These days you have to be careful when selecting a company for all types of services, including surety bonds. There are companies out there illegally issuing bonds which can cost hard earned money and threaten the livelihood of your business; this is exactly what happened to a contractor in Virginia.
The Virginia State Corporation Commission Bureau of Insurance shut down a Virginia insurance agent and two companies while fining them a total of $280,000 for the fraudulent vending of surety bonds for public construction projects. President of Genesis Business Group Inc., Don Delwyn Tuzo was fined $115,000 including an additional $50,000 fine for another company of his named Genesis Capital; Virginia law authorizes regulators to enforce a fine of $5,000 for each offense. Genesis Business Group Inc. was acting as an insurance broker licensed to sell surety bonds while Tuzo’s other company, Genesis Capital, was acting as the surety issuing the bonds. Authorities stated that Genesis Capital provided bogus and deceptive information relating to the assets supposedly supporting the bonds. According to Tuzo, the illegal bonds were backed by land assets.
At a hearing in October, Larry Beadles testified that in 2009 Tuzo contacted B&R Construction Management Inc. offering to provide surety bonds for its state and local construction projects. Beadles said there were a total of five projects Tuzo sold bonds for.
The projects included:
• A $1,102,000 performance and payment bond to Portsmouth Redevelopment & Housing Authority for B&R’s work involving the Jeffry Wilson Housing Project.
• A $713,486 performance and payment bond to the City of Portsmouth in connection with B&R’s demolition of Hunt Mapp/Willett Hall for the City of Portsmouth, Va.
• A bid bond of $200,000, and performance and payment bonds of $373,000 for B&R’s construction of a K-9 facility for Virginia Beach, Va.
• A bid bond for $50,000, and performance and payment bonds for $732,616 in connection with B&R’s construction of a visitor center for the Virginia Department of Conservation and Recreation.
• A bid bond for $25,000 for B&R’s bid for the Jarmin Road/Crossways Boulevard site construction project in Chesapeake, Va.
This encounter with Genesis Business Group Inc. and Genesis Capital demonstrates how important it is to carefully look in to the surety company issuing your bond. Unfortunately B&R most likely won’t get the money back that has been lost with these bad bonds simply because there doesn’t seem to be any resources to support the bonds. Not only does the contractor lose money, they may also lose the job for which they had the bonds for in the first place. One of the main things you should research when considering a company is the surety’s financial strength since they will be the ones backing the bond. You can get a good idea of a company’s financial condition by looking at their rating from a nationally recognized rating service such as A.M. Best. Another important list to view is the Circular 570 Treasurer Listing which is the Department of the Treasury’s listing of approved sureties. This can provide some piece of mind that a company you are considering is qualified to issue or sell bonds.
Many companies are available when it comes to providing surety bonds. It’s important to weed out any potential frauds because it can cost not only money but the welfare of your business. Do the necessary research and you will be that much closer to obtaining a legitimate bond.
The state of Arkansas enacted a new law concerning vendors within the state. Titled HB 1002/SB26, the new law asks vendors to acquire a performance bond, letter of credit or securities for contracts with the Arkansas Lottery Commission; the commission will establish the required surety bond amount. All lottery retailers also have to place a surety bond or alternative security in a quantity that cannot surpass the average ticket revenue throughout two billing periods. Any staff handling the Lottery Commission’s funds or lottery revenue must obtain a surety bond in an amount that the Commission will establish. HB 1002/SB26 became active on July 1, 2009. 
A new law was enacted concerning guaranteed energy savings contracts in the state of Massachusetts. The new law, SB 2768, demands a performance bond for all guaranteed energy savings contracts. The performance bond quantity must be 100% of the contract value from a surety company licensed in the commonwealth and also must be listed on Circular 570 of the U.S. Treasury Department. Such energy savings contracts entail the procurement of energy management services in order to accomplish energy savings at public facilities and establishments. 
On 05/26/2008, a new law was introduced referred to as HB 2436. The new North Carolina law permits the North Carolina Department of Health and Human Services to have discretion when requiring Medicaid-enrolled suppliers to provide a performance bond, letter of credit, or an alternative financial instrument in an amount no more than $100,000. Previous law required the bond as a stipulation of receiving Medicaid payments. HB 2436 states that the health department may require a surety bond when the provider has failed to display financial viability, if it is concluded that “significant potential” for deception and fraud existed, or if the department determines that it is best for the Medicaid program. 
SB1289, enacted on April 28, 2008 and made effective October 10, 2008, created flood protection districts and a Board of Directors for each district to construct flood protection facilities. The new law states that performance and payment bonds are required for any construction, and clarifies the process for claims against the performance and payment bonds. The surety has 60 days to act upon a contractor found to be in default by the board or the board may re-let the contract. If the costs to complete the project surpass the finances available for payment, the defaulting contractor’s surety has 20 days after mailing of the notice to satisfy the board’s demand for payment of the difference. This demand cannot be more then the penal sum of the bond, and monies must be used to pay for the costs of completing the work. Delivery of writ may be served on the Surety’s principal office or it’s Attorney-In-Fact. If there is no office or Attorney-In-Fact, it may be service on the insurance commissioner.
