Understanding Theft by Contractor in Wisconsin: Know the Law

Understanding Theft by Contractor in Wisconsin

Wisconsin law provides severe penalties for violation of its Theft By Contractor statute. Wis. Stat. 779.02(5). If a contractor (typically prime contractors) is found to have stolen funds that are to be paid to a subcontractor for services and/or materials, the prime contractor could face criminal charges, civil lawsuits, and could result in personal liability of the prime contractor’s corporate officers. Here’s a simple breakdown of what this law means and how it works.

What is Theft by Contractor?

When a project owner pays a prime contractor, the funds are required to be held in trust by the contractor until all subcontractors and suppliers have been paid. If the contractor uses that money for anything else, the contractor may be liable for Theft By Contractor.

Elements of a Claim for Theft By Contractor

1. Prime Contractor: A Prime Contractor is defined by Wis. Stat. 779.01(2)(d) as:
   • A person, other than a laborer, including an architect, professional engineer, construction manager, surveyor, or other service provider, employed by the owner, who enters into a contract with the owner of land to improve the land, or who takes over from a prime contractor for an uncompleted contract.
   • An owner of land who acts personally as the prime contractor in improving such land.
2. Received Money: The contractor must have received money from the project owner or a lender.
3. Misuse of Funds: The contractor intentionally used the money for purposes other than paying of legitimate claims for labor and/or materials.
4. Without Consent: The use of the money was without the owner’s or lender’s consent and was contrary to the contractor’s authority.
5. Knowledge: The contractor knew they were using the money without consent and contrary to its authority.
6. Intent: The contractor intended to convert it for their own use or someone else’s.

Consequences

• Criminal Charges: Although not common, contractors can face criminal prosecution for theft of trust funds.
• Civil Lawsuits: More often, contractors face civil lawsuits. If found liable, the contractor also must pay triple damages and must pay reasonable attorneys’ fees to the subcontractor.
• Personal Liability: Corporate officers can be held personally liable, even if they did not benefit personally.

Avoiding Problems

To avoid potential violations, Contractors should:

• Keep strict payment procedures.
• Maintain detailed records and documentation of all payments received, payments made to subcontractors and/or material providers, and of all lien waivers.

Halling & Cayo, S.C. is here to help Prime Contractors and Subcontractors. If you are a Prime Contractor and you are being accused of violating the Theft By Contractor statute, you should seek immediate guidance from an experienced business litigation attorney. The attorneys at Halling & Cayo, S.C. have helped Prime Contractors like you to work towards an amicable resolution. If you are a Subcontractor or a service provider that has not been paid, the experienced attorneys at Halling & Cayo, S.C. have helped people just like you get paid for the materials and/or work that were provided for a job. Please contact one of our attorneys for a free consultation today.