$415K Ordered Paid By Harford County Home Builders To Clients, Contractors

HARFORD COUNTY, MD ? A father and son who previously owned a home building business together have been found in violation of the Consumer Protect Act for taking money from clients then not starting the home projects for which they paid.

Attorney General Anthony G. Brown announced Monday that his Consumer Protection Division issued a final order against Korey Homes Building Group, LLC and Kenneth W. Smith and Korey Wayne Smith, father and son, until the father, Kenneth W. Smith, left the company. The final order described the situation as a Ponzi-like scheme.

Home builders are required to hold consumers? deposits and other advance payments in trust for the benefit of the consumer purchasers and to protect the funds in an escrow account separate from the home builder?s operating account or with a surety bond or irrevocable letter of credit. Home builders also are required to timely pay subcontractors and suppliers, and provide consumers who are purchasing custom homes with proof of the timely payments.

The final order found that consumers were harmed when Korey Homes Building Group took their payments for home building services, promised homes and failed to complete their homes or delivered homes with significant defects. Consumers also were financially harmed when Korey Homes Building Group, Korey Smith and Kenneth Smith misappropriated the consumers? funds for their own personal use. The final order requires the repayment of money that was improperly taken from consumers, the attorney general's office announced.

?Home builders have a responsibility to protect the money Marylanders trust them with ? not run a Ponzi scheme that leaves people without homes or their life savings,? Brown said. ?This costly outcome sends a clear message: if you cheat Maryland homebuyers out of what is likely the biggest purchase of their lives, my Office will hold you accountable and fight to get their money back.?

In addition to returning the money that was improperly taken from consumers, the final order requires the payment of more than $300,000 in civil penalties and in excess of $115,000 in costs. The final order also prohibits Korey Homes Building Group, Korey Smith and Kenneth Smith from engaging in unfair and deceptive trade practices and requires them to post a bond of $500,000 before acting as a home builder in the state.

Consumers who have had problems with homes built by these or other builders should contact the Division?s Mediation Unit at (410) 528-8662 in Baltimore or call toll free at (888) 743-0023. The Attorney General?s Office encourages new home buyers to check whether their builder is registered by calling or visiting https://oag.maryland.gov/our-office/Pages/home-builder-registration-unit.aspx.