California Brothers Promised Affordable Backyard Homes, Now Face 35 Felony Counts Each After Prosecutors Say They Collected More Than $1 Million From 13 Projects Without Doing The Work

Backyard homes sound like the perfect answer for families who want to keep Mom or Dad close without sharing a kitchen. In California, one company’s promise of exactly that has ended in a courtroom. According to the New York Post, two brothers who ran Anchored Tiny Homes now face a mountain of felony charges.

Modern townhouses with a fence and trees on newly developed land.

Austin and Colton Paulhus, co-founders of the company, have each been charged with 35 felony counts. The charges come from the Sacramento County District Attorney’s Office.

Prosecutors Say More Than $1 Million Went Out For Work That Never Happened

Prosecutors allege the brothers collected more than $1 million from customers across 13 projects without performing the promised work or providing materials. In some cases, construction never even started.

They also claim more than $653,000 was diverted from company accounts to expenses and activities unrelated to construction projects.

Each brother faces 33 counts of diversion of construction funds, one count of conspiracy and one count of employee wage theft.

The company’s collapse left a trail of angry homeowners across California, including elderly residents and families hoping to build backyard homes for aging relatives.

“They Stopped All Communication And We Are Just Left With A Shell Of A Home”

Renee Kumamoto reportedly paid $168,000 for a backyard home intended for her father, who was battling cancer. Just two weeks after she made her final payment, the company shut down before construction had even begun, according to Realtor.com.

Mariah Dorn publicly accused the company of taking $266,000 from her elderly parents, leaving them with an unfinished structure and a financial nightmare. “They have scammed my elderly parents out of $266k before I stopped my mom from making another payment,” she wrote in a July 2024 Facebook post.

She claimed subcontractors had gone unpaid for six months and were filing liens against her family’s property. “They stopped all communication and we are just left with a shell of a home and out of money,” she wrote. Dorn warned other Californians to steer clear, claiming families from Southern California to Northern California had suffered similar experiences.

Retired nurse Jan Truelock paid more than $40,000 in January 2023 for a 450-square-foot backyard home at her Roseville property. She was promised construction would take about a year. Twelve months later, her backyard remained completely empty.

Truelock sued for breach of contract and negotiated a $25,000 settlement, according to Realtor.com. “I’m very glad they are finally held accountable,” she told the outlet, adding that she believes prison time would be an appropriate outcome.

Regulators Pulled The License After More Than 200 Complaints

The allegations sparked a large investigation by the California Contractors State License Board, which received more than 200 consumer complaints spanning 18 counties. Regulators revoked the company’s contractor license in November 2024, and the investigation continued after the business ceased operations.

“Nothing Illegal Was Done,” The Brothers Insist

The brothers say the collapse was not criminal. In a lengthy December 2024 Facebook post, Colton Paulhus acknowledged the failure of the company while denying wrongdoing. “My last business failed. In a major way,” he wrote. “There’s nothing for me to hide. Nothing illegal was done.”

He blamed the downfall on rapid expansion and insufficient funding. “We simply grew too fast, scaled too quickly, and were not properly capitalized to support the growth,” he wrote. “I feel horrible for how many people were affected. The intentions were pure, the execution was not.”

Austin Paulhus’s Sacramento-based criminal defense attorney, Blair Goss, also pushed back in a statement to the California Post. “A business failure is not proof of a crime,” Goss said. “The prosecution has made its accusations, but it has not yet shown us its evidence. Austin will be judged on his own conduct, not on a company’s collapse.”

Both brothers appeared virtually in court on Oct. 14 but did not enter pleas. They are also seeking bankruptcy protection in federal court. The case returns to court January 12.

How To Protect Your Money Before A Contractor Breaks Ground

Whatever happens in court, the stories above offer a clear checklist for anyone planning a big project. Here are sensible steps that apply to any contractor.

Check the license. Most states let you look up a contractor’s license status online, and a revoked or suspended license is a hard stop.
Be wary of large deposits. Many states cap how much a contractor can ask for up front, so look up the rule for your state before you pay.
Pay in stages tied to finished work, not to the calendar. If the foundation is not poured, the foundation payment should not be made.
Ask for proof that subcontractors and suppliers are being paid. Unpaid subs can file liens against your property, as Dorn described.
Search for complaints with your state licensing board and ask for recent customers you can call.
Keep a written contract with a clear start date, finish date and payment schedule.

Ask one more question when the stakes are high: what happens if the company folds mid-job? A trustworthy builder will have an answer. Anyone who gets defensive about it has told you something important.

Willow and Hearth