BRADENTON -- "We stand behind our reputation." said George Glance, President of KB Home Central Florida, as he stood before the Manatee Board of County Commissioners. It appears the builder is doing just that. The company has been sued for fraud and price fixing in Arizona, Nevada and California -- building homes on a former bombing range -- violating Federal Trade Commission agreements to repair crumbling houses -- while getting hit with a $20 million settlement for poor construction in Texas. Former CEO Bruce Karatz was even indicted by a federal grand jury for fraud in a stock option scandal. KB brings new meaning to "BANG for your buck."
Armando Delgado's house for the past two years
Photo taken 10/15/2012
For years, Willowbrook homeowners have been complaining to the Manatee County Building Department about their shoddy disintegrating homes, their wet walls and electrical boxes, crumbling balconies and leaky roofs, and mold -- lots of mold -- to no avail.
Building Department Director, John Barnott, didn't think it was necessary to visit the Willowbrook subdivision to investigate the complaints, and neither did the commissioner of the district. The county attorney, Micky Palmer, felt the best advice he could convey to the commission was, "I caution you to not get involved." This advice was not only too late, but could end up proving far more costly to all parties, as it abandons the responsibilities of local government.
The problems here reach far beyond a "private conflict." If we can put aside the realities: residents can't sell their homes, afford to fix them, or live in them without endangering their health and safety. Now it seems that they can't even expect those they pay to set the standards and enforce regulations, to do their job. It seems it's not only the houses, but the system that is broken.
The State Housing Initiatives Partnership (SHIP) program provides funds through local governments as a incentive to create partnerships that produce and preserve affordable homeownership. Some of the Willowbrook homeowners received assisted financing through SHIP and other similar programs.
These zero interest loans are put on the back side of the mortgage and must be repaid upon: selling of the home, making another home their primary residence or renting out the home. The amount available to applicants for new construction is $25,000.
These are just some of the stipulations placed on the borrower. With some homes now worth less than half their previous value, these homeowners have no other choice but to abandon their homes to foreclosure. That means for every one that does walk away, the county has less funds to help other strapped homeowners, and the state is out funding for the $25,000 loans.
The Building Department is responsible for the safety and welfare of the general public by ensuring that the review and inspection of permitted activity is in compliance with the Florida Building Code, state statutes and local ordinances. It's not known how many homes have been built by KB using public assistant programs like SHIP, but those that have must comply with Florida Chapter 553 of the Building Construction Standards. Any diversion from the codes or state statute, challenges the viability of KB being able to take advantage of SHIP and/or other public assistance programs that make it much easier for buyers to purchase their product.
Willowbrook homeowners could challenge the county's willingness and ability to perform proper inspections, or confront them on the health and safety issues. In situations where the county refuses to get involved -- cases of fraud and product liability -- in which citizens are faced with health hazards and safety issues, homeowners with allegations could file a complaint with Jeff Atwater, Chief Financial Officer, at the Florida Department of Financial Services, under Fraud and Consumer Protection. These complaints will stay on KB's record, making it more difficult for officials to claim KB is a reputable company.
Fortunately, the Manatee County Building Department has a License Review Board. Review boards usually have the power to halt any further permitting to license contractors in situations concerning substandard work, safety hazards and multiple code violations. The state's Department of Business Professional Regulation (DBPR) has some effective authority as well. Their Office of General Council (OGC) has the power to prosecute an administrative action -- to insure compliance -- by dictating practices that best serve the interest of the people.
When asked by Manatee commissioners whether KB has experienced problems with other projects, Glance replied "no more than other builders." Glance said that all builders have occasional problems. But while all builders surely hit snags, KBs' seem inordinately crippling and systemic, manifesting themselves nearly everywhere they build.
As far back as 1979, the Federal Trade Commission (FTC) issued a cease and desist order against KB, requiring timely repairs to "major construction defects," and a requirement to disclose certain information to prospective buyers. The disclosure was about an arbitration clause that prevented buyers from taking KB to court for reasons of faulty repairs and warranty disputes. KB ignored the orders.
That same arbitration clause is one of the problems that has hamstrung the Willowbrook residents from taking their complaints to the courts. Manatee commissioners and attorney Palmer say there isn't much that can be done because of the arbitration clause. The truth is, they choose their battles, and for some at the commission, this isn't one they're inclined to fight.
In 1991, KB settled the 1979 agreement it broke by not complying with the FTC orders and paid a $595,000 settlement. In 2003, KB was ordered to send out letters to tens of thousands of KB homeowners releasing them from the arbitration clause. Over 20 years later the same repudiated tactics are being accepted, uncontested by the commission while KB throws Manatee citizens under the bus.
State after state, the exact same reoccurring problems -- more than 20 years of crumbling houses, mold and roof leaks -- and the commission still says their hands are tied.
According to the Las Vegas Sun, in 1999, KB had to write off $11.7 million when one of its mortgage department employees was caught making illegal trades. In 2000, the San Francisco Chronicle reported that KB was ordered to pay $2.4 million in an age discrimination suit.
Perhaps KB's history is best portrayed by their selection of property they choose to build on. Poisoned land is cheap, and KB has chosen some very troubled sites. In Texas, KB knew they bought a retired bombing range. KB didn't tell their Southridge Hills development homeowners in Arlington, because they said they were told it was safe to build on the land by the previous owner.
Those same homeowners and their kids started finding active bombs in their back yard, just inches below the surface. The Army Corp of Engineers swept the neighborhood and found 58 (Mark 23) active practice bombs. The NY Times reported KB was sued by 64 of their homeowners as a result.
The Ventura County Reporter disclosed that KB Home had plans to build 461 homes on a 1,595 acre site in Simi Vally California, in Runkle Canyon. The Santa Susana Field Laboratory, (SSFL) known as "Rocketdyne" was built there in 1940, less than a mile from the Runkle Canyon proposed site. At Rocketdyne, lethal radionuclides strontium-90 was found, along with heavy metals like, uranium, chromium, arsenic, nickel and molybdenum.
The site was ground zero for the Sodium Reactor Experiment (SRE), a nuclear reactor which operated from 1957 to 1964, until it experienced a meltdown. In October 2006, a SSFL Advisory panel concluded the SRE meltdown caused the release of more radiation then was released by the Three Mile Island accident.
KB has built homes on a pesticide laden crop-duster airfield, among other contaminated sites, fighting their residents and the courts in almost every case. Their buy-back policy binds the owner to a no disclosure policy and if the complainant used a website to voice their displeasure, the domain and website had to be in the deal. Afterward, any breach, revealing opinion about the homeowner's experience, is quickly followed up with a lawsuit.
What's needed is exposure and examination of KB's operations, a look into their strategy, to further understand how they escape due criticism and still acquire such enormous financial success. Their roots are broad and deep, their demeanor arrogant and without remorse. But the issue at hand is the suffering homeowners in our own community at Willowbrook, and that is the story to follow.
It would be too painful to stand by and watch these bullies beat-up on our fellow citizens, and why some of those at the county commission are allowing that to happen remains puzzling. Often it is hard to understand just who the local government is working for.
When Commissioners told Willowbrook residents "their hands are tied," I couldn't help but think of when Commissioner Whitmore sat at the "Tourist Development Council" talking to member Ed Chiles about how ugly the three-story seasonal houses on Anna Maria Island (aka Party houses) were, saying they have "too many cars, and they are ugly," then turned to the other members and said, "if someone makes a motion, I'll vote for a moratorium on them right now." It sends a signal that the county-wide commissioner is willing to go to the mat when beach houses threaten the quaint charm of her beloved island, but not when east county homeowners have problems much bigger than obstructed views.
If Whitmore could take that same attitude to the table that seems ever present when "the island" is at stake, to help resolve a truly serious situation, Willowbrook residents might have a chance. If the commission is really worried about jobs, perhaps it should quit assisting problematic and careless corporate creatures like KB, who tap into the millions of dollars in SHIP and other taxpayer assisted funds, only to make it easier for the almost 10,000 quickly-denigrating homes that sit empty. That might send a message to the incentive-seeking giants in the building industry to go elsewhere with their Ka-Boom housing.