New fed big-$$$ lawsuit filed against Texas Descon LP, et al

In the construction heyday of Michael Doug Smith and his company, Texas Descon, L.P., he was living large, and he wasn’t shy about showing off his bling on Facebook:

A gold-and-diamond Rolex watch that cost approximately $40,000. A new Mercedes, estimated to cost $250k. A red Ferrari worth about the same. Some bright yellow street rocket that looked like a Lamborghini. In a show of humility, Smith even posted on his Facebook page a picture of himself gassing up his own exotic sports car.

He also posted selfies that included multiple trips to Vegas where the cost of a hotel room apparently wasn’t a problem. He had high-rent offices in McAllen and central Texas, and he was bagging construction gigs like nobody’s business. Then it all went south. The rumors as to what led to his company’s downfall allegedly center around personal and business issues; but they’re well talked about in construction circles.

Approximately two years ago, Smith’s world began to fall apart, as his company suddenly, for whatever reason, seemed incapable of finishing multiple public construction projects.

For example, in August of 2015, PSJA ISD board trustees voted to terminate the district’s contract with Texas Descon L.P., which had been in the midst of wrapping up four school construction projects.

Other public projects followed suit, and it soon escalated into a problem for both the bonding companies ensuring Descon’s work as well as the subcontractors still looking to get paid for work they had already completed.

About a year ago, Smith showed up on Facebook, wearing a hard hat, writing that he was now working on an off-shore oil rig. Most the photos of the fancy cars, high-priced jewelry had been removed from his social media account.

Today, on Facebook, Smith has but few pictures remaining, mostly centered around his personal life. The glory-year photos are long gone. His timeline is also very short. He did mention in a summer post, however, that he’s still driving an Escalade, and it appears that he’s moved to New Braunfels.

Meanwhile, however, in U.S. (federal) District Court in McAllen, new problems involving Doug Smith and Texas Descon LP have arisen.

The New Lawsuit

In August of 2015, Doug Smith sent out a letter to his employees:

“The bond companies have taken us over,” he wrote. “We have requested money from them to meet our payroll expenses, but they aren’t meeting our request. As such, I cannot personally subsidize the company with funds to cover payroll. Unfortunately, because of this, payroll checks will be delayed until such time that I can secure funds from the bonding companies.”

Texas Descon LP’s offices shut down not long after that, leaving behind bond companies looking for Smith to repay the money they had spent to finish the construction projects from which he had walked away. The subs were also left in a terrible bind.

Two weeks ago, a new lawsuit was filed in the U.S. District Court for the Southern District of Texas, McAllen Division, by The Hanover Insurance Company, titled: The Hanover Insurance Company v. TEXAS DESCON LP; DESCON 4S, LLC; and MICHAEL DOUG SMITH.

For Smith, the picture doesn’t look bright, nor does the cost to defend a civil case in federal court. Unlike construction, in this case, there’s no bonding company sitting on the side able to bail him out of this fix.

The “fix,” listed in the lawsuit is no small potatoes: “$21.5 million.”

The lawsuit also includes Smith’s mother, Anetia M. Smith, who is listed as one of two members of Descon 4S LLC. Doug being the other member.

The projects for which Hanover wants remuneration include: two IDEA schools and its new headquarters building; the La Joya ISD Natatorium; Robstown High School additions; and at least five other public projects.

After execution of the surety bonds needed for the defendants to land the jobs, Hanover soon started hearing from subcontractors who weren’t being paid (circa mid-2015), according to the federal lawsuit.

On Aug. 27, 2015, Hanover filed its original complaint against the defendants (the Indemnitors) and was granted a default judgment in June of 2016 in the amount of approximately $11.3 million, which only covered losses through February of that year.

Since then, the new lawsuit claims, additional damages in the amount of approximately $10.2 million have been added to the mix.