Midlothian man cleared of construction fraud charges in New Kent

A Midlothian man had five charges dismissed after a two-day contested trial in New Kent Circuit Court.

James William Arehart, 39, of the 400 block of Coalfield Road, was found not guilty on three charges of failing to pay subcontractors, and one charge each of construction fraud (advance pay, no construction) and embezzlement.

In August 2015, Karyn Victory entered into a contract with Arehart, who operated under J.A. Custom Builders, to build a house. Work begin in late November of that year but progressed slowly. While construction was occurring, Victory begin to work with her financial supplier, TowneBank, to disperse funds to Arehart for the build. However, the amount of those draws (withdrawals) were different than what the two have negotiated in the originally contract.

Over that time, Victory and her husband, David, met with Arehart on several occasions about changes and errors during the build. One of the major changes included the installation of a fireplace, which upgraded from 36-inches to more than 50 inches.

In March 2016, more concerns began to arise from the client when she noticed her house wasn’t being painted. The painter, Deborah Armstrong, talked about her interactions with Arehart.

“I was priming the Victory’s home and another home,” Armstrong testified. “However, I refused to finish the Victory’s House until I received payment for the first home.”

Testimony and evidence showed that Arehart asked Victory for a $6,500 check to be made out to Armstrong. Victory agreed, but only wanted to make the check out to the defendant. In turn, the defendant received the funds and issued a check to the painter, noting on the check that it was for the Victory’s home and not the first home. Armstrong testified that she took the check as a payment for the other home.

The issues of payment continued with two other companies. Russ Sprouse of Fireplace Solutions said that the defendant did not pay for the upgraded fireplace and that Victory had paid all but $500 towards the balance. Charlie Guard testified that Victory paid him to work on the stone masonry of the home.

Eventually, Arehart was terminated on June 27, 2016 from his contractor duties working on the Victory’s home, with the clients citing poor progress. After the defendant’s termination, Victory emailed and attempted to contact Arehart for her money back from the construction as it was the contractor’s responsibility to pay fees and the subcontractors. Victory also asked for the return of a television wall mount that was specifically purchased to be mantled over the fireplace. When contact ceased with the defendant, Victory contacted New Kent Sheriff’s Office.

Testimony from bank representatives and financial experts showed money being transferred from Arehart’s business account to his personal account. However, defense attorney Nicholas Braswell argued on behalf of the client, pointing out to purchases on both accounts.

“You can see Mr. Arehart made business purchases from both his accounts,” said the defense lawyer. “Mr. Arehart isn’t the best businessman in the world when it comes to finances, but he had no intent to defraud these people.”

Commonwealth’s Attorney Linwood Gregory argued, saying that draws from TowneBank into his account were payments to the defendant to help pay the subcontractors.

“You see these large amounts of money withdrawn on dates for certain items,” Gregory said, presenting documents that showed how TowneBank dispersed funds based on an inspection of the house’s progress by an independent contract. “You can see the bank assigns a certain number and that helps designate where the money goes.”

Gregory added more than 50 pieces of evidence, pointing to checks, documents, and invoices paid by the client to different subcontractors. She continued to keep the workers on board after Arehart’s dismissal, and her husband took over the contractor duties.

However, Braswell countered with an argument that the money is dispersed after the withdrawals, saying that those funds are not advance payments. Judge B. Elliott Bondurant agreed, striking the construction fraud charge. Bondurant later struck the embezzlement charge, saying that Arehart didn’t take the wall mount as it was given to him by David Victory during construction to help find out how to put it above the fireplace. The defendant also didn’t sell nor use the television mount, leaving it in the same box it arrived in and presented it during the defense’s portion of the trial.

With the only three charges remaining, Bondurant commented about the totality of the case.

“This is a tough case and there is no question that Mr. Arehart isn’t a good business man,” said the judge. “There is a reason you make a business account.

“But what gets me is why I don’t understand why neither party went to the bank when the withdrawals were different,” Bondurant continued, pointing to the documents that both parties received via email from the bank when money was designated for construction and must be approved by both parties. “There is fault by both parties in this issue.

“You didn’t do any change orders as you are required to, and I’m surprised the IRS hasn’t come down on you with all these transactions,” Bondurant said to Arehart. “As a homeowner, you should want to know how much those change orders are going to cost you,” the judge said to Victory.

“To me this is a civil case and I’m not going to find this man guilty,” Bondurant said as he wrapped up this case. “I just don’t see that there was any criminal intent to defraud these people of their money.”