The owner and the chief financial officer of a Palo Alto construction company have been charged with several felonies in a scheme that allegedly defrauded an Atherton homeowner, according to the San Mateo County District Attorney's Office.

Richard James Smith, 54, who owned R.J. Smith & Associates, a California Avenue firm, and Tariel Gusseinov, former chief financial officer, allegedly fraudulently over-billed the homeowner by thousands of dollars and diverted money owed to a subcontractor of the project, the district attorney's office said.

Mr. Smith's company was contracted to perform a massive construction job on a Stockbridge Avenue home owned by Larry Lowry, according to court documents. But in 2009 and 2010, the company allegedly engaged in practices that included diversion of $28,000 owed to subcontractor Plumbing & Things, inflated a subcontract by $39,000 to Dimmers Electric and billed the victim for it, and had a fraudulent change-order that billed the victim for windows at $5,000 more than the windows originally ordered and installed, according to the DA.

The total amount of alleged fraud has been estimated at $400,000, according to Lt. Joe Wade of the Atherton Police Department.

The fraud came to light when fixtures from the subcontractor arrived late and the victim started communicating with the subcontractors. The victim then called the police, the DA's report said.

Mr. Smith, whose case came up for a court review conference on Jan. 23, faces three counts of larceny with grand theft and a count of fraud/forgery.

The case against Mr. Smith is set for a preliminary hearing on Feb. 28 in San Mateo County Superior Court. He is out of custody on $75,000 bail.

Mr. Gusseinov's case is set for jury trial on March 11. He is out of custody on his own recognizance.

Renee Batti of the Almanac contributed to this report.

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