[CPEO-MEF] --CORRECTED-- Many Texas Homeowners Clash With Builder Over Tract Houses

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The following archive entry has been updated to reflect the Wall Street Journal's corrections.____________________________________________

Texas
THE WALL STREET JOURNAL
Texas Showdown
Texas Homeowners Clash With Builder Over Tract Houses
KB Home Attributes Conflict To Activist Who Faces Criminal Prosecution

Mrs. Ahmad and the Bomb
By QUEENA SOOK KIM
August 18, 2003
(See Corrections & Amplifications item below.)
SAN ANTONIO, Texas -- KB Home promotes itself as a company that builds
inexpensive tract homes for people such as Elena C. Rocha. The
68-year-old restaurant worker spent her life's savings of $123,000 on a
new KB home here last year.
But soon after she and two grown daughters moved in last September,
problems surfaced. She says a toilet malfunctioned, a hallway wall
separated from the ceiling, and water leaked in beneath the front door.
The Rochas made repeated complaints to KB, some of which the company now
acknowledges it ignored. Frustrated, Mrs. Rocha and her older daughter,
Grace, joined about 15 protesters, including other disgruntled KB
customers and homeowner activists, on a road leading to a nearby company
sales center.
In March, KB responded. The Los Angeles-based homebuilder, one of the
nation's five biggest, sued Mrs. Rocha and eight other alleged
protesters in a state court in Tarrant County, Texas. The suit seeks $20
million in damages for what the company says was the malicious damage
the defendants did to its reputation and business.
KB has since dropped Mrs. Rocha and some others from the suit, leaving
only one KB homeowner among the remaining defendants. But sitting at her
dining room table, Mrs. Rocha recounts many sleepless nights and worries
that somehow the company will take away her house.
Builders say they are facing an increasing number of
construction-related lawsuits as new homes go up at a record pace
nationwide. But disputes involving KB in Texas -- where the company
sells nearly a third of its homes -- stand out for the aggressiveness
displayed by both sides.
In addition to twice taking the rare step of suing customers, KB has
threatened to publicize two adversaries' criminal records. It has
snapped pictures of protesters and their car license plates. KB has also
tangled with the Army Corps of Engineers over the safety of a KB
development in Arlington, Texas, built on the site of a former bombing
range.
Since late 2001, more than 100 homeowners have filed suit against KB in
Texas, plaintiffs' lawyers say. The vast majority of those plaintiffs
are involved in a pair of suits concerning whether KB made sufficient
disclosure of conditions at the subdivision in Arlington, which opened
in 2000. A KB spokeswoman declines to say how many customers are suing
the company nationwide, but adds that the litigation "doesn't have a
material effect on the company." KB sold 7,873 homes in Texas last year
-- 31% of its nationwide total of 25,565.
The company attributes most of its problems in Texas to Janet Ahmad, an
amateur consumer activist from San Antonio. She has never owned a KB
house but has made a personal mission of going after the company. KB
named Mrs. Ahmad in the Tarrant County lawsuit, accusing her of slander
and employing sensationalist tactics to draw media attention. Last week,
a Tarrant County grand jury indicted her on charges of planting a small
World War II-era bomb at the Arlington subdivision in January 2002. She
faces two felony counts for fabricating or tampering with evidence to
influence a civil lawsuit and a police investigation. KB has also
accused Mrs. Ahmad of orchestrating pickets and hiring day laborers to
bolster their numbers.
Mrs. Ahmad denies planting the bomb or hiring stand-in protesters. "This
is nonsense," she says of the indictment. "How do you accuse someone of
planting a bomb on a bombing range?"
John J. Walsh, an outside lawyer for KB, said in a letter Friday that
"Ms. Ahmad's credibility is under clear and direct attack from the Texas
authorities." He condemned "her sheer recklessness, her lack of
acquaintance with the truth, and the fact that her picketing and
media-generating campaigns are causing great distress and pain, and
threatening economic loss of value to the satisfied KB Home buyers in
the Texas subdivisions she has singled out."
The company makes no apologies for using tough tactics when faced with
what it considers false accusations concerning a small fraction of its
customers. "KB has an obligation to protect its institutional integrity,
its shareholder value, its employees and its thousands of satisfied
purchasers," Mr. Walsh said in an earlier letter. The company says it
carefully tracks repair requests and tries to respond quickly.
Mrs. Ahmad and her allies say their tactics are legal. The 61-year-old
wife of a physician began her campaign against builders and contractors
in the 1970s, after a protracted fight with the builder of her own home.
She heads Homeowners for Better Building, an advocacy group based in San
Antonio.
Formerly known as Kaufman & Broad Home Corp., KB was started in 1957 by
developers Donald Kaufman and Eli Broad to build a limited selection of
inexpensive houses. KB's sales in Texas have slumped lately because it
has sold out of houses in San Antonio and has struggled in the Austin
area, where a technology-heavy local economy is limping, says Larry
Oglesby, KB's regional general manager. Bad publicity from protests and
suits has also hurt, he says.
But nationwide, KB's revenue rose 10%, to $5.03 billion, in the fiscal
year that ended Nov. 30, 2002. The company improved its profits by 47%,
to $314.4 million, by raising prices, mostly in California, and offering
upgrades, such as whirlpool tubs. Its stock closed at $56.94 Friday in
composite 4 p.m. NYSE trading, down from a 52-week high of $71.55 in
June. Analysts attribute the stock's slide to rising interest rates,
among other factors.
In the late 1970s, the Federal Trade Commission accused KB of selling
homes in Illinois with serious defects. Without admitting or denying
liability, the company settled the allegations in 1979 by agreeing to a
consent decree. The judicially enforced decree prohibited KB from
requiring that consumers submit complaints to binding arbitration. This
cleared the way for unhappy customers to sue KB in court. Companies
generally see expert arbitrators as more sympathetic to them than lay
jurors are.
A homeowner's suit, filed in March in federal court in Laredo, Texas,
showed that KB was enforcing mandatory-arbitration clauses. After much
wrangling over what the consent decree forbade, KB has reaffirmed that
the decree broadly bans mandatory arbitration. In July, the company
began sending letters to tens of thousands of homebuyers, telling them
they need not submit to binding arbitration if they prefer to sue.
Almost all of the more than 100 homebuyers suing KB in Texas live in
Southridge Hills, the subdivision in Arlington. KB built the development
on land used by the Navy in the 1940s as a practice-bombing range, and
people still occasionally find ordnance in the area. The explosives are
about eight inches long and resemble tiny torpedoes. The Army Corps of
Engineers has said in public meetings that people who come across the
practice bombs should call 911, so emergency workers can dispose of them
safely. There haven't been any explosions at Southridge Hills.
About 550 families have moved into Southridge Hills so far. The
homeowner suits filed in Tarrant County allege that KB failed to
disclose fully the presence of the ordnance. The suits had been held up
by legal skirmishing over the arbitration issue, but with that issue now
resolved, plaintiffs' attorneys say they hope the cases will move
forward.
KB says the suits are baseless, asserting that it has made all proper
disclosures in its sales documents. KB's outside lawyer, Mr. Walsh, said
in his letter that "the site was long ago remediated and certified by
the U.S. government and the [Army] Corps of Engineers as free of any
hazards from its former use."
But the Army Corps of Engineers disagrees. In a September 2001 letter,
the corps responded to an inquiry from a plaintiffs' lawyer by saying
that there wasn't a danger of chemical contamination at Southridge
Hills. KB obtained a copy of the letter and began distributing it to
buttress the contention that there was no safety risk at the
subdivision.
This prompted the corps to send KB a letter in November 2001, demanding
that the company cease misrepresenting the government's position. The
corps said that any old bombs remaining at the subdivision could pose "a
potential safety hazard, i.e., one which could hurt or kill someone if
not properly handled."
Brian Condike, a project manager with the corps, says in an interview
that the agency recently awarded a contract valued at nearly $1 million
to clear Southridge Hills of remaining ordnance. "If we thought this
site was safe, we wouldn't be awarding all this money to remove these
items," Mr. Condike says. The cleanup is scheduled to start in October.
Mr. Condike says that the remediation and certification to which KB
referred is a clearance issued in 1956 by an Army bomb-removal group.
That unit cleared the area's surface of bombs and said it could be used
"for any above-surface use to which the land is suited." But Mr. Condike
says that building homes is "absolutely not an above-surface use" and
that KB is "misrepresenting" the 1956 certification.
The company says that before acquiring the land, it had thorough
environmental testing done. KB adds that its employees didn't find a
single explosive when moving "miles of earth" and digging "deep
trenches" as the land was prepared for construction.
In its suit in Tarrant County, KB alleges that its antagonists have
deceitfully tried to ignite panic over Southridge Hills. The suit says
that Mrs. Ahmad planted one of the small bombs at Southridge Hills and
called 911 to draw emergency workers and media attention. That
allegation was reinforced by last week's criminal indictment of Mrs.
Ahmad, who faces up to 10 years in prison if convicted.
An Arlington police officer who responded to the 911 call said in a
civil deposition in December 2002 that he believed that the bomb had
been brought to the site, not found there. A police report about the
incident said that the bomb recovered was "very dry," even though it had
been removed from "rather wet black clay since it had been raining the
previous day." In a separate civil deposition taken last November, an
acquaintance of Mrs. Ahmad's testified that the activist told her she
had planted the bomb.
Mrs. Ahmad says in an interview that, contrary to the accounts of others
at the scene, she legitimately discovered the bomb at the site and then
dialed 911. But the criminal charges could hurt the credibility of those
homeowners who have worked with the activist.
Some KB customers wish Mrs. Ahmad would just go away. Mark S. Herrera,
who owns a home in the San Antonio subdivision of Bridgewood, says the
activist used "scare tactics" when she led a demonstration in his
neighborhood in July. He fears such protests will bring down property
values.
Robert Collins, a plaintiffs' lawyer in Houston who has consulted with
Mrs. Ahmad, says people elsewhere in Texas with complaints about KB
homes have held off on filing suit because of the uncertainty about
mandatory arbitration. Now that it is clear that customers may go to
court, Mr. Collins and a small group of other Texas attorneys he is
working with have begun to file suits on behalf of about 200 disgruntled
KB homebuyers they say they have signed up as clients. Twelve of these
suits have been filed in state court in Bexar County. One of those
attorneys is defending Mrs. Ahmad in the $20 million lawsuit and against
the felony charges.
One disgruntled homeowner is Mrs. Rocha, although a suit hasn't yet been
filed on her behalf. Her problems began last year, shortly after she
bought her house in Tara West, a community of 130 KB homes in San
Antonio named for the plantation in "Gone with the Wind." More troubling
than the toilet that didn't flush properly, the bathtubs that drained
too slowly, and even the water that seeped in through the front door
after rainstorms, she says, was the wall in the hallway upstairs that
started to tear away from the ceiling.
The Rochas lodged a series of complaints with KB. At one point, KB sent
a plumber to fix the bath drains, but nothing more. A KB spokeswoman
confirms that the company "dropped the ball" on some early requests by
the Rochas. The company tried to make up for that by installing a free
sink in the bathroom of the master bedroom, the spokeswoman says.
One block away, Roberto and Nubel Rodriguez discovered last November
that the foundation of their one-story $104,000 house was buckling. The
couple had purchased the new dwelling and moved in with their two
daughters only a year earlier.
KB offered to install underground supports for the foundation. But Mr.
Rodriguez says KB then delayed, and he ran out of patience. The company
had already irritated him by trying to fix cracks in his walls with only
tape and paint, he says. "I started thinking, chances are they're going
to do another [bad] job," Mr. Rodriguez, a 33-year-old electrician,
says.
KB says its repairs have been consistent with the standards of its
wallboard manufacturer. The company says Mr. Rodriguez requested the
delay in fixing the foundation during the Christmas holiday. The company
also says the Rodriguezes are an example of customers who have signed on
with Mr. Collins and then stalled on needed repairs in the interest of
bolstering possible lawsuits.
The Rodriguezes say they signed on with Mr. Collins in January, after
telling KB not to repair the foundation. The Rochas say they hired the
attorney after KB sued them in March.
Mr. Rodriguez got in touch with Mrs. Ahmad after finding a Web site she
operated. She came to his house in February for a meeting with about 40
Tara West homeowners, including Mrs. Rocha. Mrs. Ahmad told the KB
customers that the quickest way to get a builder's attention is
attracting the media. "It's the homeowners who picket that get
something," she says in an interview.
A few days later, Mrs. Rocha decided to join protesters under a KB
billboard that directed drivers to a new home development. Mrs. Rocha
held a sign her granddaughter had made on yellow poster board, showing a
house splitting in two.
Suddenly, the Rochas say they got attention. KB employees came knocking
to see if they needed repairs. But then in March, the Rochas heard on
the radio that KB had sued a group of protesters who allegedly posed as
homeowners. To their surprise, the Rochas later found out they were
named in the suit. In addition to seeking damages, the suit sought a
judicial injunction barring the Rochas, Mrs. Ahmad and others from
demonstrating.
In June, KB dropped six of the nine defendants, including Mrs. Rocha and
one of her daughters. The remaining defendants are Mrs. Ahmad, her son
and a KB homeowner in Arlington who accompanied Mrs. Ahmad on the day
she allegedly planted the bomb.
KB says it made a mistake naming the six people in the suit who have
since been dropped. The company says it hired a private investigator to
photograph demonstrators and their license plates to figure out who they
were. Outdated motor-vehicle records apparently showed the dropped
defendants as not living in KB Homes. That led company employees to
conclude that they weren't really unhappy homeowners, but had been hired
to picket, the company says. KB sued even though its repair people were
simultaneously offering to fix the Rocha house.
KB critics don't buy the explanation. "KB is ruthless; they filed the
lawsuit to shut the protesters up," says John R. Cobarruvias, president
of the Texas chapter of Homeowners Against Deficient Dwellings, a
nonprofit advocacy group.
The feuding has been fierce elsewhere in Texas, too. Last fall, KB
homeowners Yolanda and Andrew Brammer started organizing pickets in
their tract, located in the small town of Kyle, near Austin. The
Brammers bought their two-story house in December 2000. KB made some
repairs at their request and in July 2001, paid the couple $2,000 for
wages the Brammers said they lost while supervising the repairs. The
Brammers agreed to keep the deal confidential.
Since then, the Brammers said they found more problems. After they
appeared on a local television-news program last October, complaining
about a leaky roof and dipping floors, they received a letter from KB,
threatening to reveal Mr. Brammer's criminal record "to any media who
happen to inquire" about the demonstrations. Public records show that
Mr. Brammer, 34, was convicted for misdemeanor marijuana possession in
1997 in a Texas court.
In December, KB obtained an order from a state-court judge in Travis
County, Texas, barring the Brammers and their attorneys from discussing
the matter. A state appellate court later narrowed that order. KB says
it checked Mr. Brammer's background only after he intimidated KB
employees near the company's office in Kyle last November. During a
court hearing in December on KB's injunction request, Judge Paul Davis
concluded from the bench that Mr. Brammer "has physically threatened and
verbally abused" KB's employees and customers. In recent weeks, the
Brammers reached an out-of-court settlement with KB, which both sides
decline to discuss.
Corrections & Amplifications:
The Online Journal, in a headline in an early edition on the Web site,
incorrectly characterized the legal situation of a consumer activist
from San Antonio. Janet Ahmad has been indicted for allegedly
fabricating or tampering with evidence to influence a civil lawsuit and
a police investigation. She denies the charges, and the criminal case
has not been concluded.
Write to Queena Sook Kim at queena.kim@wsj.com




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