When the water heater went out at his Pasadena home, Steven Stafford called his home warranty company, which sent a plumber from All State Plumbing, Heating & Cooling to replace it. Stafford paid the plumber $175 in cash to obtain a permit. When the plumber asked for more money, Stafford began to sense something was amiss.

"I couldn't understand what their deal was," Stafford said. "They were charging you all these extra things on top of what they were supposed to do. The next thing I knew, I was paying more for their services than the actual water heater cost."

He canceled the job, deciding to buy and install the water heater himself. When he called the county to inquire about the permit he had paid for, he was told no permit had been obtained.

Stafford is among thousands of Maryland consumers victimized by either All State Plumbing, Heating & Cooling Inc. or All State Plumbing Inc. and its owner, Wayne Garrity. On Jan. 3, the state attorney general ordered the companies and Garrity to pay at least $1 million in penalties and restitution.

All State and Garrity used unlicensed plumbers and skipped required safety inspections, the order found. The companies and their owner also admitted to some of the hundreds of instances of charging customers for permits never obtained, documents show. There is no evidence there was anything wrong with the plumbing work performed by All State.

Finksburg-based All State and Garrity "have a long-standing and disturbing pattern of being cited and fined by state and local regulatory authorities for failing to obtain permits and using unlicensed persons to perform plumbing services," according to findings in the state's case, heard last June by an administrative law judge.

The final order issued by the attorney general's consumer protection division required Garrity to pay a civil penalty of more than $700,000 and reimburse consumers for improper jobs, starting with an initial restitution fund of $250,000. He also must begin to comply immediately with state's Consumer Protection Act, which the state found he violated at least 7,079 times. If the company fails to comply, the order can be enforced in Circuit Court.

"We wanted to send a message," said Philip D. Ziperman, deputy chief of the consumer division, which upholds the consumer code but doesn't regulate plumbers. "We wanted to punish fairly egregious violations that were intentional. Our hope is a penalty this large will deter others who are acting similarly."

Garrity did not respond last week to repeated requests for comment.

But his attorney, Harvey K. Maizels, said he disagrees with the state's case and is considering an appeal.

State regulators who oversee licenses for plumbers and other building trade professionals called the case one of the most flagrant in recent memory because of the number of violations and victims.

"The scale of the violations and the audacity of the perpetrators is not something we run into every day," said Michael Vorgetts, deputy commissioner of the state Department of Labor, Licensing and Regulation. "I think we have made a great deal of progress regarding putting this company out of business."

State regulators hope the case will focus attention on a growing problem — the loophole created by licensing individuals, not the firms that employ them, in areas such as heating, air conditioning and plumbing.

Looking for a way to hold accountable businesses that use unlicensed workers, the state labor department tried to close the loophole with a bill proposed in 2008 that would have required permitting of HVAC and plumbing firms.

"We've recognized that this has been a problem in these industries going back over time," Vorgetts said.

However, he added, "It's a paradigm shift for the industry, and we do try to avoid undue burden on our licensees."

So the department has put the permitting proposal on hold for now and will instead push this legislative session to require continuing professional training for master plumbers seeking license renewals.

Vorgetts said DLLR flagged the All State situation as one to be referred to the attorney general's office because of the number of victims identified. The AG's consumer division filed charges against All State and Garrity in February.

During a June hearing at the Office of Administrative Hearings of Maryland, Garrity refused to answer any of the state's questions. He later defended his actions in an Aug. 27 memo opposing the state's findings.

"Nothing in the statutory text expressly requires that the individual shall be licensed during the time he provides plumbing services in the state, only that he be licensed before he provides plumbing services," the memo said.