The surety put escrow controls in place - so how did the money slip through?
A surety's playbook for managing a troubled contractor worked — until it allegedly didn't.
Frankenmuth Insurance Company filed suit on February 12, 2026, in the US District Court for the District of Maryland, accusing contractor Oakmont Contracting LLC and two individual indemnitors of breaching an indemnity agreement connected to more than $25 million in surety bonds across multiple construction projects, most of them for federal government agencies including the US Navy and the General Services Administration.
The case traces a familiar arc for surety professionals, but with a twist that makes it worth watching.
Frankenmuth says it first spotted trouble in the summer of 2024, when Oakmont began showing signs of financial strain - performance issues, cash flow shortfalls, and mounting unpaid bills to subcontractors and suppliers. Payment bond claims soon followed. To date, Frankenmuth says it has paid out $450,996.89 to claimants on one bond, with another $2,313,218.71 in claims still under review across several others.
What happened next is where the case gets interesting. Frankenmuth did what many sureties do in this situation: it brought in a funds control company - Great Horn Financial Services, LLC - to hold contract proceeds in escrow and manage payments. The arrangement was designed to keep bonded project funds flowing to the right places.
But according to the suit, Oakmont sidestepped the safeguard. Frankenmuth alleges the contractor received at least $1,084,289.08 in bonded contract proceeds directly from project obligees and never deposited the money into the escrow account - despite having signed a formal assignment of those proceeds to Frankenmuth in April 2025.
The filing also alleges that during one of several meetings held throughout 2025, Oakmont admitted to commingling funds across bonded projects - taking money earned on one job and using it to pay bills on another. Under the indemnity agreement the parties signed in May 2019, that kind of fund diversion qualifies as a default.
When Frankenmuth demanded repayment of its losses in March 2025, Oakmont reportedly acknowledged it lacked the assets to pay and promised a repayment plan. That plan never materialized. Frankenmuth says the contractor also failed to turn over financial books and records it was contractually required to provide - hampering the surety's ability to evaluate and process claims against the bonds.
Frankenmuth is now seeking $700,320.92 in indemnity losses from Oakmont and the individual indemnitors, William S. Tose, Jr. and Stacy P. Tose, along with $1,084,289.08 for the allegedly retained contract funds, and a court order compelling access to the contractor's financial records.
Meanwhile, the surety is also defending a separate payment bond claim brought by Allspec Construction, Inc. in the Eastern District of Pennsylvania - meaning it is fighting on two fronts at once.
No determination on the merits has been made. The case remains in its earliest stage.