Last week, a law firm in Coral Gables, Fla., Roberts & Durkee, filed a class action suit against Engle Homes—a brand of now-liquidating TOUSA—over its use of contaminated drywall imported from China in new-home construction. At the press conference announcing the suit, plaintiffs stood with their attorney, David Durkee, as well as M. Thomas Martin, president of America's Watchdog, a relatively obscure consumer advocacy group that has propelled itself into the limelight by attacking home builders for allowing the installation of toxic drywall and using undocumented workers, which Martin contends are two connected issues.
America's Watchdog has been around for about eight years, says Martin, the group's president, who describes himself as an “activist.” He claims, vaguely, that his background includes involvements in real estate and banking, and that he finances his company through consulting work for law firms and individual attorneys.
But Martin's past is considerably more checkered than he let on during an interview with BUILDER on Monday. The Sarasota Herald-Tribune reported Tuesday that in 1998 Martin was convicted on two counts of fraud, and sentenced to 46 months in prison, for bilking his radio show listeners out of $1.68 million by promoting a bogus mutual fund. In 1995, Idaho’s Security Division slapped Martin with a cease-and-desist order for selling unregistered securities and violating disclosure regulations. And in 2006, Allied Mortgage Capital Corp. in Seattle filed a complaint against Martin for alleging it had committed illegal brokerage practices, and for charging Allied’s clients a fee to investigate their transactions for errors. (The case was dropped on appeal.)
Martin owned up to his past transgressions and told the Herald-Tribune that his advocacy efforts are an attempt to "restore dignity to my life." He bristled when BUILDER suggested that America's Watchdog’s Web site and press releases, at least ostensibly, give the appearance of soliciting clients. “That would be illegal, and we don’t do that,” he insisted.
While his company might be, in Martin's words, “a very small advocacy group,” its interests over the years have been wide-ranging, and it has tackled everything from workplace-related cancer to Martin’s latest “passion,” helping what he estimates to be 145,000 “victims” get back money they invested in auction rate securities, which in many cases are now frozen because of the recession. America’s Watchdog claims that brokers lied to investors when they said these securities were liquid. In its literature, the organization calls this “the worst case of securities fraud in U.S. history.” And Martin went one step farther when he told BUILDER “this is worst than Madoff because it’s $330 billion and no one is doing anything about it,” referring to convicted felon Bernard Madoff, who bilked investors out of $65 billion.
Martin’s penchant for worst-case-scenario readings of events is evident whenever America’s Watchdog sends out press releases, whose favorite whipping posts appear to be U.S. House of Representatives Speaker Nancy Pelosi and the tax policies of California (which Martin refers to as “Taxafornia”).
Now, home builders are drawing Americas Watchdog’s attention and vitriol.
In a release issued last December, for example, America’s Watchdog accused builders of not paying overtime and other benefits to the “millions” of undocumented workers the builders’ contractors hired during the last housing boom. Martin says he bases his accusations on interviews his organization has done with field superintendents, although he did not quantify the number he spoke with or in what markets. However, his conclusions need no clarification: “If big U.S. home builders think they are about to get a windfall from the U.S. taxpayer, think again. It’s show and tell time. Start thinking about prison, if you are a large U.S. residential home builder CEO, COO, or CFO.”
Most builders have heard such threats before, and from organizations better versed in new-home construction practices, so they tend to shrug them off. And even Martin admits his advocacy efforts have been only fitfully effective. For example, his recent attempts to organize law firms into a network to help homeowners seeking redress for construction defects fell on deaf ears. “One firm called me, and then they never called back,” he says with a laugh. But America's Watchdog’s can’t be completely ignored by builders when the consumer media picks up the group’s message, as has been the case in the Chinese drywall situation--the Wall Street Journal recently cited the group in a story.
America's Watchdog is benefiting from a controversy that’s creating its own media heat, as more law firms file class actions on behalf of homeowners, including one last week that named Homestead, Fla.-based general contractor South Kendall Construction Corp., and its drywall distributor, Banner Supply. That suit alleges that the supplier imported more than 67 million pounds of Chinese-made drywall.
After it got sued, Engle Homes issued a statement on March 17 claiming that its initial investigation into complaints about the smell and toxicity of the drywall “seems to indicate” that the problem is isolated to “a small number” of homes Engle built in and around Fort Myers, Fla. Engle said it was developing a plan to assist affected homeowners and provided a phone number for them to set up an inspection.
The suing attorneys claim the problem is much larger. In its class action suit against Engle Homes, Roberts & Durkee contend that more than 65,000 American homes “could be affected by the hazardous drywall, which emits sulfur gases, corrodes wiring, contaminates furnishings and fabrics, and damages air conditioners and appliances.” America's Watchdog also expects the toxic drywall issue to manifest itself in other markets, especially those in the South and West where undocumented workers flourished and installed whatever contractors told them to. (David Durkee told the Herald-Tribune that his firm doesn’t have “any relationship” with Martin.)
“We are 110% certain this is going to [be] an even bigger problem in the entire western half of the U.S.,” the advocacy group states, without offering evidence or research. Consequently, America’s Watchdog estimates that 350,000 homes built since 2001 “might have to be bulldozed.” For good measure, the group calls the Chinese drywall issue “the single worst environmental and serious health hazard ever faced by U.S. and Canadian homeowners.”
The Consumer Product Safety Commission (CPSC), which has been exploring this issue for two months, is more circumspect in its judgment. “I don’t know where they got that figure,” says CPSC’s spokesman Joe Martyak. “There are a lot of allegations being thrown around, but they aren’t based on facts.” CPSC currently has field staff on the ground in Florida, where it is investigating with the EPA, the Centers for Disease Control, and the Florida Department of Health.
“We’re trying to identify what the facts are, and what are the risks,” Martyak said.
John Caulfield is a senior editor at BUILDER magazine.