Chasing a disaster chaser; complaints swirl around recovery firm
By Jason Felch
Los Angeles Times
PALOS VERDES, Calif. — In the top-floor ballroom of a downtown San Francisco hotel, Steve Slepcevic took the podium to share the story of his success.
The son of Serbian immigrants, he began working on construction sites at the age of 12. By 17, he had started his own general contracting business. Soon enough, he was chasing natural disasters, looking to help victims rebuild their property and put their lives back together.
"I was always fascinated by disasters," said the 41-year-old contractor, wearing a tailored pinstripe suit and a sparkling smile. "But not in a sick way. . . . You've got to take a disaster and turn it into an opportunity."
The quip provoked muffled laughter from the roughly 150 people attending the 2009 National Disaster Summit, Slepcevic's seven-city road show, now in its third year. The property owners, government officials and risk managers had paid $395 a head to learn how to prepare a disaster plan, read an insurance policy and use a fire extinguisher.
There was no indication that the man with the sharp suit and smile was half a step ahead of his own disaster, a cyclone of angry customers, subcontractors, lawyers, banks and state regulators. They accuse him of being a special brand of con artist, one who preys both on insurers and those already devastated by catastrophe.
The Times found dozens of fraud complaints, lawsuits and government investigations targeting Slepcevic and his Rancho Palos Verdes-based company, Paramount Disaster Recovery, spanning six states over the last decade. In California alone, insurance companies have filed 22 fraud complaints since 2002, records show.
In a recent interview, Slepcevic acknowledged that he had "made mistakes" and that Paramount had suffered from "management issues," but he said those problems were in the past. He attributed most of the complaints to "greedy" insurance companies and disputes with subcontractors but refused to address pending litigation in detail.
"Since 1989 I've completed several thousand projects with no problem and no complaint," he said. "I'm like the Robin Hood in the industry, we're taking money away from the big bad insurance companies and giving it to the little people."
The story of Paramount and its founder sheds light on the world of "storm chasers," traveling contractors and insurance adjusters who descend on natural catastrophes, offering to help victims maximize their claims and rebuild. Regulators, fraud investigators and victims' advocates allege that many inflate damage estimates, do unnecessary repair work and take exorbitant cuts from insurance settlements -- or skip town with all of the money.
"Every disaster has them," said Dave Stuart, president of a nonprofit that helps wildfire victims. "They're literally like vultures circling."
Chasing the storm chasers through court can prove a costly, time-consuming and often fruitless exercise.
Contractors and public adjusters - who negotiate with insurers on behalf of policy holders - are subject to a patchwork of regulation and uneven enforcement from state to state. Half of the states do not even license public adjusters, giving the government no jurisdiction to pursue complaints. Many victims have no recourse beyond filing suit.
"If you screw someone who's down and out, he's not going to have the resources to go after you," said Steve Irving, a Louisiana attorney who is seeking $600,000 from Slepcevic and other Paramount employees in a racketeering suit on behalf of two victims of hurricanes Katrina and Rita.
In some cases, homeowners make out well and the victims are insurance companies, which often pay inflated claims rather than spend money on litigation, industry experts say. Policy holders ultimately pay the price in rising premiums.
The cost of post-disaster insurance fraud is hard to measure. The Insurance Information Institute, a trade group, estimates that fraud accounts for 10% of all property damage claims, suggesting that the toll from a disaster the size of Katrina could reach billions of dollars.
Paramount has left a trail of complaints from Mississippi to California, which, despite some of the toughest regulations in the country, has struggled to hold the company accountable.
Only recently have Slepcevic's troubles been closing in.
The day before the San Francisco conference, California suspended his contractor's license. Weeks earlier, a judge had thrown out his petition for personal bankruptcy.
In the bankruptcy case, Slepcevic had acknowledged 21 claims against him or Paramount. But the U.S. trustee said in court papers that Slepcevic was "actively concealing" a $200,000 fine by the California Department of Insurance and six related criminal charges for allegedly misrepresenting himself to victims of California wildfires.
Slepcevic has promised to pay the debtors -- just as soon as the next disaster strikes.
Paramount touts itself in news releases as "the world's leading disaster restoration . . . company," with offices in 11 states and the Caribbean. The company says it employs "some of America's finest engineers, architects, estimators and construction crews."
In fact, the company's Rancho Palos Verdes headquarters is in a small office suite where on a recent day only one person was working. Many of Paramount's other offices appear to be homes or small businesses operating under a different name.
Paramount's principal employees are Slepcevic; his mother-in-law, Sue Manners; and, until recently, Matthew Todd, a California attorney whose disciplinary record with the state bar runs more than 100 pages.
Despite his legal and financial troubles, Slepcevic drives a Mercedes-Benz and lives in a $1.6-million Redondo Beach home with an ocean view. Over the years, he has earned up to $80,000 monthly, divorce records show.
In addition to heading Paramount, Slepcevic runs the National Disaster Summit, a for-profit educational conference that serves as an advertising vehicle for disaster services. He charges other self-described disaster experts $3,000 for 45 minutes on stage.
Todd, who recently stepped down as vice president but still provides legal services to Paramount, has filed for bankruptcy protection five times and, since 1996, been disciplined by the state bar three times, including two suspensions.
In state bar court, Todd stipulated to violations including misappropriating a client's insurance settlement and several other acts of "moral turpitude, dishonesty or corruption." He is participating in an alternative discipline program for lawyers who attribute their troubles to substance abuse or mental problems, according to state bar attorney Monique Miller. His license was recently reinstated.
Slepcevic and Todd, who joined the company in 2005, built the business as legal complaints mounted. They often fought government regulators by filing copious challenges on everything from technical to constitutional grounds. Many civil lawsuits were simply ignored, leaving plaintiffs to pursue default judgments, court records show.
Paramount "pushed the envelope," said Trudy Slepcevic, Slepcevic's second wife and the company's bookkeeper from 1997 to 2002, when the couple separated. Slepcevic was "doing business in a manner that appears highly inappropriate in order to maximize his profits," she said in a later divorce declaration.
Her father, Rudy Linke, offered an example in his own declaration in the divorce, saying he had accompanied Slepcevic to a house whose roof had suffered minor wind damage. Slepcevic poked holes in the roof, explaining that there was "not enough damage to the property," Linke said.
"Steve expressed being afraid that if the insurance regulators ever caught up with what he was doing, his profits would dry up," Linke said. In an interview, Slepcevic called Linke's statement "a lie."
Over the years, Paramount developed an unusual business strategy: presenting itself as a one-stop disaster recovery shop. It offers to estimate damage, negotiate with insurers and help fix or rebuild damaged property, according to interviews and contracts filed in court records. In return, even if it does no repair work, the company frequently charges clients 20% of their insurance settlements, the contracts show.
Typically, these services are provided separately. Public adjusters negotiate claims, usually charging a 5% to 10% commission. General contractors oversee repairs, taking up to 10% profit.
Providing both services is illegal in some states, including California, because of the inherent conflict of interest: Both contractors and adjusters stand to benefit when insurance claims are inflated, regulators say. In other states, the law is silent.
Operating in this sometimes fuzzy zone between victim and insurer, Paramount has reaped outsize fees. At times, former clients allege, it has reaped far more than that.
Soon after Hurricane Katrina slammed into Louisiana in 2005, Paramount set up shop in a rundown apartment complex in Slidell, La., and a private residence outside Meridian, Miss. Company salesmen fanned out across the disaster area.
Among the new clients were the parishioners of a large brick Greek Orthodox church in Jackson, Miss., which had sustained wind and water damage.
Church officials recall Todd telling them he could help get a favorable settlement with their insurance company. In return, Paramount would keep 20% of the claim, plus expenses.
In May 2006, Travelers Insurance issued a check for $100,000 in the name of the church and Paramount; days later, the entire settlement check was deposited into Paramount's California bank account, according to a church lawsuit against Paramount.
When church officials learned of the settlement, they contacted Paramount and were told a reimbursement check was in the mail. The check bounced, church officials alleged.
Church officials found that someone had forged the endorsement of the parish council president on the back of the original insurance check, the lawsuit says. They again demanded payment, to no avail.
With the lawsuit pending and no money for repairs, the congregation says it is still living with the damage.
Across the Mississippi River in Louisiana, three hotel owners signed the same 20% contingency arrangement with Paramount to handle claims from Katrina and Rita, which hit weeks afterward.
The contract listed Paramount's public adjuster license number, court records show. At the time Louisiana did not license public adjusters and prohibited such contingency fees, state officials say.
None of the hotel owners received their insurance settlements from Paramount, which totaled nearly $300,000, according to lawsuits they have filed. A Louisiana judge found that the signatures had been forged on the settlement checks and deposited into Paramount accounts.
Paramount employee Michael McKeel later told Sam Ratanji, one of the hotel owners, that Slepcevic and Todd had used their insurance money to throw a big party and buy California real estate, according to Ratanji's sworn affidavit filed in his suit. (Ratanji said in an interview that McKeel appeared disgruntled with Paramount. McKeel could not be located by The Times.)
Six months after Hurricane Rita hit, Slepcevic purchased the $1.6-million home in Redondo Beach, records show.
Ratanji estimates he has already spent $45,000 pursuing Paramount in court.
"It shows you why most people don't complain," said Irving, his attorney.
Sometimes the amount of money involved in a case doesn't seem worth the time or trouble -- to regulators or aggrieved clients.
But Danny Denoux, a former New Orleans police officer whose associates describe him as "a bayou version of Dirty Harry," wasn't going to let the matter lie.
After Katrina, he said, a Paramount employee helped boost his wind damage claim from $1,800 to $11,000. But Denoux said in a complaint filed with the Louisiana attorney general that he never got his settlement.
"They forged our names on the check and took all the money," said Denoux, who attached a copy of the check to his complaint.
Other homeowners also stepped forward, prompting the attorney general to order Paramount to cease its activities in the state. Paramount pushed back hard, generating legal objections that filled five bankers boxes, state officials said.
Eventually, Paramount's local attorneys asked to withdraw -- Slepcevic had filed for personal bankruptcy in June 2007 and was no longer paying Paramount's legal bills, court records show. The attorney general's office dropped the matter, believing Paramount had gone out of business.
But when Hurricane Gustav blew through Louisiana months later, state authorities once again saw that Paramount trucks were plying the streets of Baton Rouge.
Officials in pursuit
In bankruptcy court, Slepcevic claimed a monthly net income of $9 and debts exceeding $1 million.
Paramount "to a large extent depends on the fortuity of disasters," his court filings stated. The company had miscalculated, gambling that hurricanes would continue at the pace they had in 2005.
But things were looking up. "The recent devastating California wildfire season has resulted in a great and unanticipated volume of work," the filings say. In the summer of 2007, shortly after Slepcevic filed for bankruptcy, the Angora fire started in South Lake Tahoe.
Slepcevic arrived in town and immediately ran newspaper ads, posted fliers and tried to join the chamber of commerce. Stuart, the fire victims' advocate, recognized Paramount's name from the 2003 fire at Lake Arrowhead and warned local officials, who contacted the state Insurance Department.
The department already knew about Paramount. Since 2000, officials had tried to stop the company from acting as an unlicensed public adjuster. Paramount's attorneys successfully staved off any action by insisting it was a general contractor. After a three-year investigation, the department dropped the matter, even though its own investigator concluded that Paramount "continues to act as a public adjuster without a public adjuster's license."
Now, the department believed Paramount was at it again, offering to help Tahoe residents negotiate insurance claims for smoke damage. The department ordered Paramount to stop, referring to the company in a news release as "predators" and "scoundrels."
Paramount responded by suing Insurance Commissioner Steve Poizner, including affidavits from several Tahoe homeowners who said they were pleased to have the company's help. The company's 20% commission "seemed pretty high," recalled Paramount client Neil Cohn, but he felt he was getting the runaround from his insurance company.
As the litigation dragged on, Paramount immersed itself in disasters large and small across the state.
When wildfires broke out in San Diego County that fall, Slepcevic ordered 100 signs that advertised Paramount's work on "insurance claims," despite the state's cease-and-desist order, records show. Paramount held a Fire Recovery Summit in Rancho Santa Fe, where Todd was described as the principal of "Paramount Adjusters," Insurance Department records show.
More lawsuits piled up as Paramount failed to pay its bills -- a $43,000 judgment for one Los Angeles subcontractor; a $162,000 suit by another. A sign maker, a website designer and the Seattle hotel where Slepcevic had put on the latest Disaster Summit all claimed they had been stiffed.
In January 2008, Poizner and Paramount reached a settlement. Without admitting wrongdoing, Paramount agreed to stop representing itself as a public adjuster and pay a $200,000 fine.
The district attorney in El Dorado County, site of the Angora fire, agreed to suspend six related misdemeanor charges, as long as Paramount paid its fine and obeyed the law.
"I am pleased that we could take these unscrupulous characters out of the post-disaster marketplace," Poizner said in a statement.
By fall, however, when hurricanes Gustav and Ike swept across the Gulf states, Paramount was on the scene to help.
It wasn't long before complaints surfaced. Paramount was fired by the owners of a 92-unit condo complex in Galveston, Texas, for allegedly doing unnecessary repair work. Two subcontractors say they are owed a total of more than $250,000. And the Texas attorney general recently opened an investigation into the company's activities.
Meanwhile, Slepcevic is six months behind on his fine payments to the California Insurance Department, which received five new complaints about the company in 2008. The department defended its record in a statement, saying it "has actively pursued Paramount and fined the company hundreds of thousands of dollars."
Even so, Slepcevic was as of last week Facebook friends with Steve Poizner, who is running for governor. And far from being out of the "disaster marketplace," Paramount continues to look for new opportunities in disaster.
"Crews Deployed in Santa Barbara to provide smoke/fire clean up and total custom home reconstruction," Slepcevic announced via Twitter recently.
His contractor's license was suspended at the time, but he told The Times he referred customers to relatives.
He also recently put out a news release offering a new service: cleaning schools and hospitals contaminated by swine flu.
"Stick around," Slepcevic said in the recent interview. "We're getting bigger and better."
Copyright 2009 Los Angeles Times