Builder’s bankruptcy shows vulnerability of clients, system

As Lake City Builders’ debts mounted last year, owner Myck Beard held tearful conversations with his clients.

He told them he was a Christian; he wouldn’t leave them in a lurch. Beard also assured his clients that the subcontractors working on their home-remodeling projects had been paid, according to accounts given by multiple customers.

Shortly afterward, the Post Falls builder filed for bankruptcy, listing debts in excess of $300,000. Within days, subcontractors and suppliers started filing liens against the clients’ homes for unpaid work and materials.

Paige Lewis, of Athol, who testified at Beard’s bankruptcy hearing, said she’s out $136,000 for a home addition and patio that Beard estimated would cost $41,000. She drew down her savings and refinanced her house to pay off the subcontractors’ liens.

“After what I’ve been through with Myck Beard, I would not build an outhouse in this state,” said the retired corrections officer. “There is no safety net for homeowners.”

The story of Lake City Builders is a cautionary tale for anyone who hires a contractor.

In Idaho and Washington, homeowners have little recourse when their builder runs into financial troubles, leaving them with an unfinished project, shoddy work or unpaid subcontractors.

Idaho contractors aren’t required to post performance bonds, which act as insurance if a contractor defaults on a project. In Washington, general contractors must post performance bonds, but the most a homeowner can collect is $12,000.

That’s a pittance in an era when kitchen remodels can cost $50,000, acknowledged Pete Schmidt, chief of the contractor registration program at Washington’s Labor and Industries Department. If multiple creditors file claims against the same general contractor, they end up dividing the $12,000, he said.

Beard’s bankruptcy has renewed calls for tougher standards for Idaho contractors, a perennial and controversial topic in the Legislature. In 2006, after a long fight, Idaho began requiring contractors to register annually.

“It’s going to take a number of situations like this to move from contractor registration to meaningful licensing and bonding,” said Sen. Mike Jorgenson, R-Hayden Lake.

Meanwhile, homeowners’ best protection is to investigate contractors’ backgrounds thoroughly, said Jerry Nemec, chairman of the Idaho Contractors Registration Board, a group that also supports mandatory performance bonds.

However, “people need to accept a little bit of responsibility,” he said. “They do more due diligence when they’re buying a car than when they’re building a house.”

Customers of Lake City Builders agree they should have researched Beard’s background. Before his company filed for bankruptcy in August 2006, Beard had twice filed for personal bankruptcy. Beard’s amiable demeanor lulled them into a sense of complacency, the customers said, and his radio advertisements gave the impression that he was a successful businessman.

“Most of us knew Myck personally when we hired him on,” said Dan Davis, of Coeur d’Alene. “Myck is somewhat charismatic. He’s a nice guy. He portrays himself as giving a fair price for the work.”

In hindsight, Davis isn’t sure what he would have done differently. He manages an automotive store, where Beard had been a customer for three years. Because Beard always paid his bills on time, Davis said he felt comfortable hiring Beard to install a new driveway at his home, finish the basement and remodel a bathroom. With the construction industry booming in Kootenai County, Davis said it was hard to find a contractor who could work within his time frame.

Davis said he paid Beard $10,000 upfront and another $10,000 advance after the driveway was poured. A month later, Beard told Davis that he was having business troubles, but assured Davis that the concrete contractor had been paid for the driveway, according to Davis’ accounts of the meeting.

Shortly afterward, Davis said, the concrete contractor filed a $7,200 lien against his property.

Beard could not be reached for comment for this story. He and his wife, Leah, have moved to Fallon, Nev., according to telephone records. Phone calls placed to their residence were not returned.

Ted Rupp, the attorney representing Lake City Builders in the bankruptcy, said Beard’s business troubles stemmed from his company’s rapid expansion.

“He started growing faster than he had the financing to handle,” Rupp said. “Basically, he outgrew the ability to handle what was going on.”

Creditors last saw Beard during an emotional and heated bankruptcy hearing in November. They accused him of stringing them along as his company spiraled deeper into debt, continuing to collect money after he knew he’d be filing for bankruptcy, and lying to them, according to recordings of the hearing.

According to creditors, Lake City Builders’ debt is closer to $500,000. In the hearing, Beard denied deliberately misleading customers.

Wayne Stanley and his wife, Jerri, hired Beard last year to build an addition to their daughter’s house in Post Falls, where the couple planned to live. Beard submitted an estimate of $51,800 for the addition, the Stanleys said. The couple eventually paid out nearly $74,000 for the addition, including payments to Beard, money to settle the subcontractors’ liens and payments to other contractors to finish the job, according to their receipts.

The stress took a toll on the couple’s marriage, Wayne Stanley said. His wife left him for a time and had to get out of town and away from the daily tension, he said. The couple dipped into their savings and turned to credit cards to come up with the extra $22,000, Wayne Stanley said. The 62-year-old is still working to pay off the bills.

Liz Wells hired Beard to build a covered patio for her Post Falls home. Dealing with him left her feeling cynical and vulnerable. “As a single woman going to look for contractors, you might as well have a bull’s-eye on your head,” she said.

Wells paid Beard nearly $6,000 in July 2006 – a one-third down payment, she said. Beard delayed the start date for the work, then showed up at Wells’ house in tears, according to her account.

“He said he was having to file bankruptcy, but I was top on the list to be paid, since I was a single mom with a disability,” said the 41-year-old Wells. “He really worked it. … He played me to a tee. I never got a box of nails, a post dug, nothing.”

Once they paid Beard large upfront fees, customers said they had no choice but to try and work with him. Lewis, the Athol homeowner, said she even gave Beard $4,000 in cash at one point so he could pay his workers. Her goal was to keep the company afloat long enough to get her addition done, she said.

Beard appeared to be “robbing Peter to pay Paul,” said Ford Elsaesser, the U.S. bankruptcy trustee for the Lake City Builders case. The creditors got caught at the end; their money was spent paying off previous projects, Elsaesser said at the November hearing.

Lewis outlined other suspicions in a 38-page statement filed with the Kootenai County Sheriff’s Office. When Beard said he couldn’t afford to feed his family, Lewis prepared tubs of homemade enchiladas and Spanish rice. She said she was surprised when Beard and his wife drove up in a new van to get the food, and talked about sending one of their sons to a private military school in California. Another of Beard’s sons was taking flying lessons, Lewis said.

She and other angry customers want Kootenai County Prosecutor Bill Douglas to pursue theft or fraud charges against Beard. Douglas said he is reviewing the case but hasn’t made a decision.

“There’s a gray area between criminal conduct and being a bad businessman,” Douglas said. “We need to determine where the line is.”

Unlike other contractor cases the prosecutor’s office has pursued, Beard completed a substantial amount of work on customers’ homes, Douglas said. Cases where contractors accept multiple down payments, but fail to do any work, are more clear-cut, he said.

“I’d like to see the state of Idaho try to prosecute Myck Beard,” said Wayne Stanley. “If I could get any money back, if he did some jail time, that would be fantastic.”