Rescue squad alleges former chairman committed fraud
A longtime leader in the Glenville-Cashiers Rescue Squad is facing criminal charges and a civil suit claiming he used lies and deception to position his construction company for a $2 million job building a new rescue station.
“We take very seriously the stewardship of our county and donated money, and provision of search and rescue and emergency medical services,” said Nat Turner, CFO for the rescue squad. “Once we identified and found these irregularities, we immediately turned them over to the county and since then have fully cooperated with government and law enforcement officials.”
The allegations span several years and feature a renovation project so faulty as to be unusable, stolen funds and an illegally executed contract.
Inadequate living space
According to a civil suit the rescue squad filed in June 2019 against the squad’s former chairman Brandy Sullivan, the roots of the story go back to 2016, when Jackson County commissioners approved a tax increase in order to fund a second 24/7 ambulance crew at the rescue squad, which is a nonprofit entity. The plateau’s population was growing and call volumes were increasing, squad leaders told commissioners at the time, and in order to serve the Glenville-Cashiers area in the years to come, they’d need more crew members and a centrally located substation at the crossroads.
While plans proceeded for the new building, the second crew was to be housed at the existing squad headquarters. Sullivan, a licensed general contractor, converted a portion of the squad’s equipment and vehicle storage garage into a living space under the auspices of Sullivan Custom Homes LLC, of which he is the president. There was no written contract for the job, but he invoiced the squad $21,520.
However, according to the squad’s suit, squad leaders would later find out that, despite including line items for design and permitting costs in the invoice, SCH never pulled any permits for the project. The finished product proved to be rife with code violations, to the point that the squad has had to rent a house for its second crew rather than using the living quarters for which it had shelled out $21,520.
Securing an unlimited license
While certainly significant, it is the construction of the still non-existent new squad building — not renovation of the living quarters — that sits at the heart of the legal battle now playing out between the rescue squad and Sullivan, who did not return a call requesting comment for this story.
As the rescue squad began to plan and gather funds for the building, its leaders had not yet discovered the deficiencies in Sullivan’s 2016 project, and Sullivan, still serving as chairman of the board, was allegedly angling to land this larger, more lucrative job. Commissioners had agreed to underwrite a $1.8 million loan for the new squad building, with the squad itself raising some additional funds to cover costs above that amount.
However, at that time Sullivan’s company did not qualify to do the work. The N.C. Licensing Board for General Contractors requires contractors to hold an unlimited license in order to perform any job valued at more than $1 million, and SCH’s intermediate license was good only for projects valued at $1 million or less.
To qualify for an unlimited license, a company’s assets must exceed its liabilities by at least $150,000, and that benchmark appears to have been out of reach for Sullivan. According to the county’s Nov. 20, 2019, forensic audit, SCH’s had only $9,114 in working capital at the time Sullivan applied for licensure, but he used rescue squad funds to make it appear that the number was actually $161,114.
On June 29, 2017, the squad’s suit alleges, Sullivan instructed the rescue squad’s treasurer to transfer $152,000 from the squad’s account to SCH, a figure that represented “virtually all” of the squad’s operating funds at the time. The board didn’t authorize the transfer and didn’t even know it had happened, the suit alleges.
With the money in his account, Sullivan allegedly provided bank statements reflecting the artificially enlarged balance to an accounting firm that then provided him with the audited financial statement he needed to apply for licensure. Nowhere in the auditor’s report is the rescue squad identified as the source of the money — instead, the report shows the $152,000 as a long-term loan from Sullivan to his company. Sullivan allegedly generated a fictitious promissory note to give the auditor this impression.
The rescue squad’s money didn’t stay in the SCH account long — Sullivan transferred it back on July 5, 2017, less than a week after he allegedly took it. It was there long enough to fool the auditor, but when Sullivan appeared before a notary to sign his application on July 19, the money was long gone from his account, the forensic audit showed. The squad alleges that due to the “fraudulent misrepresentations” contained in the report, the N.C Licensing Board for General Contractors did not know that Sullivan did not qualify and granted him the unlimited license he sought.
The allegations don’t stop there.
The rescue squad had paid $109,351 in invoices for planning expenses surrounding the project, the squad’s suit alleges, but “despite the fact that the contracts … were between the designers and the rescue squad, Sullivan took possession of the plans,” refusing several board requests to review them. In addition, documents included as attachments with the forensic audit show that at some point in the process, the billing address that T.E. Allen Engineering used for its invoices was changed from the rescue squad’s P.O. Box to the P.O. Box number used by Sullivan Custom Homes.
“Beginning in October 2017, Sullivan took multiple invoices from Allen, added unjustified amounts to the totals and then issued inflated Sullivan Custom Homes invoices to the rescue squad for Allen’s design work,” the squad’s suit alleges.
The county’s audit includes various examples of this, including an Oct. 17, 2017, invoice from T.E. Allen to the rescue squad — but mailed to Sullivan — for $15,300. An Oct. 18, 2017, invoice from SCH then bills the rescue squad for $17,595, which includes the $15,300 engineering cost plus a 15 percent “management fee” of $2,295.
The board eventually contacted the vendors directly to obtain copies of the plans, the suit alleges, and severed ties with Sullivan. The board then had the plans evaluated and found that they were deficient in various ways — the squad had to pay about $50,000 for completely new drawings, the suit says.
An unvoted contract
Sullivan still had his eye on the contract for the new squad building and signed a contract for the project on Feb. 1, 2018, starting work on Feb. 5.
The only problem, the rescue squad claims, is that the board never approved the contract and didn’t even know it existed until after the bank loan for the project was approved later that spring.
However, the conflict between Sullivan and the squad first appeared in court when Sullivan sued the rescue squad — not the other way around.
Sullivan filed his suit on Jan. 25, 2019, claiming that the rescue squad broke its contract with his company when it ordered him to cease and desist construction of the new squad building based on false allegations against Sullivan. Then, Sullivan’s suit said, the rescue squad declined to pay him for the work and materials he’d provided to the site thus far. This led Sullivan to file a lien on Nov. 26, 2018, in the amount of $22,034.55 plus interest and attorney’s fees.
According to the squad’s lawsuit, around Feb. 1, 2018, Sullivan prepared a proposed contract that would allow SCH to build the new rescue squad station for a lump sum of $1.96 million, but he never submitted it to the board for approval. Instead, the suit alleges, he “induced” Chief Carl Stewart and Treasurer Sandy Taylor to sign the document when he “falsely suggested” that the contract had been approved. Once he’d obtained the signatures, he started working on the project and invoicing the rescue squad.
By early April, board members were asking questions about Sullivan’s role in the project, and Sullivan became “agitated” at the questions, resigning from the board on April 12, 2018, the squad’s suit said. On July 25, 2018, the rescue squad served SCH with a cease and desist letter, ordering the company to stop work. The squad then told Sullivan to submit documentation for work performed prior to the cease and desist letter being issued so that all vendors could be paid for work they’d actually performed, the suit says.
Sullivan offers an alternative version of events. In court documents, he denies that he refused to turn plans over to the board and avers that he had a valid contract for the project, gathering signatures the way he did on the advice of a local attorney who had “from time to time” served the squad. Sullivan’s suit states that he began work on Feb. 5, 2018, and that in March, two change orders totaling $382,800 were added to the contract, bringing the project’s total value to $2.34 million before a 15 percent markup for the contractor’s fee. The change order was signed by Stewart, Taylor and Sullivan, Sullivan’s suit states.
“Plaintiff provided invoices to the Defendant and Defendant made some payments totaling $91,553.45,” Sullivan’s suit reads. “Defendant did not object to Plaintiff’s performance and in fact sought Plaintiff’s continued performance until, for reasons satisfactory to itself, it changed its position.”
Regarding the initial licensure and alleged transfer of the $152,000, Sullivan denies the allegations in his response to the squad’s complaint but does not offer an alternative explanation.
Sullivan is asking a jury to award him damages in excess of $25,000. The rescue squad “ratified the contract” when it allowed him to continue work for months prior to the cease and desist order, Sullivan’s suit states. It accepted work performed prior to that time, “defeating any arguments it has already raised or may later raise based upon invalid contracting authority, defective contract formation or other theories.”
In its response to Sullivan’s lawsuit, the squad denies that it agreed to pay Sullivan’s $91,553 invoice or that the contract — which it holds was never valid — included a contractor’s fee. It also denies that it had “ratified” the contract by its actions prior to the cease and desist letter. Furthermore, the squad claims that it has paid all actual costs associated with the project.
“Plaintiff has never provided an accounting of the $22,034.55, but it appears to consist of the management fee mentioned above and a percentage markup, on what was supposed to be a lump sum agreement, on excavation costs paid directly by the rescue squad to one of the Plaintiff’s vendors,” the squad’s countersuit said. In an earlier paragraph, the document stated that the “purported contract” does not provide for a management fee and that the attempt to charge such a fee was a “punitive action in response to the cease and desist letter.”
The squad then goes on to bring 11 causes of action against Sullivan Custom Homes and eight against Sullivan in his individual capacity. Of the 19 total causes, 15 claim damages in excess of $25,000, and the suit requests a jury trial to determine the total amount.
Criminal cases and a licensing hearing
Sullivan is also facing criminal charges following a State Bureau of Investigations probe. He was indicted Sept. 10 on three counts, all pertaining to the manner in which he obtained his unlimited license. The charges include two felonies — obtaining property by false pretenses and corporate malfeasance — and a misdemeanor for giving false evidence to the N.C. License Board of General Contractors.
Sullivan is in trouble with the licensing board too. The rescue squad brought two separate complaints against him in August 2019, and a formal hearing is expected sometime in early 2021, said License Board Executive Director Frank Weisner.
The licensing board complaints claim that Sullivan failed to comply with state building code requirements and that he failed to procure proper permits.
“We investigated the case. We obtained evidence that the board’s review committee determines supports the allegations, and they recommend to the board that Sullivan Custom Homes be brought before the board for a hearing,” said Weisner.
Hearings are conducted in a similar manner to court proceedings. Sullivan will be invited to present his case, and the board’s prosecution will present theirs. The board’s authority is broad, Weisner said — discipline can range from a formal reprimand to suspension or even revocation of the license.
Sullivan’s alleged actions also resulted in an investigation by the county into overall doings at the rescue squad — hence the forensic audit. On May 8, 2019, the county contracted with Dixon Hughes Goodman to ensure that financial irregularities within the rescue squad were relegated to the alleged issues involving Sullivan. According to the completed audit dated Nov. 20, 2019, and published as part of county commissioners’ Oct. 13 work session, they were.
“The incidents appear to be isolated, and steps have been taken to protect taxpayer dollars,” County Manager Don Adams told commissioners during an Oct. 13 work session. “We look forward to continuing to work with the squad.”
When the squad and the county first started talking about expanding search and rescue capabilities in the Cashiers area, both the county and the squad had expected that by fall 2020 the new substation would have been built and in use for some time. As it stands, the property set aside for the station is still empty, and there’s no telling when the project will resume.