Dive Brief:
- Colorado contractor Roddy Reef, owner of R2 Construction, has been indicted for allegedly stealing more than $470,000 from clients and subcontractors on approximately 10 different projects since October 2013, the Denver Business Journal reported. According to the indictment, prosecutors allege Reef, who acted as a general contractor, still owes more than 30 subcontractors money on just one project.
- Prosecutors charged Reef with 64 counts of theft and five counts of forgery in violation of the Colorado Crime Control Act, alleging that Reef did not pay subcontractors for work they performed on several projects even though he had been paid for the work.
- Reef, who prosecutors say engaged in a pattern of racketeering, told the Business Journal he has operated successfully for 30 years and that the allegations in the indictment are unfounded. According to R2’s website, its projects include restaurants, retail, residential and multifamily.
Dive Insight:
"I will defend myself," Reef told the Business Journal. "I don’t think I’m guilty of this."
Most of Reef’s alleged victims are in the county of Denver, where construction has been booming, especially since the legalization of marijuana. Denver housing prices have soared 17% this past year, and Colorado saw $253 million of recreational cannabis income during the first six months of 2015 alone. Colorado voted to legalized marijuana in 2012, and, by next year, it expects to collect $94 million in cannabis taxes.
If Reef is convicted, the case wouldn’t be the first time a flurry of construction activity, and a steady flow of cash, has led a contractor to cut corners and play fast and loose with the proper allocation of funds.
In New York City, which has also seen a marked increase in construction this year, Tishman Construction, practically a New York institution, admitted it had been intentionally overbilling clients for 10 years and must pay fines in the amount of $20 million.
Also in New York, a former Citigroup executive was recently sentenced to prison for demanding $500,000 in bribes from contractors in exchange for the promise of work.
Manhattan has even formed a construction fraud task force to combat the increased criminal activity that has come with the increase in building.