PROVIDENCE, R.I. (WPRI) -- An unlicensed company that claims it is in its eighth year of selling construction performance bonds remains in business in Providence, despite a half dozen cease and desist orders from Rhode Island and other states, the Target 12 Investigators have learned.
Contractors are required to pay for performance bonds to cover the cost of a project if something goes wrong.
Insurance companies accept the often multi-million dollar risk, in exchange for a percentage of the total value of the bid.
The bonds ultimately protect taxpayers from covering a project that is not completed properly.
Coventry developer John Gauvin found out the hard way about a man named Leo Rush, who has owned a number of unlicensed bonding agencies in Rhode Island.
Gauvin's Plainfield, Connecticut housing-development project, which has been stalled for years, was impacted by a bond from unlicensed, Danbury-based Great Northern Bonding Company, owned by Rush.
That and other Rush-owned outfits have been hit with several cease and desist orders in multiple states, and yet at least one that lists a Providence address as its headquarters remains active.
In Gauvin's opinion, the orders have no teeth, resulting in a "mere slap on the wrist."
"[The cease and desist order] is worthless, just as worthless as the bond," Gauvin said. "Because it doesn't have any weight to it. They just change the name of the bond company, and the chase is on again."
The chase, at least through paperwork, has been on often with Rush, from New England to much farther south.
Florida's Office of Insurance Regulation has aimed cease and desist orders at Rush more than once, and Rhode Island's Department of Business Regulation has done the same, four times since 2007.
Elizabeth Kelleher Dwyer, the DBR Superintendent of Banking and Insurance, said Rush's name is well known in her Cranston office.
"For 10 years," Kelleher Dwyer said, referring to how long the DBR has been dealing with Rush's various agencies. "We first encountered Mr. Rush in 2007, and issued an order against him then."
Regardless of the cease and desist orders, Rush is listed as the "administrator" for Newport Insurance Company on Westminster Street.
According to its webpage, the agency is celebrating its 8th year in business.
Gauvin's ordeal starts with his purchase of a large piece of land in Plainfield.
Before he could start building a housing development on the property, 186,000 tons of granite had to be removed.
There were issues between Gauvin and the contractor from the beginning, and along the way he discovered the performance bond that was accepted by the town was "worthless."
When Gauvin took a closer look at the document, he noticed the date was wrong, and the amount that was insured was more than what was required.
"Who in their right mind pays more than they have to?" Gauvin asked, as he walked through the mounds of granite that still need to be cleared. "This project should've been completed already, in December."
As his development ground to a standstill, with issues that eventually provoked a lawsuit he filed this month that names the contractor and the town of Planfield, Gauvin reflected on the bond.
"It shocked us," he said. "It shocked us to the point that we drove all the way to Danbury to check out the corporate headquarters of [Rush's] bonding company to find out it was nothing more than a mail drop."
The most recent DBR cease and desist order against a Rush-owned company was filed in 2015, when Rush's Providence agency provided a document for a bid, known as a bid-bond, for a contractor who pitched his company for a Rhode Island State Police construction project.
The contractor did not get the job, but the bogus bid-bond was evidence in the cease and desist order.
Kelleher Dwyer emphasized an insurance licensing database is available online, allowing consumers to verify that a company is licensed.
And with the contractors' credit worthiness and work history as key factors in whether they qualify for a legitimate bond, she pointed out a red flag about Rush's Providence firm.
The current website states he is catering to contractors who might be denied by licensed agencies.
"The website says we're a market for people who can't otherwise qualify for bonds," Kelleher Dwyer said. "They're just an illegitimate market. They're not a licensed insurer."
Target 12 went to Rush's Westminster Street office, but no one would ring us in from the lobby.
We also called, and a man who did not identify himself, acknowledged the agency was not licensed by the DBR.
"We have a federal license," he said.
The company employee hung up on Target 12 before the next question.
Kelleher Dwyer confirmed there are no federal licenses to sell performance bonds or insurance.
She said the town, city or state agency that puts a project out to bid is responsible for making sure the bonding company is licensed.
She also acknowledged that the only way anyone would know about a bad bond that was accepted is if a project was not completed as contracted, which is how Gauvin discovered the problem with the bond he bought.
"You could have a bond sitting out that there's no claim made on, that might not be legitimate," Kelleher Dwyer said. "But that's up to the authority that's looking at the package to make sure it's a legitimate bond."
As far as Gauvin's point that cease and desist orders lack teeth; under Rhode Island law, if an insurer does not comply with a cease and desist order, the DBR can file a complaint in Superior Court.
Operating an insurance company without a license is a misdemeanor, punishable by up to a $1,000 fine.
The DBR decided taking Rush to court would have less of an impact than warning consumers about buying "fraudulent bonds" from unlicensed companies.
"We reach out to the people that accept these bonds and we let them know these aren't legitimate bonds," Kelleher Dwyer said.
Just not enough according to Gauvin.
"[The cease and desist order] doesn't say he's going to prison if he doesn't stop doing it," Gauvin said. "No fine, no real punishment? Why would he stop?"
So far, his website indicates he hasn't.
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