TEXARKANA, Texas - A former administrator of a Texarkana, Texas, nursing home for Alzheimer's patients has been accused of "equity skimming" in connection with a multi-million dollar Housing and Urban Development-guaranteed mortgage.
According to a docket entry in the case, Antonio Otero has already entered into a plea agreement with the U.S. Attorney's Office in the Texarkana Division of the Eastern District of Texas. A plea hearing is scheduled for later this month before U.S. Magistrate Judge Caroline Craven in Texarkana's downtown federal building.
According to an information filed Thursday, the Magnolia, an Alzheimer's assisted-living facility in Texarkana, Texas, is the beneficiary of a HUD-insured mortgage program that prohibits the distribution of assets when the borrower is in default on its mortgage and in a "surplus cash" position.
"After construction of the facility, the Magnolia began making mortgage payments. But just a few months later, the Magnolia defaulted on the loan," the information states. "From July 2011 through at least December 2015, the Magnolia was in default on its HUD-insured mortgage."
The information alleges Otero pocketed at least $350,000 in addition to his regular salary and that the Magnolia's mortgage is delinquent by more than $6 million. The information notes that HUD insures loans on care facilities to encourage lenders to fund such projects. Consequently HUD, not the lender, is on the hook in the event of a default.
"The National Housing Act makes it a crime for owners, agents, or managers of a care facility to take a profit distribution from a care facility when the mortgage loan is in default," the information states.
The single count charged in the information, and presumably the one to which Otero has agreed to plead guilty, alleges that Otero used more than $27,000 in July 2015 for purposes other than those required to keep the nursing home running. The offense is punishable by up to five years in federal prison. The law also allows the court to impose a fine up to $500,000 or twice the amount gained by the defendant or lost by the victim.
Assistant U.S. Attorney Jonathan Hornok is representing the government. Otero is represented by Craig Lewis McCloud of Lexington, Kentucky.