The Rev. David Sul's Korean Seventh-day Adventist Church was supposed to be in business in Columbia by now.
The church's 150 members signed a deal, put money down and watched bulldozers roll. But construction stopped in late 2008 and the congregation never recouped its investment — thanks in part, church officials say, because a bond that was supposed to insure the project didn't pay off. The worshippers now borrow a building from a sister church, meeting in the afternoon after the other congregation worships in the morning.
"It was a shock. It's a nightmare. We never expected this," Sul said in an interview. "As Christians we have prayed" for a solution and a settlement to lawsuits in the case, he said. "But the time is almost over two years."
Where prayer fails, sometimes regulation succeeds. The church's problems are being held out as evidence that the state needs to increase oversight of wealthy individuals guaranteeing small contractors who can't get backing from licensed corporate surety companies.
These "individual sureties" and their brokers are pushing back, seeking legislation that would allow them to continue to back construction without regulation by the Maryland Insurance Administration.
The surety bond business is little known, but the issues are as old as government. How far should regulation extend? What are the trade-offs in terms of taxpayer cost and restraints to free enterprise on one hand, and the prevention of heartache and financial loss on the other?
"This is the only financial transaction that I can think of that is completely unregulated," says Minor Carter, a lobbyist for Liberty Mutual, one of the regulated, corporate surety companies that wants greater oversight for individual underwriters. "It's the wild West."
But Karen Barbour, who brokers individual-surety bonds and has been promoting a bill that would essentially allow unregulated deals to continue, says regulation would hurt small business.
"I have some minority-owned business, women-owned businesses and businesses in general that couldn't get bonding that would like to become a subcontractor on state work," said Barbour, head of the Westminster-based Barbour Group.
"Given the economy, a lot of financial statements for contractors are not going to be stellar," she said. "They are going to need an alternative for a bond product" after they get rejected by the big companies — one from an individual surety, she said.
That was the kind of bond relied on by the church. Formerly based in Anne Arundel County, the church wanted to move closer to Howard County's Korean population and chose a site near Route 32 in Columbia. But the project was halted soon after it started.
The church was unable to collect on surety coverage sold through Barbour and backed by an individual named Alexander Xavier, who lives in Florida. Litigation flew. Church officials say they are out millions of dollars in construction and legal costs.
"Whether or not this church can go forward is very doubtful," says Charles Griffin, executive secretary of the Chesapeake Conference of the Seventh-day Adventist Association, who testified in Annapolis in favor of regulating individual sureties. Individual sureties have "got to be regulated. Otherwise there are going to be vulnerable people out there."
Xavier's lawyer denied wrongdoing on his client's part, saying the church misrepresented the progress of construction and induced Xavier to issue bonds when he shouldn't have. Xavier gave a guarantee "based on those representations, and they were absolutely phony," said attorney Laurence Schor.
Church lawyer Dean Bouland declined to respond to that allegation, citing the fact that the case has not been resolved in court.
Unfortunately, it's difficult to tell how many individual-surety failures have harmed contractors and construction customers. Since they're unregulated, no registry or database exists. Those opposing regulation say that failures are rare and that big-construction customers are sophisticated enough to analyze for themselves whether bond issuers are up to the task.
"We can't restrict free trade in this country," says Wayne Frazier, the head of the Maryland Washington Minority Contractors' Association, who testified in favor of a bill allowing unregulated sales of individual surety bonds. "That's what the corporate sureties are trying to do."
Those favoring increased regulation note that Edmund Scarborough, an individual surety based in Virginia who testified in favor of allowing individual sureties free rein in Maryland, recently settled with Virginia's State Corporation Commission over allegations that he sold surety guarantees without the right kind of license.
Scarborough's lawyer, David Buoncristiani, disputed that he even needed a Virginia license and said he settled to avoid lengthy and expensive litigation.