Local builder Henderson, Inc. is suing the Williamsburg Pottery and its Vice President Peter Kao for fraud, breach of contract and more. Henderson is looking for millions to be awarded by the court.
Founded in 1938 by Jimmy Maloney, renovation began on the Pottery in 2010. According to documents filed in Williamsburg James City County Circuit Court, Kao and owner Kim Maloney – Jimmy Maloney’s widow – accepted a bid of $16.5 million from Henderson on the project after the company reduced the original bid by $2 million. The Pottery was finished and reopened on April 5 this year in celebration of what would have been the 100th birthday of its late owner.
In court documents, Henderson alleges that Kao verbally agreed to pay for additional construction beyond the agreement but failed to pay for those extras. Henderson also alleges Kao told Pottery staff he never planned to pay for the extra work. The suit was filed Nov. 30 but Pottery attorney Gloria Freye of McGuireWoods LLC said it wasn’t until Wednesday afternoon that she had even seen the court documents.
The Virginia Gazette ran a story on the suit Wednesday morning, but Freye said she and her clients had not yet heard of it. Freye said she had not heard from any other media until WYDaily contacted her.
Henderson’s suit against the Pottery alleges breach of contract, breach of implied covenant of good faith and fair dealing, fraudulent inducement and fraud.
Henderson’s attorney requests the court grant the following:
- A monetary judgment against the Pottery in the amount of $1.5 million
- A monetary judgment against Kao in the amount of $1.5 million
- Punitive damages against each defendant in the amount of $1 million
- Attorney’s fees incurred for breach of contract, breach of implied covenant of good faith and fair dealing, fraud and fraudulent inducement
- Pre- and post- judgment interest
- Costs and such other relief as the court deems appropriate
According to court documents, changes to the original project came up as construction went on and, rather than entering into a new contract with Henderson to allow for the changes, Kao repeatedly promised to make Henderson “whole,” implying he would pay for the additional work. Kao told former Henderson President Bill Strack he could not sign a new contract because of costs incurred preparing the initial contract and that they didn’t want to “raise red flags with their lender, Bank of America,” according to court documents.
The suit alleges that rather than signing a new contract, Kao and Maloney verbally promised payment to Strack if Henderson would continue with the project, making changes and adding the extra things requested; they would pay all the costs incurred plus a fee equal to five percent of the total cost. They insisted “they were trustworthy and pay all their bills,” court documents said.
The suit contends that after this verbal agreement, when Kao and Maloney made a new request Henderson would inform them of the price for the work prior to starting it. According to court documents, “as the cost of the extras began to mount, Henderson repeatedly requested assurances from Kao and others at the Pottery that they would be paid for the extras at the end of the project.”
Kao confirmed numerous times Henderson would be paid for the extras but Kao told Strack his request for assurances was insulting, the court filing said.
After the project was completed, Henderson said in court documents the company submitted a pay application for approximately $290,000 for work on the project as well as $822,000 for the extras requested and the five percent fee. The Pottery, Kao and Maloney refused to pay Henderson for the work despite formal negotiations and mediation, the court documents said.
Court documents state Pottery employees said Kao pretended not to understand the contract and said he was only required to pay $16.5 million despite actual costs or extras. After meetings with Henderson representatives, Kao allegedly told internal employees he did not intend to pay Henderson for the extras or the fee and “Americans, like Henderson, were stupid for not realizing that this was his negotiating strategy,” the court documents said.
The suit goes on to say “Henderson has learned from numerous vendors who worked for the Pottery, that Kao’s modus operandi and pattern and practice are to insist on work beyond what is required under the contract, to promise to pay for that work to induce the vendor to perform, and then, after the extra work is done, to refuse to pay for the work in an effort to obtain the extra work for free.”
Recently the Pottery was cited by James City County with a zoning violation for the types of external lights used on the property. The Pottery was appealing the violation but withdrew their appeal prior to the last Board of Supervisors meeting on Nov. 27.
County proffers stipulate “all external lights be recessed fixtures with no globe, bulb or lens extending below the casing or otherwise unshielded by the case so that the light source is visible from the side of the fixtures.”
County officials say the lights designed for the Pottery are not in compliance and according to court documents, Henderson repeatedly told Kao the county would have a problem with the lights but Kao said he did not care what the county thought. Kao insisted “his friendship with the governor would allow him to get his way.”
Governor Bob McDonnell and Lt. Gov. Bill Bolling were among the guests of honor at the Pottery’s grand reopening in April. A search on the Virginia Public Access Project site shows combined donations of $30,000 from Kao and Maloney to Governor Bob McDonnell and his political action committee since 2007.
