S&P 500—Dow—NASDAQ—Russell 2000—FTSE 100—DAX—CAC 40—Nikkei—Hang Seng—ASX 200—ALEX—ALK—BOH—CPF—CYAN—FHB—HE—MATX—MLP—NVDA—AAPL—GOOGL—GOOG—MSFT—AMZN—META—AVGO—TSLA—BRK.B—WMT—LLY—JPM—V—XOM—JNJ—MA—MU—COST—BAC—ORCL—ABBV—HD—PG—CVX—NFLX—KO—AMD—GE—CAT—PEP—MRK—ADBE—DIS—UNH—CSCO—INTC—CRM—PM—MCD—ACN—TMO—NEE—BMY—DHR—HON—RTX—UPS—TXN—LIN—QCOM—AMGN—SPGI—INTU—COP—LOW—AMAT—BKNG—AXP—DE—LMT—MDT—CB—ADP—GILD—MDLZ—SYK—BLK—C—ADI—REGN—SBUX—NOW—CI—VRTX—ZTS—MMC—PLD—SO—DUK—CMCSA—APD—BSX—BDX—EOG—ICE—ISRG—SLB—LRCX—PGR—USB—SCHW—ELV—ITW—KLAC—WM—EQIX—ETN—TGT—MO—HCA—APTV—BTC—ETH—XRP—USDT—SOL—BNB—USDC—DOGE—ADA—STETH—S&P 500—Dow—NASDAQ—Russell 2000—FTSE 100—DAX—CAC 40—Nikkei—Hang Seng—ASX 200—ALEX—ALK—BOH—CPF—CYAN—FHB—HE—MATX—MLP—NVDA—AAPL—GOOGL—GOOG—MSFT—AMZN—META—AVGO—TSLA—BRK.B—WMT—LLY—JPM—V—XOM—JNJ—MA—MU—COST—BAC—ORCL—ABBV—HD—PG—CVX—NFLX—KO—AMD—GE—CAT—PEP—MRK—ADBE—DIS—UNH—CSCO—INTC—CRM—PM—MCD—ACN—TMO—NEE—BMY—DHR—HON—RTX—UPS—TXN—LIN—QCOM—AMGN—SPGI—INTU—COP—LOW—AMAT—BKNG—AXP—DE—LMT—MDT—CB—ADP—GILD—MDLZ—SYK—BLK—C—ADI—REGN—SBUX—NOW—CI—VRTX—ZTS—MMC—PLD—SO—DUK—CMCSA—APD—BSX—BDX—EOG—ICE—ISRG—SLB—LRCX—PGR—USB—SCHW—ELV—ITW—KLAC—WM—EQIX—ETN—TGT—MO—HCA—APTV—BTC—ETH—XRP—USDT—SOL—BNB—USDC—DOGE—ADA—STETH—

Contractor Fraud Incidents Require Enhanced Due Diligence: Potential for Reputational Risk and Subcontractor Scrutiny

·7 min read·👀 Watch

Executive Summary

Recent incidents of contractor fraud, highlighting a $220,000 loss for a Maui couple, underscore the need for businesses to strengthen contractor vetting processes to avoid reputational damage and operational disruptions. Small business operators and real estate owners should proactively review their current contractor management practices. No immediate action is required, but ongoing monitoring of contractor reliability is advised.

  • Small Business Operators & Real Estate Owners: Increased risk of financial loss and reputational damage from fraudulent contractors.
  • Tourism Operators: Indirect risk through damaged community trust and potential impact on local supplier reliability.
  • Action: Watch trends in contractor dispute cases and enhance internal vetting protocols.

Watch & Prepare

While important for reputation and risk management, there is no specific deadline impacting operations within 30 days, but it's a good reminder for ongoing operations.

Monitor reports of contractor disputes and fraud cases from sources like the Better Business Bureau and local news. A significant increase in reported incidents affecting businesses in your sector or region should trigger a thorough review and potential enhancement of your internal contractor vetting and oversight procedures. For real estate owners, track litigation and insurance claims related to contractor malfeasance. For tourism operators, observe local business sentiment and supplier reliability reports.

Who's Affected
Small Business OperatorsReal Estate OwnersTourism Operators
Ripple Effects
  • →Increased contractor fraud cases → higher insurance premiums for businesses involved in construction or renovation.
  • →Property owners and developers increase contingency funds or legal oversight → higher overall cost of development and real estate.
  • →Diminished trust in contracting sector → potential concentration of market power with larger firms, increasing costs for smaller enterprises.
Professional team engaged in a collaborative boardroom meeting with a presentation in progress.
Photo by Christina Morillo

Increased Vigilance Needed: The Growing Risk of Contractor Fraud in Hawaii

The Better Business Bureau (BBB) Foundation's Restoring Trust program recently highlighted a concerning case where a Maui couple lost $220,000 due to a fraudulent contractor who disappeared after commencing roof repairs, leaving the property damaged and unrepaired. This incident, while resolved through community aid, serves as a critical warning sign for businesses about the persistent risk of contractor fraud within Hawaii's operational landscape. The lack of immediate recourse for victims and the reliance on goodwill for resolution indicate a systemic vulnerability that requires proactive risk management.

Who's Affected

Small Business Operators (small-operator)

For small businesses, particularly those undertaking renovations or relying on external contractors for construction or maintenance, contractor fraud represents a significant threat. The loss of substantial funds can cripple operations, delay projects, and impact cash flow. Beyond direct financial loss, the association with a fraudulent contractor, even indirectly through a subcontracted project, can lead to reputational damage within the local community. This risk is amplified if the business is perceived as not conducting adequate due diligence.

Real Estate Owners (real-estate)

Property owners, developers, and landlords are directly exposed to the financial and legal ramifications of contractor fraud. A fraudulent contractor can lead to incomplete or substandard work, resulting in costly rectifications, prolonged project timelines, and potential litigation. The case of the Maui couple demonstrates how significant such losses can be, impacting not just individual property owners but potentially creating a ripple effect on the local housing market if such incidents become widespread and affect developer confidence.

Tourism Operators (tourism-operator)

While not directly engaging contractors in the same way as small businesses or real estate owners, tourism operators face indirect risks. A breakdown in trust within the local business community due to widespread contractor fraud can affect the overall perception of Hawaii as a reliable business environment. Furthermore, if local suppliers or maintenance providers for tourism businesses fall victim to fraud, it could lead to disruptions in service delivery, impacting the visitor experience.

Second-Order Effects

This increase in contractor fraud incidents can lead to higher insurance premiums for businesses engaging in construction or renovation projects. Property owners and developers may increase budget allocations for contingency funds or legal oversight, thereby increasing the overall cost of development and real estate acquisition. This, in turn, could translate to higher rental rates for commercial and residential properties, further impacting the cost of doing business and living in Hawaii. A diminished trust in the contracting sector could also lead to increased use of unionized labor or established large firms, potentially concentrating market power and increasing costs for smaller enterprises lacking established relationships.

What to Do

Action Level: Watch

While no immediate crisis necessitates urgent action within 30 days, the persistent nature of contractor fraud in Hawaii warrants ongoing vigilance. Businesses must proactively strengthen their contractor vetting processes to mitigate financial and reputational risks. The community's response in the Maui case, while commendable, highlights the lack of systemic safeguards.

For Small Business Operators:

  • Monitor: Track reports of contractor disputes and fraud cases in local news and through bodies like the BBB. Pay attention to any increase in such incidents reported by industry associations.
  • Trigger: A significant, localized increase in reported contractor fraud cases targeting businesses in your sector, or a rise in formal complaints filed against contractors in your operating region, should trigger a review of your own vetting procedures.

For Real Estate Owners:

  • Monitor: Observe trends in construction defect litigation and property damage claims attributed to contractor negligence or fraud. Look for any patterns in county or state permit office complaints related to contractor performance.
  • Trigger: If there is a noticeable uptick in legal actions or significant insurance claims related to contractor malfeasance affecting properties similar to yours, or if reputable construction companies report widespread issues with subcontractors, it is time to enhance your due diligence.

For Tourism Operators:

  • Monitor: Keep an eye on reports from local business associations and chambers of commerce regarding business challenges, including issues with local service providers. Note any trends that suggest a breakdown in supply chain reliability affecting the hospitality sector.
  • Trigger: If local business sentiment regarding contractor reliability and service integrity significantly declines, as indicated by surveys or direct feedback from supplier networks, consider reinforcing your own supplier vetting and diversifying your critical service providers.

More from us

Related Articles

Charming BBQ corn stand surrounded by palm trees in Honolulu.
Business & Startups

Hawaii's Minimum Wage to Reach $16 in 2026: Impacts on Businesses and Economy

·4 min read
Maui Grapples with Soaring Food Insecurity: Crisis Demands Urgent Action
Business & Startups

Maui Grapples with Soaring Food Insecurity: Crisis Demands Urgent Action

·3 min read
A stunning view of Honolulu's harbor with skyscrapers and mountains in the backdrop.
Business & Startups

Why Hawaii Sticks to Standard Time: Business Implications of No Daylight Saving

·3 min read