The brothers behind Anchored Tiny Homes, a Sacramento-area accessory dwelling unit builder whose license was revoked in 2024, are facing 35 felony counts tied to unfinished and abandoned ADU projects across California (via the Contractors State License Board).
Colton and Austin Paulhus are each charged with 33 counts of diversion of construction funds, one count of conspiracy and one count of employee wage theft, according to the CSLB. The case was investigated by the license board and the Sacramento County District Attorney's Office. A settlement conference originally set for last week has been moved to Jan. 12, 2027.
The CSLB says it looked into more than 200 consumer complaints against the company in 18 counties. Those complaints described ADU projects that were left unfinished or abandoned, subcontractors who didn't get paid, payments collected ahead of work that often never happened, and homeowner money that wasn't spent on homeowners' projects. The board filed an accusation through the state Attorney General's Office and revoked the company's license in November 2024.
NBC Bay Area, which has followed the company's collapse since 2024, reported this month that the complaint alleges the brothers billed customers about $1,046,433 "despite performing no work and supplying no materials," and took more than $653,000 out of company accounts for expenses unrelated to company projects. The station said more than 30 customers are tied to the complaint, including an Oakland family who said they were out $80,000. NBC also reported that both brothers are seeking bankruptcy protection in federal court. Colton Paulhus told the station in a text, "It was a failed business and I hate that it happened." The DA's office said it doesn't discuss pending cases.
Back in August 2024, NBC Bay Area reported that customers in places like Walnut Creek and San Leandro had collectively prepaid millions for ADUs, that several lenders had filed liens against the company, and that it was weighing bankruptcy. The company had once described itself as a $100 million business.
The main charge, diversion of construction funds under California Penal Code 484b, covers taking money for construction work, labor or materials and willfully using it for something else, or failing to finish the job or pay the subs and suppliers it was meant for. When more than $2,350 is involved, it can bring up to a $10,000 fine and jail or prison time. The charges are allegations, and the brothers haven't been convicted.
The CSLB used the case to remind homeowners of the payment rules: on a home improvement job like an ADU, the down payment can't be more than $1,000 or 10% of the contract price, whichever is less, and later progress payments can't get ahead of the work done or materials delivered.
Why it matters for Contractors
If you build ADUs in California, this case is the reason homeowners will ask hard questions about your payment schedule. Honest shops can turn that into an advantage. Keep your down payment within the legal cap, tie progress payments to work that's actually in place, and put that schedule in writing up front.
The other lesson is about cash flow. Diversion charges come from using one customer's money for something other than that customer's job. Track deposits and progress payments by project, pay your subs and suppliers from the job they worked on, and don't take on more prepaid work than you can deliver. If a job is going sideways, deal with it early, before the money's gone.