Ohio Landlord Faces Federal Equity Skimming Charges; Allegedly Pocketed Tenant Rent, Allowed HUD-Insured Mortgages To Go Into Default

In a recent press release, Gregory A. White, United States Attorney for the Northern District of Ohio, announced that a federal Grand Jury in Cleveland returned a nine-count indictment charging three individuals and one property management company with various offenses involving fraud against the United States Department of Housing and Urban Development (HUD).

Among the charges was a charge of equity skimming, in which, according to the press release:

• The indictment [...] alleges that the defendants defrauded HUD by failing to make timely payments on the HUD-insured mortgages for [two housing projects], resulting in additional multi-million dollar losses to HUD. Moreover, the defendants used project funds to pay personal expenses and other unauthorized expenditures in violation of regulatory agreements between the projects and HUD. The total loss to HUD was more than $5 million.

Charged in the indictment were Martin L. Shulman, 54, his wife, Gail R. Shulman, 53, Keyetta L. Williams, 35, and S.B.G. Management, Inc., the management company that the Shulmans operated. For more, see the U.S. Attorney News Release.

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For those looking for some Federal case law applying federal equity skimming statutes in cases where Federal authorities have prosecuted landlords / property owners who collected rent from real estate and stiffed FHA-insured or VA-guaranteed mortgage lenders, see:

• U.S. v. Weaver, 290 F.3d 1166 (9th Cir. 2002) (foreclosure rescue operator found guilty),
• U.S. v. Travers, 233 F.3d 1327 (11th Cir. 2000),
• U.S. v. Beckley, 97 F.3d 507, (11th Cir. 1996),
• U.S. v. Laykin, 886 F.2d 1534, 1537 (9th Cir.1989),
• U.S. v. Capano, 786 F.2d 122 (3d Cir.1986).

For a California state appellate court case convicting a property owner for pocketing rent while stiffing mortgage lenders and allowing houses to go into foreclosure, in violation of the state's rent skimming statute, Section 890 through Section 894 of the California Civil Code, see People v. Lapcheske (Cal. App. Ct. 1999) (may require free registration).

Go here for Sample Indictment -- Equity Skimming, 18 U.S.C. § 157 (Source: U.S. Attorney Criminal Resource Manual - Title 9 - #882).