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Brown and Contractors State License Board Stop Massive Statewide Home Repair Scheme

Monday, March 23, 2009
Contact: (415) 703-5837

SAN DIEGO – Attorney General Edmund G. Brown Jr. and the Contractors State License Board (CSLB) have finalized an agreement that will stop a massive service and repair scheme that unfairly overcharged thousands of Californians for “shoddy and woefully inadequate” home repair work.

“This massive scheme defrauded thousands of California homeowners who were charged exorbitant fees for shoddy and woefully inadequate home repair work by unlicensed and unskilled contractors,” Attorney General Brown said. “The agreement stops the illegal practices and gives homeowners a chance to recover some of their losses.”

A months-long investigation by the Attorney General’s Office and the Contractors State License Board found that SRVS Charge Inc. and its affiliated companies had been cheating some 6,000 customers each year for overpriced and substandard home repair work since 1989.

To stop the companies’ illegal practices and provide restitution to those who were victimized, Brown and the CSLB reached a settlement with:

• SRVS Charge Inc. and its affiliates,
• Principal owner, Sarkis Terabelian, 43, of Burbank;
• General manager, Zohrab “Rob” Mkhitarian, 40, of Burbank; and
• Associates Marine Metspakyan, 33, Avetik Avo Gyandzhyan, 38, Lilit Lusparyan, 28, Alisa Oganyan, 35, Estine Akopyan, 28, and Vardui Terabelian, 45.

The defendants operated various service and repair companies that employed electricians, plumbers, and heating and air-conditioning technicians in Southern California, the San Francisco Bay Area, and the Sacramento region. These companies routinely targeted elderly Californians.

Exorbitant customer fees enabled Sarkis Terabelian, Mkhitarian, and his associates to purchase two helicopters, a Mercedes-Benz, and real property valued in excess of $1 million. Title to these vehicles and real property were seized by the Attorney General’s Office last year and will be released as a result of the settlement.

SRVS Charge Inc.’s scheme worked like this:

• The company placed millions of dollars in telephone directory advertising, including many full-page ads. The ads, which listed different company names, claimed a 100% satisfaction guarantee and senior discounts. When customers called the numbers listed in any of the ads, they would be directed to a central call center.

• Many times repairmen would be dispatched from a different company than the customer called.

• Often, these workers had not undergone the criminal background check required of all contractors and Home Improvement Salespeople licensed by the Contractors State License Board since January 1, 2005.

• Customers were charged high prices for emergency home service and repair, often unrelated to the actual home repair work. Much of the work was poorly done or never completed.

• If a customer refused to pay, the company would file a lien against the home to force payment.

Because the company used multiple business names, it was difficult, if not impossible, for customers to seek recourse for incompetent workmanship, incomplete work, or any other issue that arose on their project. Customers were often denied refunds, despite the existence of the “100% satisfaction guarantee” promised in the ads.

Over several years, the Attorney General and the CSLB shut down affiliates of SRVS Charge, Inc. But instead of ending their scheme, the defendants continued to run their company under a labyrinth of business names and fraudulent contractor license numbers that were interchangeable. When CSLB either revoked a license or received an excessive number of complaints, the company would establish a new corporate identity and business would continue without interruption.

As part of its investigation, CSLB conducted undercover stings against service technicians suspected of using these fraudulent licenses and referred instances of the illegal activity to the San Diego, Los Angeles, Santa Clara, and Sacramento County district attorney’s offices. In one instance, the San Diego District Attorney’s Office found that a service technician had also committed burglary and theft and is now being prosecuted for his crimes.

Attorney General Brown entered into a final agreement with the defendants in San Diego Superior Court on March 12, 2009, and the agreement was made public today. The settlement provides for the following.

• A permanent injunction against the defendants’ prior illegal activities. This includes:
o CSLB monitoring of the defendants’ operations for one year;
o Mandatory registration of all company service technicians with CSLB. This requires technicians to undergo a criminal background check;
o Capping the number of business licenses that the defendants can use to a maximum of five;
o Preventing the defendants from charging exorbitant fees or fees that have nothing to do with the actual work that is performed;
o Fully disclosing to CSLB the names of the directors, officers, and employees of their company; and
o Mandatory customer complaint tracking with proper complaint investigation and reasonable efforts to resolve them.
o Prohibiting the defendants from engaging in false advertising.

• $3 million in penalties and restitution to be distributed as follows:
o $1.3 million to be used for consumer restitution;
o $450,000 to be assessed in penalties for state Business and Professions Code violations; and
o The remainder to be used to reimburse CSLB for investigative costs, legal costs, and costs of monitoring future compliance with the judgment.

“This settlement is a victory for California consumers and legitimate contractors, and brings resolution to thousands of hours of investigative work,” said CSLB Registrar Steve Sands. “Victims will now be able to regain some of their money, and CSLB will be able to watch this company closely so others aren’t harmed.”

If the terms of the settlement are violated, the defendants could face jail time.

The following companies are affiliated with the defendants and are included in the settlement:

• American Electric (CSLB #834398)
• American Home Repairs, Inc. (CSLB #834206)
• 59 Minute Service (CSLB #837697)
• Cal Repair Services, Inc., dba Pick Red Plumbing (CSLB #797241)
• Answering Resources, Inc., dba Thrifty Electric (CSLB #723375)
• Orbell Enterprises, Inc., dba Plumbing One (CSLB #713006)
• USA Services, Inc. (CSLB #775863)
• Love My Home, Inc. (CSLB #811361)
• Electric Avenue, formerly A Plus Electric Company (CSLB #569322)
• American Electric 911 Fast Inc. (CSLB #826916)
• Pro Electric Co. (CSLB #670171)
• RG Electric (CSLB #516892)
• Pacific West Heating & Air Conditioning (CSLB #604150)

If you think you have been the victim of fraud by this company and its affiliates, please contact the Contractors State License Board at 1-800-321-CSLB (2752) and press 7.

The original complaint and settlement terms are attached.

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