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Wichita contractor must implement procedures to safeguard customer funds in order to resume doing business in Kansas

Release Date: Feb 25, 2020

TOPEKA – (February 25, 2020) – A Wichita contractor currently undergoing bankruptcy reorganization has been ordered to implement safeguards against diverting customer funds before it may resume doing business in the state, Attorney General Derek Schmidt said today.

Tim Henry and Elizabeth Willis Henry and their company Energy Guard Midwest, LLC, of Wichita, became overextended in 2016, eventually resulting in the company entering bankruptcy and more than 30 consumer complaints being filed against the company with the Office of the Attorney General. Most of the complaints alleged the company had taken money for work on roofing and other general contracting jobs in northwest Kansas that it never completed.

In March 2018, Schmidt filed two consumer protection lawsuits against the company in Sheridan and Thomas counties. The district court entered a temporary restraining order prohibiting the company from undertaking new home improvement jobs but allowing it to finish jobs already underway. The company later did not renew its roofing registration in 2019, leaving it unable to lawfully provide roofing services in Kansas.

Under the settlement announced today, which resolves both of the attorney general’s lawsuits, the company will be allowed to resume operating as a general contractor in Kansas. However, the company will be allowed to resume operating as a roofing contractor only if it successfully applies to renew its registration as required by the Kansas Roofing Registration Act (KRRA). As of today, the company has not applied and is not registered and so may not lawfully provide roofing services in Kansas.

Once the company resumes operations in Kansas, roofing or otherwise, today’s consent judgment requires that it must maintain safeguards to avoid again becoming overextended and failing to complete work for which it already has been paid. One of those safeguards will require the company to maintain a separate accounting for funds paid by each of its customers and to avoid using one customer’s funds to buy materials or otherwise pay expenses used on a different customer’s job. The company also will be required to provide each customer a detailed accounting each month of the status of funds the customer has deposited with the company, amounts withdrawn by the company, materials purchased, work performed, and the remaining account balance. Another safeguard will require the company to keep its customer accounts separate from its business operating account.

 

The settlement was approved in a consent judgment entered earlier this month in Sheridan County District Court by Chief District Judge Kevin N. Berens. The consent judgment also requires that if the company resumes business it must provide information to the attorney general’s office in the event of a contractual dispute with a consumer or if the attorney general’s office receives a consumer complaint regarding the company. The consent judgment permanently enjoins the company from violating all Kansas laws, statutes, rules and regulations relating to consumer transactions, including the Kansas Consumer Protection Act (KCPA) and the KRRA. If the company violates the terms of the consent judgment, it will be subject to a permanent ban from conducting consumer transactions, including roofing services and door-to-door sales, in Kansas.

Because the company is in bankruptcy, any consumer restitution will be handled by the bankruptcy court. The consent judgment does order restitution payments to 12 consumers subject to the bankruptcy plan filed in federal court, Case No. 18-11070.

Schmidt had alleged that between October 2016 and November 2017, the defendants diverted funds from Kansas consumers, contracted to perform roofing and home improvement services with Kansas consumers but failed to perform the services, and provided only partial or no refunds to the consumers. These actions constituted violations of the KCPA and KRRA. The case is in Sheridan County District Court, No. CP-17-002749.

A copy of the consent judgment is available at www.ag.ks.gov/roofer-enforcement

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