Family sues Sandusky, CHIP program under federal racketeering law

SANDUSKY Another local family troubled by a years-long housing scandal has filed a lawsuit against Sandusky. In 2006, First Street residents Derrick and LeAnn Close watched as workers allegedly added faulty electrical wiring and heating and a shoddy porch to their home.
Jason Singer
Jul 31, 2010

SANDUSKY

Another local family troubled by a years-long housing scandal has filed a lawsuit against Sandusky.

In 2006, First Street residents Derrick and LeAnn Close watched as workers allegedly added faulty electrical wiring and heating and a shoddy porch to their home.

Ill-fitting doors and windows were installed while, among other problems, the Close family was exposed to lead paint as workers from the city's Community Housing Improvement Program, or CHIP, did the work.

The Close family paid top-of-the-line prices for substandard work, according to their lawsuit, and to this day they haven't received adequate repairs.

The lawsuit, filed in Erie County Common Pleas Court this past week, lists four defendants: the city of Sandusky; former city housing employee Mark Warren; contractor New Horizon Development; and New Horizon owner Steven Strang.

The complaint accuses the defendants of breach of fiduciary duty, breach of contract, violations of the Ohio Consumer Sales Act, unjust enrichment and violations of RICO.

RICO, or Racketeer Influenced and Corrupt Organizations Act, is a decades-old statute most often used to prosecute organized crime syndicates.

Warren is the only city employee listed in the complaint, but the lawsuit said additional defendants and claims could be added as the discovery process continues.

"The pattern of corrupt activity was a scheme ... by Defendants to raise substantial revenue for the enterprise though deceptive home improvement," the lawsuit said.

The defendants are accused of intimidating people to engage in various crimes, such as tampering with records, theft and securing writings by deception.

Under RICO's definitions, these activities constitute as racketerring and a form of criminal enterprise, said Roger Stark, the Closes' attorney.

 

Carbon-copied complaint

The Close's lawsuit mirrors another lawsuit that homeowner Victoria Irby filed in 2008.

Irby claims Warren and Strang pressured her into unnecessary repairs and then used sub-standard materials to complete the work.

In one instance, workers replaced her 7-year-old roof when it didn't even leak or have any obvious shortcomings.

Coincidentally, the new roof leaks, Irby's lawsuit says.

Irby also says workers installed new windows, a furnace and a hot water heater that weren't needed.

Her attorneys claim the substandard work was deliberate.

Irby received a "new" water heater that was billed as top-of-the-line. But when investigators traced the product's serial number, they found it was a low-quality knockoff.

New Horizon actually placed a sticker from a higher-quality water heater on the lower-quality water to trick Irby, said Stark, who is representing Irby as well.

Irby's lawsuit is still pending. She asked for a jury trial, but Strang and New Horizon insisted the case should be settled with an arbitrator.

An arbitrator could only award damages for the amount of work specified in the contract. A jury, however, could assess other damages.

In October 2008, a local magistrate ruled a jury, not an arbitrator, should hear the case. Strang appealed but Judge Roger Binette upheld the magistrate's ruling.

Strang's later appeals to higher courts were also denied.

The city, meanwhile, has counter-sued Strang and New Horizon for more than $2 million.

City officials claim Strang and Warren conspired to defraud at least 22 homeowners of hundreds of thousands of dollars.

The city says it can't be held accountable for the Warren and New Horizon Development's actions.

Bill Lang, the city's attorney, said he hasn't received any files from the Close lawsuit, though he said if it's similar to the Irby lawsuit the city will likely file a second counterclaim against New Horizon.

 

More to come?

The Office of Inspector General -- a division of the Ohio Attorney General's office -- is still conducting an investigation into the scandal, city officials said.

Eric Bizjak, the original investigator, recently received a promotion. The new investigator met with city officials last month.

The FBI is also looking into the matter, Stark said.

Stark said he'll likely merge aspects of the Close and Irby cases, the latter of which is set for trial early in 2011.

The Close family's lawsuit mentions other city employees, but not as defendants because it's unclear if those employees deliberately contributed to the scandal, Stark said.

Even so, Stark is confident that others should be held accountable for the suffering of Sandusky residents whose homes were destroyed.

The discovery phase could lead to additional defendants.

"Either through poor oversight -- or even worse, no oversight -- they did this to many families over many years," Stark said. "That's just unacceptable."

Earlier this year, Strang said declined to comment.

"I'd love to tell you my side of the story, but I've been advised by my lawyer against it," Strang said. "All I can tell you is you've got a story there, but you're looking at it the wrong way. I'm sorry. I'd love to comment, but I can't."

Comments

indolent indiff...

if the city doesn't want to pay for the damages on their own the court will make them. 

Julie R.

Where's the big Ohio Attorney General? I thought he was supposed to be investigating this? 

Forward Looking

If any of these cases settle in or out of courts, then any monetary awards should go to fix their homes and then go to repay the city.  Sure there has been some headaches, but nothing is free.  I doubt most of these people planned on refinancing their homes or even understood that they would have to repay some of the costs.  I have heard that some had mentioned that the program was free and I doubt anyone with that understanding even had the intentions to repay the program back or refinance their homes. 

It is sad to say, but this generation of children and adults is going to be known as the "entitled" generation.  Their thoughts are "What does everyone owe me?"  Me...Me...Me.  Someone else will pay for it because it is owed to me.  I have yet to realize why everyone owes something to these people because us others have taken responsibility for our actions or are employed.  Ask your grandparents how many jobs they had when your parents were younger or before they were born.  I bet you will find that your grandfather had 2-3 jobs in the early 1920s and 30s. 

ReallyNow

Really.. Forward you obviously have no idea what you are talking about and must have a stressor in your homelife. These poor people have lost eveything or are about to because of the city's negligence and all you can do is stereo type their generation. Come on what does that say about you/

This family needs a little TLC and if your heart is to small to offer some compassion than sit back, be quiet and let the truely proud americans handle the situation. Shoot any person with half a brain can see it isn't their fault that they are in this situation and if you knew all the facts you would agree.

Forward please stop stereo typing this generation and open your eyes, not everything is black and white!

As for the family I hope that they get the help they deserve from the caring members of our society. A American veteran is an american hero in my book, how about yours?

Salvatore

Doesn't Sandusky have an inspector to inspect the shoddy work? Did any of these so called contractors have insurance? Sue the contractors too.

Forward Looking

What did I say that was bad or that made me into an uncaring American?  It is the simple truth that many people feel that things are owed to them because they are on hard times.  Some say they don't want to do that kind of job, but when you need money that is what needs to be done.  There are jobs out there, but maybe not the ones you want to do.  Those jobs will help pay bills.  Aren't they collecting unemployment?  That should help.  Might mean cutting out extra things like cable, internet, newspapers, or any extra non essential items.  I have since I have not gotten a raise in 2 years and we are on a single income.

A Veteren is a hero in my book too, but a Veteren will say that they are not owed anything, they were doing their duty.  I have several veterens as friends and are some of the hardest working people I know.   

As a taxpayer, I am wondering if after the lawsuits are settled will those who were part of the lawsuit fullfil their part of the contract that says they must repay their portion of the original costs?  I would hope so.  Otherwise they are breaching their portion of the contract like they are saying the City and contractors did.  I would also think that any money that is awarded above and beyond the repair costs would be put back into a fund to help other families bring their homes up to standard.  That is the American way...helping others.  But will people part with the awarded money?   Probably not.  They will buy new cars, TVs, or other things that are not needed.  

I am curious why the Closes turned down repairs when the City offered.  Roof aside.  The materials that were used were new weren't they? 

ReallyNow

It stated in the article that between the two of them they have four jobs and the mom attends school full time. Those are two hard working americans , and they are also raising a family and taking care of a disabled parent. They really don't have any free time to get yet another job.

i also believe it has been mentioned that the materials used were substandard and not to code. the Close family has every right to turn down reusing what is already bad and depreciating their home. Also per the contract they are legally obligated to pay off the lein either when they sell their homes or die. which ever seems to come first.

The close family has lost many appliances, neccessary appliances do to the stubstandard neglegible work that they received. They lost their refridgerator, stove, toaster oven, microwave, telephone, garbage disposal, and even their stereo. They have suffered much loss and deserve compensation for such. they also have outlets that have caught on fire, and experience multiple electrical surges daily.

Derrick is a hard worker and his family doesn't deserve this, and he is not on unemployment.

brutus smith

 forward looking needs to quit watching faux news.

Bailey

My experience with Attorney Generals have always been this;

THEY DON"T CARE ABOUT ANYONE

THEY ONLY CARE ABOUT COLLECTION OF FUNDS FOR THE STATE.

Be late on some tax issue and the A, G will send you a notice VERY quickly.

You write them about an issue of your rights being violated by a public entity and you will NEVER hear from them

Betty Montgomery's office was the WORSE A.T I've ever had to deal with, and she claimed to be a conservative. In truth, she was worthless in representing me or others I know, it was always about collection of some tax that she was concerned about.

Conclusion, the AT office is a JOKE.

Salvatore

Oy Bailey!  I have to agree with you about the attorney general's office. Their office is staffed with many attorneys and they say that they help the people of Ohio that get ripped off or try to report wrongdoing or unethical public practices. Plus they cannot give any legal advice and tell you to hire an expensive attorney. Why then does the AG ask for people for votes if they AG does not care about the Ohio people? And why does the AG outsource to private law firms to collect Medicaid costs from nursing home costs? My neighbor received a threatening letter to pay up using AG stationary by a private law firm. I think that this private law firm gets about 40% of any recovered Medicaid money. My neighbor offered to pay 60% of the money due minus what the private law firm's 40% cut for only writing a threatening letter. The state would still get 60% but the AG refused. The AG wanted a private lawfirm to get their 40% cut. Isn't this a racket between the AG and private law firms?

Forward Looking

Take a breath everyone before you burn me at the stake.  The Register seems to be blurring the lines between their house going into foreclosure and the CHIP program.  That is where I am confused how one is causing the other.  Are there other CHIP victims that are in foreclosure because of the program?  I have not heard of any in the Register.  Would they have been able to fulfil their end of the contract by refinancing their home to repay their obligation if the program worked like it was suppose to? 

By all means, those responsible should face the music and the homes should be fixed.  In the Close case, along with replacing any appliances that were damaged due to the work that was done.  The sad thing is is that if this had happened to a person's home that was not part of the CHIP program, we would not be hearing about this and that person would be extremely lucky to get any kind of compensation or repairs made. 

If they really watched the substandard parts being installed as the Register reported last time, why didn't they tell them to stop?  I would have told them to get out of my house if I knew they were doing something wrong and I would have reported it to whoever I could at City Hall.  Were the parts substandard or was the installation substandard?  If a part was substandard, I am willing to bet it would have replaced it with one of good quality had the Closes taken the previous offer from the City.  Reusing a substandard part would not be fixing the problem. 

One last question, why is Mr. Close not on unemployment?  That is what it is there for, to help those who were laid off to get by til another job is found. 

ReallyNow

He is not unemployed so why would he need unemployment.

Forward Looking

Is the Register faux news? 

Americanonly

Sandusky government at it's best........no wonder Sandusky is dying!!!  Maybe these idiots who run the city need to spend more time watching over the people they hire to do jobs.   They sure didn't investigate the contractors very well did they?  I think it's fine to give hard working people a helping hand and from what I've read in the comments these people were that ... they just got themselves in a bind.  It's the ones who think everything is owed to them that sickens me, they are the ones costing "us" the taxpayer, a huge amount of money that we are really getting sick and tired of forking over to government agencies who hand it out like candy and then want us to fork over more.   I wonder who in the city government KNEW these contractors personally and owed them something!!!  makes you wonder doesn't it?

outsider

 The city was the stewart of these federal or state funds. A city employee was in charge of dispercing these funds and awarding contracts to qualified companies.  A city employee oversaw the workmanship. 

The only problem was a city employee with authority had a little scam going with a friend. Shoddy workmanship and substandard material were commonplace. 

Who's to blame? The cheating contractor? The dishonest city employee? The layers of burearacry that hid the corruption? Answer: All three.

Forward Looking

That is no what the Register said in the previous article.  It said Mr. Close was unemployed since he lost his job at Routh Packing last year and that Ms. Close was working 3 part time jobs.  Who is right?  Did the Register again not check it facts? 

Mr. Info

I have the last article in front of me. It says Mr. Close " works as a temp employee, but those hours could dry up at any moment." Looks like "Forward Thinking" is the one who's not checking his/her facts.

maverick12's picture
maverick12

I agree! Fix their houses!......just be sure to hire contractors qualified to do it right!