INVESTIGATIVE REPORT - In too deep: Some pool owners in the hole when company goes under

Nestled in suburban neighborhoods, about 50 North Texas homeowners invested in a little backyard fun in 2007 and late 2006. But their investments for swimming pools went shallow after their pool company shut its doors, some projects still unfinished. 

A few families ended up with concrete holes in their once-grassy backyards. Others forked over tens of thousands of dollars to fix what wasn’t done right. But, all remaining customers were left with a “defunct” pool company called Outback Design, as defined by the owner himself. Gary Ross closed his company in late November, leaving its former customers treading water ever since.

The homeowners mostly live in Flower Mound, but trickle out into Frisco, Southlake, Coppell and Dallas. Now, they're on a few subcontractors' “most-wanted” lists n a scrawl of hand-written notes marking missing payments for work the subcontractors say they already completed. 

 “We tried to do our best,” said Ross, the former owner. “Nobody’s happy about what occurred. It’s not a happy situation.”

It’s also not a new phenomenon, said Trey Poer, the owner of Poer’s Custom Pools n a company unaffiliated with Outback Design. The turnover rate for pool companies is “fairly high,” he said, because some owners get into the pool business with only a limited amount of knowledge.

“They think, ‘All I have to do is dig a hole and put in plumbing and plaster,’” said Poer, who builds mostly in Dallas. “I wouldn’t call us an esteemed profession.”

A handful of Ross’ customers say they are still paying a price, as they try to ward off payment demands from subcontractors n money the families say they already gave to Outback Design.

The town of Flower Mound has also restricted the company’s registration, said town spokesperson Mark Wood. Because Outback Design has “stopped work on several people’s pools,” Wood said company employees can no longer obtain permits, as of December 2007.

“Gary truly believed he’d catch up. In his mind, he truly believed he could pull it off,” said Doug Taylor, who acted as Ross’ project manager, service manager and permit facilitator during his year with the Flower Mound-based company.

But, the company went under a month before Christmastime. And not even Ross n its leader for five years n could resurrect it. Its legacy and lawsuits live on.

Coming after the common man

When a company like Outback Design goes under, it isn’t the only thing that sinks.

Some homeowners, left with unfinished business in their backyards, are now being threatened by subcontracting companies who say Ross never paid them for their work. Instead of going after Ross, they’re snarling homeowners.

“In going out of business, (Ross) has left a tremendous amount of people, taken their money and left their pools unfinished,” said Rodney Dorman, subcontractor and employee for Sierra Steel and Plumbing. “The only way we could recover our money is to get it from the homeowners.”

When the company closed its doors more than two months ago, Ross said he divvied out the unfinished projects accordingly.

“If there were any projects that weren’t completed, they were given to someone else to complete,” Ross said. “Nobody lost money.”

Subcontractors say otherwise. The bad news comes in the form of “trapping notices,” which are legal statements issued by a subcontracting company to a homeowner, asking them to pay up. After subcontractors remained unpaid by Ross’ company n such as the $60,000 owed to Sierra Steel and Plumbing, according to Dorman n homeowners become targets.

“It’s the citizen and the customer that (are) getting harmed here,” said Robert Hudson, former general manager of Outback Design, who quit in April 2007 when he saw the “poor financial situation” of the company.

Hudson has since taken a job with American Gunite, a subcontracting company that he says is still owed money by Outback Design.

Though the stress has brought higher expenses into one Flower Mound resident’s backyard, Heather Whiting says money is only part of the headache. In 2007, she paid Outback Design for half of a pool before the company went under. Today, her pool is still under construction.

“If I had it to do over, I’d just pour concrete in it,” Whiting said.

She said her family has been threatened with three trapping notices from three subcontractors who are trying to get paid for a job they’ve already done. Her kids, ages 2, 4 and 6, aren’t allowed in their backyard because of the dangerous, gaping hole, she said.

But, ask some subcontractors or homeowners n even those involved in legal battles with one another n to point a finger at the source of the problem, and it all comes back to the same person.

“It’s amazing to me how (Ross) just gets away with this,” said Christine Davis, a Flower Mound homeowner.

And, from a subcontractor: “This is more than just a bad businessman. He’s stepped across the line,” Hudson said.

On Feb. 1, a peace officer at the Denton County Sheriff’s office rescinded a warrant for Ross’ arrest. Ross was suspected of stealing two pieces of pool equipment in November that were installed at a Lantana resident’s home, according to Denton County affidavit for arrest warrant.

“I did recall the warrant, but investigation is still continuing,” said Officer Larry Kish.

The investigation has escalated, he said, and is currently under review with the district attorney’s office.

Ross’ lawyer, who wished to remain unnamed, said he could not comment on any facts of the case because of another situation: A civil lawsuit between Outback Texas Pools and former employee, Hudson. A temporary restraining order was filed against Hudson on May 3, 2007. Four days later, Hudson returned a restraining order against Ross’ company.

The end of Outback

Ross is glad to point customers n even after his company has folded n to a time when Outback Design was stable.

The company, also called Outback Pools LLC, Outback Texas Pools and potentially other names, had been in business for “about five years,” Ross said. But, the Better Business Bureau (BBB) n which Ross touts as a good source to check the credibility of his old company n says Outback Design was open for eight years.

Ross said his company ran out of money in 2007 after the wet summer. Six pools caved in during the 100 days of rain, Ross said, and they had to be completely redone on the company’s dollar.

From there, the business spiraled downward, Ross said.

“How am I going to pay bills if no money’s coming in?” he said.

Taylor also said salespeople in the company were told by Ross to sell the pools at cost n or even less than that n to persuade people to do business with Outback Design.

“We got phone calls like you won’t believe, for a pool company. (Customers) saw our signs … and said, ‘We got a great deal.’ Yeah, because our company didn’t make any money.”

Hudson and Sam Rogers, a former Outback employee, also confirmed the company undersold pools to make money. Ross agreed the tactic didn’t work.

“We gave too much away, and that was probably part of our problem,” Ross said.

“But, I was just a guy out to build projects,” he said. “I wasn’t the greatest businessman. Unfortunately, I paid a price.”

Though some homeowners claim Ross “went bankrupt,” Ross said he wouldn’t comment on the financial state of Outback Design. Two records clerks confirmed that no bankruptcy report has been filed with the Texas Bankruptcy Courts’ Eastern District or Northern District under Ross’ name or under the company name.

Still, Jim Striegel, a real estate agent in Flower Mound, said Ross did “very good” work on his pool and retaining wall. Striegel hired Ross after another pool company did an unsatisfactory job the first time, Striegel said.

“The work that Gary has done for me, I am very pleased and happy with,” he said.

Homeowners Whiting, Davis and Doug Lester disagree n they can count exactly how much money was lost. Subcontractors Dorman and Hudson are keeping a tally too. And Rogers, Ross’ former vice president of operations, lost money, a career and a friend.

Study No. 1: Sam Rogers

In late 2005, Rogers said Ross called him at his home in Australia, offering a sales pitch he couldn’t refuse: Come back to the United States and work for a pool company that’s bringing in $600,000 a year in profit.

Ross and Rogers had been friends for about 15 years, and their wives were close too, Rogers said. Within about a month, Rogers convinced his wife n a native of Australia n that Ross’ pool business was a good investment.

“He sold me so well that I spent $70,000 to move my family to another country,” Rogers said.

Rogers became Ross’ vice president of operations. But, within two weeks, Rogers said he could tell “something was wrong.” Six weeks into it, it was too late to get out, he said.

“I had just sold off everything to come over here, so I just kind of rolled up my sleeves and tried to make a go of this,” Rogers said.

Rogers claims Ross owes him about $15,000 in commission from his one year at Outback Design. Rogers also said he invested an undisclosed amount of his own money into the company, “trying to keep it afloat.” The money has since been lost, Rogers said.

Another employee, Taylor, was also owed about $2,000, he and Ross confirmed. Taylor stayed until the company folded, and afterward, Ross allowed him to take a used refrigerator and a computer monitor, which equaled about $600 in payment, they both said.

“I couldn’t help everybody,” Ross said. “What I had left, I gave to everyone else.”

On March 19, 2007, Rogers said he walked away from Outback Designs for good. He has since started a new pool business called Pearl River Design and Construction. Neither he nor his wife have a relationship with Ross anymore, he said.

“Upfront, when you listen to him, he’s a smooth salesman,” Rogers said. “Once you’ve signed your contract, you’re stuck.”

The way it works

When money’s at stake, paying for a pool is like a double-edged sword, Poer said.

Most pool businesses, including Ross’, present contracts for a several-step payment plan for the pools. Generally, contractors ask for 30 percent at the time of the dig, 30 percent when the gunite is sprayed, 30 percent for the decks and the last 10 percent when the pool is plastered, said Hudson, Ross’ former general manager at Outback Design. Taylor agreed that most contracts with Outback Design were done in this manner, and Poer said he’s also used it in his contracts.

Lawyers suggest that homeowners hold the last 10 percent until the pool is completely finished so that the homeowner has leverage over the general contractor if the job isn’t done right.

But, the company was able to garner advance payments on some pool projects, Rogers said. Ross was unavailable to verify this claim on Feb. 14 because the number was disconnected.

“(Ross) would say, ‘Look, make the payment or we won’t do it.’ They’d have that stalemate,” Rogers said. “Usually by that time, people were either so far behind that they were happy to pay it and get him out of the backyard, or they were so upset because things hadn’t gone the way they wanted, that they were fighting n nickel and diming n over last-minute pieces.”

Taylor agreed. “We were behind financially all the way around. … We were never getting the profit in there,” he said.

But Poer said he can’t blame Ross for asking for final payment.

“We’re stuck waiting forever to get that last payment, and that’s typically our profitability,” he said.

Lester was one such homeowner that was persuaded to pay before the job was done, he said. He paid Outback Design 100 percent n “a mistake,” Lester said in hindsight.

His pool was 99 percent finished when Ross and his crew stopped showing up to do the last-minute fixes, Lester remembered. Though he said no one from Outback Design will come back and finish the job, he said he’d rather just pay the $1,000 out-of-pocket to another company so his pool is usable.

But, his tangle wasn’t over. The Flower Mound resident has received a trapping notice from a concrete company, threatening to file a lien. Another trapping notice came two days later from another subcontractor, he said.

“It was a big shock,” Lester said.

The law on liens

A hassle, yes. A lost cause? Definitely not, said attorney Paolo Flores.

Some homeowners charged with liens simply throw their hands up, unwilling to pay attorney’s fees to get it taken care of, said Dallas attorney Anne P. Stark.

“It’s not easy, and it’s not inexpensive,” said Stark, a construction law expert.

But, if homeowners attempt to fight the liens, they will probably win, Flores said. Often, a demand letter from a lawyer is enough to scare a subcontracting company away or to get the lien released, he said. It also means homeowners would have to pay hourly lawyer’s fees, however.

According to Texas Property Codes, there is no contract whatsoever between a subcontractor and a homeowner, Flores advised.

“There is no direct obligation. That’s true with any construction relationship,” he said.

The only way subcontractors can get money out of an owner, then, is through a mechanics lien or a construction trust fund, each laid out in Texas Property Code in chapter 53 and chapter 162, respectively, Flores said.

The rules for a mechanics lien are stringent and often invalid from the start, he said.

The purpose of trapping notices is generally to scare a few homeowners into paying up without having to go to court, Flores said.

“You can’t blame them for trying,” he said. “They’re just trying to get paid.”

Lester was aware of his legal rights, he said.

“One of the (subcontractors) went so far as to attempt to file criminal charges,” Lester said. “My attorney had a good laugh over that one.”

The potentially complicated process has scared other homeowners away from getting involved with a lawyer.

Whiting, a Flower Mound homeowner, said she’s probably lost up to $10,000 in construction costs n “not including the potential liens we may end up paying.”

“I’m just real cynical right now,” she said.

Study No. 2: Christine Davis

When Christine Davis looks at her backyard, she can’t help but grimace.

“The pool is a mess,” she said of the job done first by Outback Design and then patched by another pool company. “I can show you a picture of what I was supposed to get and a picture of what they’ve done. It’s completely incorrect.”

The town of Flower Mound has trailed and cited Ross for 22 jobs in which Outback Design violated town standards since 2004. The company paid nearly $3,500 in fines for 13 of the citations, and nine were dismissed, Flower Mound records show.

Ross said the citations were oversights n his team’s responsibility, not his.

“Every builder relies on the integrity of their project manager to have that taken care of,” he said.

Also on record is a violation filed by Dustan Compton, environmental review analyst for Flower Mound, who wrote in the report that gunite was improperly disposed of at a Flower Mound home.

“The inspectors noticed a ‘trail’ of blue gunite leading to the back of the property,” ticket No. 2360 reads. “Between June 19 and June 30 (both in 2006), 90 percent of the material had been removed. As of July 3, 2006, there are still remnants of the material on the ground.”

Ross again said the run-ins with the city were his subordinates’ fault.

Poer said citations for environmental waste are generally “negligence” on the part of the pool builder. However, Poer said Flower Mound officials are more watchful than other cities.

“I would say that on a statewide perception, (Flower Mound) is considered one of the most strict,” Poer said, who has built about five pools in Flower Mound.

At Davis’ house, the family hired a second pool company to complete her pool and clean up the “mess” she said the Outback Design crew created.

The added expenses tally up to about $15,000 more than it would have cost if Outback had finished the entire job, Davis said.

The first $50,000 went to Outback Design for the initial stages of the pool. When the company folded, Davis said she paid Rogers’ pool company, Pearl River Design and Construction, to fix the cavity in her backyard. Another $40,000 has been paid so far to Pearl River Design and Construction, Davis said.

“Even what Gary did do, he did incorrectly,” she said. “Now, I’ve got somebody in here trying to fix what he’s done.”

What’s next

Outback Design has been closed for two-and-a-half months, but Ross said his grief from the folded operation has left him feeling lost.

“It sickens me on a daily basis,” Ross said. “I was just a guy trying to run a business.”

When asked what his profession has been since Outback Design folded, Ross said he is “currently not in the pool business.”

However, Hudson and Rogers say Ross is doing design work for Complete Land Sculpture, a Dallas-based pool and landscaping company. Ross said he is freelancing for the company, but “hasn’t signed on to work anywhere.”

“I have nothing with them at the moment,” Ross said.

What’s Ross’ next step? He doesn’t have one yet, he said. But, Davis is worried Ross may continue contracting pools, she said.

“The system allows him to just go out and put himself in business again,” she said.

Pool owners in Texas are not required to get a license, Poer said. Though groups like the Association of Pool and Spa Professionals (APSP) offer training, he said there isn’t a mentor program or publications to guide new pool builders. Poer explained that a business owner only needs to pay a registration fee n in Flower Mound, it’s $125 per year, said Wood n before digging a hole.

“You would not need to show any competency whatsoever to make pools. Truly, it is that easy,” Poer said, who is trying to get legislation changed to make pool owners obtain state licenses.

For now, subcontractors are slowly eating through lists of unfinished business, trying to gather funds by sending trapping notices out to homeowners.

For Ross, his cracked Australian accent voiced concern for his future.

“I’ve lost everything that I’ve had, and it’s not over for me,” he said.

Contact Staff Writer Sarah Blaskovich at 972-628-4074 or SBlaskovich@acnpapers.com

NEWS YOU CAN USE

Subcontractors versus homeowners

-In most cases, no contract between a homeowner and a subcontractor exists, said attorney Paolo Flores.

-One way a subcontractor can trap a homeowner for money is through a mechanics lien, which is “almost impossible,” Flores said.

**Some limitations, Flores said, include:

*The first notice is due on the 15th day of the second month

*The second is due one month later. “That’s an extremely short time period,” Flores said.

*Husband and wife both must sign contract. If only one signs, lien is invalid.

*Contract had to have been notarized.

-Though it may be expensive to pay lawyer’s fees, said Anne P. Stark, a construction law expert, the end result will probably be successful.

-“It is highly likely that these liens are invalid,” Flores said.

--SOURCE: Personal interviews

ON THE RECORD

The following citations and warrant were found in a search to uncover records about Outback Design. For space reasons, this list does not include all records.

Jan. 22, 2008: Warrant of arrest issued for Gary Ross for theft of $500-$1,500 from a Lantana homeowner’s backyard. A peace officer for the Denton County Sheriff’s Office issued the warrant and rescinded it Feb. 1.

Sept. 14, 2007: Small claims case closed, Ray Terrell versus Outback Pools LLC/Outback Design LLC. The plaintiff, Terrell, lost the case.

Aug. 8, 2007: Robert Hudson, former employee of Gary Ross, filed for bankruptcy in the United States Bankruptcy Court Eastern District of Texas, Sherman Division, as a result of a district court lawsuit called Outback Texas Pools, LLC/Outback Design versus Robert Willard Hudson, Jr.

July 17, 2007: Robert Hudson files an affidavit statement of fact with Denton County that says that Gary Ross used company money as personal income.

May 31, 2007: Ross cited for failing to get final inspection on two pools in Flower Mound; dismissed two months later

May 2007: Lawsuit filed between Outback Texas Pools LLC and Robert Hudson, with Hudson as the defendant. A temporary restraining order was delivered to Hudson, as requested by Outback Design. Hudson then had a restraining order delivered to Outback Design four days later.

April 2007: Ross cited for failing to get inspection or final inspection on three pools in Flower Mound; all three were dismissed.

June 2006: Ross cited for failing to get inspection or final inspection on six pools in Flower Mound; paid $255 each for five; one was dismissed.

June 2, 2006: Flower Mound ordinance violation was written to Gary Ross for improper disposal of gunite at 2100 Beachview Drive.

May 2006: Ross cited for failing to get inspection or final inspection on four pools in Flower Mound; paid $255 each for all four.

--SOURCES: Personal interviews, Flower Mound records, Denton County records

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