Oct 2, 2009 11:43 am US/Eastern
I-Team: Alleged Contractor Scam
Reporting
Jim Osman
NEW JERSEY (CBS 3) ―
Luke Bee is head of LGB mechanical - a New Jersey heating and cooling business. LGB is weathering tough times.
"I may have go to my line of credit to keep operating, now I'm borrowing money to pay my bills," said Bee.
He says it's not the bad economy.
There's plenty of work for his company -heating and cooling new schools and grocery stores.
"We've been in business for 20 years we'll be able to withstand this hit," Bee added.
The hit he's talking about has impacted dozens of local subcontractors.
It's costing them millions of dollars because a local construction company was paid by two New Jersey hospitals for building projects and then the construction company allegedly stiffed the subcontractors.
Luke's company did heating and cooling work on Life at Lourdes Pace Center in Pennsauken subcontracted by Kay Construction at a cost of 130-thousand dollars.
Kay Construction rented space at this Mt. Laurel office complex run by Lorraine Kay.
It's where Luke went to see what happened to his overdue payment.
"After 50 days we drove over to their office and their doors were closed. There were actually moving trucks moving all their property out of their office." Bee said.
Total: All the subcontractors on the Lourdes project are owed 1-point-three million dollars.
The hospital had already paid Kay Construction 900-thousand of that - the rest is being held by the courts.
Lorraine Kay sent out a letter in March of this year to the subcontractors concerning the business "we no longer have the resources to continue."
Subcontractors for Underwood Memorial Mullica Hill Commons are owed at least one million dollars from Kay Construction.
Bobby Harper works for Jersey Architectural Door.
The company is owed 70-thousand dollars for that Underwood job.
He says Lorraine Kay and Kay construction were considered well regarded in the industry.
"Her reputation was stellar there was no signs.", said Harper.
But there are questions whether Lorraine Kay knew this was coming.
Public records show Lorraine Kay transferred her Moorestown house assessed at 889-thousand dollars solely into her husband's name last year.
Kay we're told is now in Florida.
But The I-Team tracked down a former managing principal of Kay Construction...Elaine Hemphill.
Hemphill's signature is on at least six financial documents representing the company in the Lourdes project.
She wouldn't answer the I-Team's questions and she walked away.
Much like subcontractor Luke Bee believes Kay Construction walked away from its responsibilities to him and the other contractors.
"I feel very upset that someone can just close their doors and runaway," Bee concluded.
A number of the subcontractors have filed liens against the hospitals.
They're hoping outstanding payments that have yet to be made to Kay will be divided and given to the subcontractors.
Both hospitals are cooperating.
Lourdes says its "empathetic" to the victims and "dismayed" Kay didn't pay the subcontractors.
Underwood says it's acting "honorably and in good faith "to resolve this matter.
We reached out to Lorraine Kay but did not hear back.
(© MMIX, CBS Broadcasting Inc. All Rights Reserved.)
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