Office of the Attorney General News Release Archive

Tuesday, Aug. 27, 2002


Mold Restoration Inc. of Houston, Austin Sued for Numerous Violations

AUSTIN - Texas Attorney General John Cornyn today filed suit in Houston to stop alleged practices of a mold remediation company that have left many homeowners with unfinished restoration work meant to correct severe household mold problems. Many affected Houston-area residents have reported problems afterwards that are worse than those the company, Mold Restoration Inc., promised to clean up, leaving them out of their homes for prolonged periods.

Based on a lawsuit filed by Cornyn's office, Harris County District Court Judge John Donovan granted a temporary restraining order today, freezing assets of MRI's owners Richard L. and Robert M. Steffan. The order also restricts the use of MRI's corporate funds. The court has set a temporary injunction hearing for Sept. 9.

The Attorney General alleges the company, with offices in Houston and Cedar Park near Austin, has made false promises and engaged in fraudulent restoration work that caused structural harm to many residences. Their activities caused financial hardship to homeowners and to insurance companies that pay out large sums of money on these claims, the suit alleges.

The OAG also alleges that instead of using insurance proceeds to rid homes of mold, the two owners lavishly spent consumers' insurance funds for their personal uses. The alleged extravagances included furnishings for a home in Lakeway on Lake Travis near Austin, and repairs and provisions for two luxury boats, plus expenses related to travel, boat parties, club memberships, liquor, speeding tickets, medical costs, trailer storage, skiing supplies and much more.

"There are companies that provide effective, professional services, but there are also those bad actors who overcharge consumers and perform shoddy work," said Attorney General Cornyn. "They bear a share of the blame for the increase in homeowners insurance premiums that every Texas homeowner feels today. We are using the law to crack down on illegal activities that damage consumers' homes, disrupt their lives and drive up costs."

Among many other violations, the OAG's lawsuit alleges MRI:

  • Failed to perform work in accordance with cleanup guidelines under their contracts with consumers, while still charging them for the work;
  • Did not properly protect residents' belongings to prevent mold recontamination, such as placing contents in sealed "clean" rooms;
  • Charged for expensive equipment and protective gear that was never used, such as required air "scrubbers" and dehumidifiers designed to remove harmful spores from the air;
  • Misrepresented the cost for dry cleaning services for soiled clothing, significantly inflating fees to be paid by residents;
  • Misrepresented to residents and their insurers the cost for off-site storage in humidity-controlled, air conditioned rooms, when MRI employees instead stored these contents in ordinary, non-controlled surroundings;
  • Enticed consumers with kickbacks known as "referral fees," which were the consumers' own insurance monies returned to them to ensure they retained MRI to complete the job.
  • The lawsuit asks the court to order MRI to maintain a detailed accounting of construction funds so that insurance proceeds are spent for the benefit of homeowners, as required by law.

    The OAG obtained the asset freeze in an attempt to isolate funds and apply them toward finishing home restoration projects. The freeze prohibits MRI and the Steffans from removing, transferring or concealing stocks, bonds, insurance policies, safe deposit boxes or trust agreements; or selling real estate assets and recreational or other personal vehicles without prior court approval.

    The Houston office of the Consumer Protection Division, and the OAG's Insurance Practices Section and Financial Litigation Division in Austin investigated this case. The investigation was launched last February.

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