MCDANIEL SUES CONWAY ROOFER OPERATING ALLEGED PONZI SCHEME
LITTLE ROCK -- Attorney General Dustin McDaniel announced today that he has filed a consumer protection lawsuit against a Conway roofing company, claiming the company is engaging in a Ponzi scheme that has defrauded Arkansas consumers of more than $250,000.
The lawsuit alleges that Conway Roofing LLC aggressively pursues new customers who pay significant insurance proceeds to the company in advance of promised roof repairs. However, that money goes to fund roofing work already promised to other consumers. Meanwhile, company owner Michael J. Wickherst has spent tens of thousands of dollars in business money for personal expenses.
"Schemes like these are doomed from the outset, and are clearly illegal," McDaniel said. "Unfortunately, Arkansas consumers are paying the price for this disastrous business model. The company's owner appears to be using insurance proceeds to fund his lifestyle, while needed roofing repairs are left undone."
The complaint states that Conway Roofing seeks out customers through door-to-door solicitations in storm-damaged neighborhoods. The company promises a roof inspection, to work with the homeowner's insurance company, and to repair roofs in exchange for insurance proceeds.
Those insurance proceeds from one homeowner are then used to provide labor and materials for roofing work for another homeowner who had made similar payments. Repairs for new customers are put off with false excuses, allowing the company and its owner to extend the Ponzi scheme and defraud new victims. The company's financial structure is set up in such a way that its ability to fulfill existing customer contracts hinges on its ability to sign up new customers.
In addition, the company's financial records indicate that Wickherst has used Conway Roofing's accounts as his "personal piggy banks," according to the complaint. Wickherst has withdrawn cash and has paid for such items as rent on his apartment, home movie rentals and Justin Bieber concert tickets, all to the tune of tens of thousands of dollars.
The suit in Pulaski County Circuit Court claims that Conway Roofing and Wickherst are in violation of the Arkansas Deceptive Trade Practices Act and the state's Home Solicitation Sales Act.
It seeks an injunction preventing Conway Roofing from signing up new customers and requiring the company to honor existing contracts or refund payments to those customers who choose to cancel. McDaniel also seeks restitution and civil penalties.