Dustin McDaniel, Attorney General for the State of Arkansas, has announced his office has filed a consumer protection lawsuit against a local roofing company for using a Ponzi scheme to allegedly defraud more than 75 customers of $250,000.

The lawsuit against Conway Roofing LLC alleges that the company actively pursues new clients, who pay large insurance proceeds to them, in advance for roof repairs. However, the money from the new clients is then used to fund roofing work already promised to existing clients.

McDaniel said he believes this type of scheme is an unfortunate business model.

"Schemes like these are doomed from the outset, and are clearly illegal," he said. "Unfortunately, Arkansas consumers are paying the price for this disastrous business model. The company’s owner appears to be using insurance proceeds to fund his lifestyle, while needed roofing repairs are left undone."

Documentation filed through McDaniel’s office indicate that company owner, Michael J. Wickherst, has used funds collected from clients to fund his personal lifestyle for items such as rent, tuition for his children, art lessons, home movie rentals, grocery items at various Kroger stores, tickets for a Justin Bieber concert, a purchase at Cupid’s in Conway and several transactions to his personal account totaling tens of thousands of dollars.

The complaint against Conway Roofing LLC alleges that company representatives find new clients through door-to-door sales which are targeted at residents in storm damaged neighborhoods. The company promises a roof inspection and to work with the client’s insurance company so that the repair work is done in exchange for the insurance proceeds. According to the attorney general’s office, repairs for new customers are put off with false excuses, which allows the company to find new clients to defraud and extend the Ponzi scheme.

The company’s financial structure is set up in such a way that its ability to fulfill existing customer contracts depends solely on the ability to recruit new customers. If new recruits are not immediately found, the company does not have the available funds to complete the work on existing customer accounts. In documentation filed by the attorney general’s office, at the end of February, the balance in the company’s main operating fund was $-605.06. The secondary operating account had a balance of $26.74.

McDaniel alleges that Conway Roofing LLC and Wickherst are in violation of the Arkansas Deceptive Trade Practices Act as well as the state’s Home Solicitation Sales Act. His office is seeking an injunction preventing the company from signing up new customers and requiring the company to honor existing contracts or refund payments to those customers who choose to cancel.

The suit will be heard in Pulaski County at circuit court.

As of press time, calls to Conway Roofing LLC and Wickherst were not returned.

(Candie Beck is a staff writer and can be reached at 505-1238 or candie.beck@thecabin.net)