. The dealership allegedly sold seven of the vehicles to customers using the fraudulent clean titles, without disclosing that the vehicles had been damaged due to Sandy.
In February 2013, the Division of Consumer Affairs filed suit against Hurricane Sandy Relief Foundation (HSRF) and its principals, alleging that they misled the public by diverting donated funds into personal accounts, falsely claimed that donations were tax-deductible when the organization did not have 501(c)(3) status, and operated an unregistered charity, among other violations of New Jersey's Charitable Registration and Investigation Act, Charities Regulations, and Consumer Fraud Act. Through a settlement reached in June 2013, a court-appointed Organization Administrator took control of HSRF and its financial accounts in order to properly distribute donated funds and to dissolve the organization. The settlement agreement also permanently bars the principals from ever operating any charitable organizations related to Superstorm Sandy, and bars them for at least two years from serving in leadership positions in any charitable organization in New Jersey. The Organization Administrator distributed HSRF's donated funds, totaling $325,000, to charitable organizations registered with the Division and with tax-exempt status, for the aid of Superstorm Sandy victims.
The Division of Consumer Affairs also
partnered with the New Jersey Motor Vehicle Commission to create an easily searchable
online database listing approximately 31,000 vehicles that have been processed by the MVC as either flood-titled or salvage-titled since Sandy made landfall. Prospective buyers of used motor vehicles are encouraged to check the online database before finalizing a purchase. It is not illegal to sell a vehicle with either a flood or salvage title, but specific requirements exist to ensure the status of such vehicles is disclosed to potential purchasers.
The Division of Consumer Affairs in December 2012 sued and obtained a court order with temporary, then preliminary restraints against the operator of the "Superstorm Sandy Reconstruction Summit" that was scheduled to take place later the same month in Trenton. The Division alleged that the event's organizer violated New Jersey's Consumer Fraud Act and Advertising Regulations by wrongfully implying he was associated with federal, state, or local government agencies; by misrepresenting to consumers that top federal, state, or local government officials would attend the Summit and/or that attendees of the Summit would receive the latest information from government agencies on Sandy relief operations and/or other topics; and by conducting business in New Jersey under assumed business names that were not registered in New Jersey.
In December 2013, the Division of Consumer Affairs announced a $27,800 settlement with an Idaho-based provider of temporary and on-demand staffing. The organization set up offices in New Jersey after Sandy, without properly registering with the State as required by law. The settlement included a $10,000 payment to the American Red Cross, for ongoing Sandy relief efforts. The same company reached a separate settlement with the Department of Labor and Workforce Development under which the company paid more than $2,844 in back wages to 13 temporary employees in New Jersey.
The Office of the Insurance Fraud Prosecutor in September 2014 announced the indictment of a Toms River man for allegedly attempting to defraud his homeowner's insurance company by submitting false information that would have enabled him to receive approximately $80,000 he needed to put a new roof on his house. The charges stem from an insurance claim filed for partial roof repairs immediately following Superstorm Sandy in November 2012, and a separate claim filed following a windy day in March 2013. The insurance company denied the 2013 claim, alleging that no repairs had been completed following Superstorm Sandy to protect against possible future damages.
The Office of the Insurance Fraud Prosecutor in August 2013 obtained a grand jury indictment charging a Monmouth County man with allegedly filing a fraudulent insurance claim for property damages related to Superstorm Sandy. The man allegedly submitted a claim in November 2012, falsely claiming that a barn on his property was destroyed during Superstorm Sandy when, in fact, he knew the barn was not damaged as a result of the storm.
Victims or witnesses of fraud committed in the aftermath of Sandy, including but not limited to home repair fraud, insurance fraud, and fraudulent charitable solicitations, should contact
New Jersey's Statewide Sandy Fraud Working Group at 855-SANDY39 (855-726-3939) or
Consumers who believe they have been cheated or scammed by a business, or suspect any other form of consumer abuse,
can file an online complaint with the State Division of Consumer Affairs by visiting
its website or by calling 1-800-242-5846 (toll free within New Jersey) or 973-504- 6200.
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