Opinion ID: 2464762
Heading Depth: 4
Heading Rank: 2

Heading: Construction and overruns

Text: Safar did not complete the six units by November 20, 2006, and prospective purchasers began to cancel their reservations. From December 2006 to March 2007, Safar reported to Norway that the project was on budget; Norway made the same reports to Wells Fargo. According to Safar, the project was delayed because of all kinds of unforeseen problems, such as municipal digging restrictions, a buried electric cable, foundation problems, and heavy rain and snow. Safar testified that he remained on budget throughout the winter notwithstanding the delays, but by February/March 2007 it became really obvious that he was experiencing cost overruns. Initially, Safar believed that he could use the 18% markup included in the construction contract price to cover the overruns. By March 22, 2007, Bjorn-Roli determined that the overruns were at least $700,000, and Safar knew that he would need more money to complete the Project, but neither Bjorn-Roli nor Safar informed Wells Fargo. Later in the spring of 2007, Safar and Bjorn-Roli informed Wells Fargo that Safar was over budget by approximately $100,000; neither Safar nor Bjorn-Roli expressed concern about the overruns, and Bjorn-Roli did not request a loan increase. Wells Fargo honored every draw request submitted by Norway and fully advanced the $3.3 million loan. Safar was out of money by April 20, 2007; he withdrew $10,000 from his personal account to cover payroll on April 20th, but many bills remained unpaid.