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• 03/23/2009

CSLB Press Release - 03/23/09

Contractors State License Board Asks Victims of Elaborate Home Repair Scheme to Come Forward

Judge sets aside $1.3 million for restitution after settlement of unfair business practices lawsuit

SACRAMENTO — The Contractors State License Board (CSLB) wants California consumers to come forward if they have been defrauded by certain home service and repair companies in the past four years. A multi-million lawsuit filed in San Diego County by Attorney General Edmund G. Brown Jr. has been settled and SRVS Charge Inc. (SRVS), the parent business, has been ordered to pay $3 million in penalties and restitution. This is the largest enforcement judgment in CSLB’s 80-year history.

Companies that were operated by SRVS engaged in a massive scheme to defraud thousands of California consumers out of millions of dollars by charging exorbitant fees for substandard electrical, plumbing and heating/air conditioning repair services that were not performed by qualified, legitimately licensed individuals.

"Anyone who believes they may have been ripped off by these companies should contact CSLB as soon as possible," said CSLB Registrar Steve Sands. "We’re ready to help consumers who have been harmed with the process of getting some of their money back."

An extensive CSLB investigation found that SRVS and its affiliated companies had been cheating some 6,000 customers each year for overpriced and substandard home repair work since 1989.

To stop the companies’ illegal practices and provide restitution to those who were victimized, CSLB and the Attorney General reached a settlement with:

• SRVS Charge Inc. and its affiliates,
• Principal owner, Sarkis Terabelian, 43, of Burbank;
• General manager, Zohrab "Rob" Mkhitarian, 40, of Burbank ;and
• Associates Marine Metspakyan, 33, of Burbank; Avetik Avo Gyandzhyan, 38, Lilit Lusparyan, 28, and Estine Akopyan, 28, all of Glendale; Alisa Oganyan, 35, of North Hollywood; and Vardui Terabelian,45, of Van Nuys

"This settlement is a victory for California consumers and legitimate contractors, and brings resolution to thousands of hours of investigative work," said CSLB Registrar Steve Sands. "Victims will now be able to regain some of their losses, and CSLB will be able to watch this company closely so others aren’t harmed."

The defendants operated various service and repair companies that employed electricians, plumbers, and heating and air-conditioning technicians in Southern California, the San Francisco Bay Area, and the Sacramento region. These companies routinely targeted elderly Californians.

SRVS’s scheme worked like this:

• The company bought millions of dollars in telephone directory advertising, including many full-page ads. The ads, that listed different company names, claimed a 100% satisfaction guarantee and senior discounts. When customers called the numbers listed in any of the ads, they would be directed to a central call center.
• Many times, repairmen would be dispatched from a different company than the customer called.
• Often, these workers had not undergone the criminal background check required of all contractors and Home Improvement Salespeople licensed by Contractors State License Board since January 1, 2005.
• Customers were charged high prices for emergency home service and repair, often unrelated to the actual home repair work. Much of the work was poorly done or never completed.
• If a customer refused to pay, the company would file a lien against the home to force payment.

Because the company used multiple business names, it was difficult, if not impossible, for customers to seek recourse for incompetent workmanship, incomplete work, or any other issue that arose on their project. Customers were often denied refunds, despite the existence of the "100% satisfaction guarantee" promised in the ads.

Over several years, CSLB and the Attorney General shut down affiliates of SRVS. But instead of ending the scheme, the defendants continued to run their company under a labyrinth of business names and fraudulent contractor license numbers that were interchangeable. When CSLB either revoked a license or received an excessive number of complaints, the company would establish a new corporate identity, and business continued without interruption.

As part of its investigation, CSLB conducted undercover stings against service technicians suspected of using these fraudulent licenses and referred instances of the illegal activity to the San Diego, Los Angeles, Santa Clara, and Sacramento County District Attorney’s Offices. In one instance, the San Diego District Attorney’s Office found that a service technician had also committed burglary and theft, and is now being prosecuted for his crimes.

Attorney General Brown entered into a final agreement with the defendants in San Diego Superior Court on March 12, 2009, and the agreement was made public by the court on March 20, 2009. The settlement provides for the following:

• A permanent injunction against the defendants’ prior illegal activities. This includes:
• CSLB monitoring of the defendant operations for one year;
• Mandatory registration of all company service technicians with CSLB. This requires technicians to undergo a criminal background check;
• Limiting the number of business names and licenses that the defendants can use;
• Preventing the defendants from charging fees that have nothing to do with the actual work that is performed;
• Fully disclosing to CSLB the names of the directors, officers, and employees of their company; and
• Mandatory customer complaint tracking with proper complaint investigation and reasonable efforts to resolve them.
• $3 million in penalties and restitution to be distributed, as follows:
• $1.3 million to be used for consumer restitution;
• $450,000 to be assessed in penalties for state Business and Professions Code violations; and
• The remainder to be used to reimburse CSLB for investigative and legal costs and costs of monitoring future compliance with the judgment.

If the terms of the settlement are violated, the defendants may be held in contempt and face jail time.

"This massive scheme defrauded thousands of California homeowners who were charged exorbitant fees for shoddy and woefully inadequate home repair work by unlicensed and unskilled contractors," Attorney General Brown said. "The agreement stops the illegal practices and gives homeowners a chance to recover some of their losses."

Consumers who believed they’re victims of any of the following 13 businesses and have documents to verify their claim are asked to contact the CSLB at 1-800-321-CSLB (2752) and press 7:

• American Electric (CSLB #834398)
• American Home Repairs, Inc. (CSLB #834206)
• 59 Minute Service (CSLB #837697)
• Cal Repair Services, Inc., dba Pick Red Plumbing (CSLB #797241)
• Answering Resources, Inc., dba Thrifty Electric (CSLB #723375)
• Orbell Enterprises, Inc., dba Plumbing One (CSLB #713006)
• USA Services, Inc. (CSLB #775863)
• Love My Home, Inc. (CSLB #811361)
• Electric Avenue, formerly A Plus Electric Company (CSLB #569322)
• American Electric 911 Fast Inc. (CSLB #826916)
• Pro Electric Co. (CSLB #670171)
• RG Electric (CSLB #516892)
• Pacific West Heating & Air Conditioning (CSLB #604150)

In 2009, CSLB, which operates under the umbrella of the Department of Consumer Affairs, marks its 80th anniversary of protecting consumers by regulating California’s construction industry. Today CSLB licenses more than 315,000 contractors. In any given year, complaints are filed against only 3% of licensed contractors. In fiscal year 2007-08, the CSLB helped consumers recover $35.2 million in ordered restitution.

Read the California Attorney General's Release