‘What Happened to the Money?' After Customers Paid Large Deposits for Home Projects, Contractor Files for Bankruptcy – NBC10 Boston
You would think the sound of construction activity at Mohamed Asif’s home in Bedford, Massachusetts, would be a welcome sign of progress.
For Asif, it was a reminder that he had already paid to have the work completed.
“It is my dream home, but what has happened is I’ve ended up paying twice,” Asif said.
Asif said he has paid twice because he wrote checks to the general contractor, Josh Kelly of JK Development Group Inc., to tear down and rebuild his home starting in summer of 2021.
However, with the project already months behind schedule, Asif said the business owner abandoned the job last June.
Asif was desperate to get a certificate of occupancy so his family could move in and stop paying rent at their temporary location in Lexington. So the homeowner took over the project and worked with subcontractors to finish the home.
After moving in, Asif said problems quickly surfaced with the work that had been completed while Kelly was still in charge. The homeowner paid to repair basement leaks in the foundation, fix the chimney and tear out and re-install tile in both bathrooms because water was leaking into the ceiling.
Asif dipped into accounts he had saved for his kids’ education and took on extra debt while trying to keep subcontractors from taking him to court.
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“The amount of stress I was in, it was a real panic situation,” Asif said. “I had my job to take care of. I had my family and kids to take care of. And on top of all that, I had subs chasing me who were not paid and threatening me with a lien on the house.”
It was more than just a threat for Rizwan Manzer.
The Bedford resident also hired JK Development to rebuild a demolish and rebuild a new home. By last summer, Manzer said he had already paid Kelly more than 90% of the project cost, but there was plenty of the project remaining.
“I told him I couldn’t pay him anymore and it was time to deliver the project instead of asking for more money,” Manzer said. “That was the last conversation I had with him in July. And then he simply disappeared.”
Even though Manzer said he had paid Kelly for work that had been completed, seven subcontractors came knocking for money. Two of those businesses ended up putting a lien on his property.
The construction equipment left behind in his garage is a bitter reminder of how much Manzer said he lost trying to get his home construction project across the finish line. He estimates he spent at least an extra $150,000.
“I lost faith altogether, I have to be honest with you,” he expressed.
Konstantin and Zoya Derman never even broke ground on the addition they planned to enjoy with their two kids.
The blueprint was ready to go, and after checking references and reviews, the couple felt confident about hiring Kelly for the project.
“The impression of him was he was very knowledgeable and charming,” Zoya said.
The Dermans signed a contract last July and handed over a $35,000 deposit. They said the expectation was the permit would be pulled and foundation work would begin at their Bedford home, but Kelly became hard to reach for any updates on progress.
“He disappeared,” Zoya said.
A few weeks later, they were blindsided with news that Kelly was filing for bankruptcy.
“He told us he doesn’t have our money,” Zoya Derman said. “The first emotion was certainly anger. It just felt very personal, and $35,000 is a big deal.”
The problems extend far beyond the town limits of Bedford.
The NBC10 Boston Investigators found homeowners who said they were out tens of thousands of dollars in communities around the Boston area, including Woburn, Arlington, Walpole, Andover, Reading and West Roxbury.
Some of the homeowners are also dealing with liens on their property from subcontractors who said they weren’t paid by Kelly.
A total of 10 consumer complaints about JK Development Group have been received since the beginning of 2021, according to a spokesperson with the Massachusetts Attorney General’s Office.
“Bankruptcy relief is designed for people who are honest but have suffered from financial distress,” said bankruptcy attorney Frank Morrissey. “Bankruptcy is not intended, nor is it a home for people who commit fraud.”
Kelly’s bankruptcy filings show he owes money to somewhere between 50 to 100 people. Along with customers, credit companies and subcontractors, Kelly also owes about $80,000 in child support and taxes, according to the documents.
Herbert Weinberg, a bankruptcy attorney representing Kelly, told creditors in an August letter that his client had some long-term jobs in July that did not come through, preventing him from obtaining any more credit.
“As will be shown in his bankruptcy pleadings, he has no significant assets and the court is requiring him to dedicate almost all his projected disposable income to pay primarily his tax debt and past due child support,” Weinberg wrote in the letter.
Weinberg did not respond to NBC10 Boston’s calls and emails asking for comment about the bankruptcy case and Kelly’s list of customers who say they are owed money.
For homeowners, it can feel like a losing economic battle of taking a number and standing in line.
“That’s the dilemma,” Morrissey said. “Many people take the position that it’s just good money after bad.”
Lesley and Rob Scully signed a contract with Kelly last July and provided a $64,000 check, which was a third of the project cost at their Andover home.
Several weeks later, the couple learned of the bankruptcy.
“I was in shock. I don’t think I said a single word,” Lesley said. “The first thing we did was call the police.”
The couple pursued larceny charges, something that we’ve shown can be a difficult task because police departments often look at contractor cases as civil matters.
However, the criminal complaint went forward and the Scullys were in a courtroom last month when Kelly was arraigned on the larceny charge. He pleaded not guilty and the case is still pending in Lawrence District Court.
Meantime, the couple is taking out lines of credit so their family can enjoy the project that had taken years of saving.
“Essentially, I’m paying interest on money he’s stolen from me,” Josh said.
“It’s extremely stressful,” Lesley added. “It takes over our thoughts every day.”
In court, we provided Kelly with an NBC10 Boston business card and let him know we had spoken with a handful of his customers and wanted to ask him some questions.
However, after the hearing, Kelly hustled to his truck without stopping to speak with us.
He drove away as we asked him to explain what happened to all the customers’ money.
We tried once more at the parking garage exit as Kelly emerged in his truck.
“I have no comment, thank you,” he said.
Court records show Kelly also filed personal bankruptcy in 2013, though that case appeared to be comprised of consumer-related debt as opposed to business liabilities.
His current bankruptcy filing indicates he has started a new job as an architect with a $180,000 salary.
Kontanstin and Zoya Derman’s project will not get off the ground until they find out if they can recoup any of their lost savings.
“We don’t get to enjoy the life we wanted,” Konstantin said. “That gets put on hold.”
They are among a handful of homeowners who have filed claims in bankruptcy court and objected to their debts being discharged. One family paid a deposit of more than $76,000 without any work being completed, according to their claim.
There is a state fund that reimburses consumers if they get ripped off by a registered contractor. However, the award is capped at $10,000 and consumers have to show they’ve exhausted other legal options first.
We’ve already illustrated how difficult it can be for homeowners to file successful claims. A bankruptcy proceeding can only make it more challenging.
A spokesperson for Attorney General Andrea Joy Campbell told NBC10 Boston the agency is not investigating the complaints about Kelly. Instead, the AG’s office is providing a referral letter to consumers on how to participate in the bankruptcy and encouraging them to see if they are eligible for recovery from the state fund.
“It just seems stacked up against us,” Zoya said. “The right thing to do would be for him to go to jail for his crime. But if he goes to jail, then all these families are still left with no money.”
Ryan Kath can be reached at firstname.lastname@example.org. You can follow him on Twitter or connect on Facebook.