Dispute between out-of-state companies leaves local contractors unpaid
By Adam Hocking
MARSHFIELD — Local contractors are caught in the middle of a squabble between two out-of-state companies over money owed on student housing projects at UW-Marshfield/Wood County and UW-Baraboo/Sauk County.
Bluffstone LLC, out of Iowa, was the developer for both projects: the Villas at Marshfield and Villas at Baraboo. Wallmasters Modular Inc. is a Kentucky-based contractor that worked on both projects, and CEO Timothy Morrison says his company has not been paid in full by Bluffstone for work done on the projects, a claim Bluffstone disputes.
Wallmasters owes money to local contractors it used as subcontractors on the projects. Morrison indicated that Wallmasters cannot completely pay those subcontractors until his company is fully compensated.
The Marshfield Police Department is investigating the local situation, where several contractors claim they have not been paid a combined total of about $450,000 for work on the Villas at Marshfield, which opened to students in fall of 2014.
The parties involved in the dispute are headed for mediation in late March. Binding arbitration could follow mediation if there is no settlement, according to Bluffstone’s Director of Student Housing Operations Kelly Young.
University Foundation hires Bluffstone
A private organization, The University Foundation: UW-Marshfield/Wood County, supports the activities of the University of Wisconsin-Marshfield/Wood County. The Foundation owns the land on which the Villas were built and leased the land to Bluffstone to construct the student housing.
“We did extensive background and reference checks on Bluffstone before we went into an agreement with them,” said Foundation Executive Director Roxie Wetterau. “There were no red flags of any kind at that point in time.”
The heart of the conflict
For the Marshfield and Baraboo projects, Bluffstone hired a company called Build to Suit, also based in Iowa, to be the construction manager, Young said. Young added that Wallmasters and a company called IDBS were then hired “to perform turnkey construction projects.”
Morrison said that the issue of local subcontractors not being paid stemmed from an initial problem between Bluffstone and IDBS. IDBS was contracted on the projects in Marshfield and Baraboo to provide the structures for the modular apartments.
Morrison said that Bluffstone believed IDBS was providing more work on the project than was detailed in the contract between the companies.
“They really didn’t read their contract that they had with IDBS,” Morrison said. “Everything that they believed that IDBS was providing them, it turned out that it was detailed in IDBS’ contract that those particular items were explicitly excluded, and they were massive amounts of items that were specifically excluded under their exclusions.”
Morrison said that Bluffstone then turned to Wallmasters to complete the tasks that were allegedly excluded in IDBS’ contract. He said Bluffstone owes Wallmasters $1.3 million “worth of work that they have not paid for.”
Young said that the money flowed straight from the title companies involved in the projects to Wallmasters. Hub City Times contacted Gowey Abstract & Title in Marshfield, who Young said was the title company involved with the Marshfield project. Gowey Abstract & Title would not discuss the matter with Hub City Times.
“The Villas has paid IDBS and Wallmasters everything owed on both projects and is confident that the arbitration process will result in a decision in The Villas’ favor,” Young said in an email to Hub City Times.
Young described The Villas, which Bluffstone owns, as an “LLC holding company” that entered into the agreements for the projects in Marshfield and Baraboo.
Morrison said that his company has proof that “every single dime” that Wallmasters received for its work on the projects was spent directly on the projects.
Marshfield police investigating
Detective Allan Neinast from the Marshfield Police Department said he has confirmed that Wallmasters has been paid at least $771,000 for the Marshfield project. However, Neinast has only been able to verify — through discussions with subcontractors and lien waivers he has received from Gowey Abstract & Title — that at least $325,000 has been paid out to the subcontractors from Wallmasters for the Marshfield project.
Neinast said subpoenas for Wallmasters’ financial records “will or have been” drafted.
“I personally spoke with 14 subcontractors. Some of them told me they were paid in full. Some of them told me they hadn’t been paid at all. Some told me that they were partially paid,” Neinast said. He later added, “The subcontractors that I’m aware of that have issues had contracts with Wallmasters.”
Former Wallmasters employee speaks out
John Nikolai, the president and principal owner of McMillan Electric, which performed work on the projects in Baraboo and Marshfield, said he is owed money for his work in Baraboo and “never dreamed that anything like this could happen.” McMillan Electric signed contracts with Wallmasters for both Marshfield and Baraboo within a few weeks of each other, Nikolai said.
Emails sent to Hub City Times by Nikolai show that Steven Terry, a former employee of Wallmasters, reached out to the mayors of both Baraboo and Marshfield in May of 2014 to warn them about the ongoing projects.
Terry said in his email that Wallmasters “has misappropriated funds across (3) contracts leaving them all in a financial deficit; i.e. robbing Peter to pay Paul. They have repeatedly fleeced their client, Bluffstone, LLC. and the University of Wisconsin.”
“I was an employee with them and resigned on 5/8/2014 because I did not want to be affiliated with the firm,” Terry wrote. Terry added that he notified Bluffstone of the situation. He wrote that at the time of the email, Wallmasters had “invoiced and/or received nearly $800k for the projects and cannot pay employees or subcontractors because they have squandered the money on travel and entertainment vs., allocating the funds to the projects.”
Young wrote a letter to then UW-Marshfield/Wood County Dean Patricia Stuhr in May of 2014 saying that Wallmasters had “provided information regarding Mr. Terry” and Terry’s email seemed to be “an unfortunate communication made by a disgruntled, former employee.”
Young’s letter also said, “As you had speculated, there is no credibility to the author’s (Terry’s) statements, but we have taken the time to look into each allegation.” Young added that Bluffstone “fully vetted” Wallmasters prior to hiring them for the projects.
Morrison also discredited Terry’s statements when he spoke with Hub City Times.
“Steven Terry was fired because of nonperformance,” Morrison said. “Every single allegation was proven to be false.” Morrison said that Terry had no involvement with the Marshfield and Baraboo projects.
City, Foundation distance themselves
Marshfield Mayor Chris Meyer said that when he received the email from Terry he forwarded it to Stuhr but that the issue was not a matter the city could mediate as it involves a dispute between private contractors, and the Foundation is also a private organization.
“This is a private business matter,” Meyer said.
Wetterau said that she also received Terry’s letter but thought little of it at the time.
“It (the letter) didn’t concern us. … It was an employee of a company that had no direct relationship with the Foundation,” Wetterau said.
Nikolai said he does not know where the problem of nonpayment originated and that he does not accuse any particular company of wrongdoing.
“All I know is what I know, and that’s a whole bunch of contractors didn’t get paid, and we need to get paid — and not just me, every one of them,” Nikolai said.