Redwood City contractor heads to prison for embezzling – The Mercury News

A Redwood City construction contractor has been sentenced to two years in prison and ordered to pay nearly $400,000 in restitution for embezzling a Los Altos client and working without a proper license.

Described as a charming and likeable salesman, Michael George Schaeffer, 52, was reported to state authorities for deceiving and defrauding the victim and two other Peninsula homeowners looking to renovate their homes.

Friday’s sentencing stemmed from a November 2006 case in which a Los Altos woman hired Schaeffer to remodel her modest home before she retired. She intended to use money inherited from her father to build a second unit on the property and Schaeffer’s company, MGS Construction Inc., came highly recommended by Diamond Certified, said Paul Colin, a Santa Clara County deputy district attorney in the real estate fraud unit.

Colin said the Los Altos victim did everything correctly, except for paying him too much upfront.

Colin said California law states that consumers can initially pay $1,000 or 10 percent of the total project cost — whichever is lower. However, the victim paid Schaeffer $316,524.50 initially and $158,000 later.

What she got in return was an unfinished job that came with roof leaks, shoddy lighting, bad windows, and a room that is still unusable, Colin said. In fact, the home was in such poor shape that the woman was forced to move out and only recently moved back in.

“He strung her along for a year and a half until she finally said, ‘No more,’” Colin said. At that point, she contacted the California Contractors State License Board.

But by then Schaeffer had poured the $158,000 into his Redwood City startup business, Green Building Exchange, and wrote up the expense as an investment, Colin said. The business, which purported to serve as a clearing house for environmentally progressive building products and services — didn’t last beyond the early stages of development, the district attorney’s office said.

It wasn’t long before the contractors board discovered that Schaeffer was operating under the license of someone who wasn’t even in the area.

Colin said rules state that a “responsible managing officer” must be actively engaged in running the company, whereas the licensee, Thom Kay, lived in Cathedral City and received payments from Schaeffer simply to use the license.

“None of the victims met (Kay) and I don’t know that any of the employees ever met him,” Colin said, adding that the company’s name — Schaeffer’s initials — was somewhat of a tipoff. “It was a complete sham.”

Since then, Colin said, Schaeffer has been convicted of defrauding two other Bay Area homeowners as well — a Burlingame resident who paid $134,000 for an unfinished bathroom remodel and a Pacifica resident whose property was gutted and abandoned after she paid about $209,000.

MGS employees weren’t happy either. Colin said many started to leave the company when their paychecks bounced and some began to warn the consumers who hired the company.

“They just couldn’t take lying to the victims … it was in a couple of months that all the employees gave up on him,” Colin said. Some have since sued for about $30,000 in back pay and the company is defunct.

In June, Schaeffer was sentenced to probation and 18 months in county jail for the San Mateo County crimes. At Friday’s sentencing in Santa Clara County, he was ordered to serve two years in prison and to pay $395,524.50 in restitution to the Los Altos victim.

Colin said all of Schaeffer’s victims are employed but lost a significant amount of money that they may never see again. Meanwhile, Schaeffer is on his way to San Quentin State Prison, he said.

“He couldn’t get a license before, so it’s very, very unlikely he’ll get a license now, based on his convictions,” Colin said. “He’d have to be on a short leash. You don’t want him to have anything to do with money.”

Email Kristen Marschall at

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