Owner of apartment company indicted on fraud charges in multi-million dollar scheme
The managing partner of an apartment operator was indicted on federal fraud charges Thursday after an investigation found he misled investors in a multi-million dollar scheme while providing poor living conditions for low income tenants.
Michael Fein was responsible for daily operations of T.E.H. Realty and several T.E.H. affiliated companies that ran apartment complexes in Kansas City, St. Louis and other cities.
He faces two felony charges of wire fraud and bank fraud related to bank loans made to T.E.H. Realty, as part of a $28 million fraud scheme, according to an announcement from the U.S. Attorney’s Office of the Eastern District of Missouri.
Three apartment complexes were mentioned in the indictment: Green Village Townhomes in Kansas City, Pinnacle Ridge in the St. Louis area and Ivy Place Apartments in Tulsa, Oklahoma.
In 2016 and 2017 in Kansas City, Fein allegedly submitted false documents to a lender and the Federal National Mortgage Association to obtain a $12.5 million loan to refinance an outstanding loan on the Green Village complex. Fein is accused of falsely inflating occupancy rates and the rental income. The company received just over $6 million when that deal closed.
For Pinnacle Ridge near St. Louis between 2016 and 2018, Fein is accused of inflating rental income, income statements, real estate summaries and submitting a false loan application.
For Ivy Place in Tulsa, Fein also allegedly submitted false documents which allowed the company to get a $7.7 million refinancing loan and helped the company get about $977,754 at the closing time.
Last year, Fein allegedly submitted false documents, including falsely inflating a real estate summary, to apply for a $5.2 million loan from a lender and the U.S. Department of Housing and Urban Development’s Federal Housing Administration. That loan was not funded.
In March, the federal government suspended voucher funding to anyone living in T.E.H. apartments after dozens of complaints of substandard living conditions. Those tenants were given transfer vouchers.
Funding was pulled to avoid using public money to pay someone not fulfilling their responsibilities.
United States Attorney Jeff Jensen, of the Eastern District of Missouri, thanked the tenants who spoke out.
“Without the courage of these tenants, this case may never have come to be,” Jensen said. “As a group, they shed light on the unacceptable living conditions being forced upon them and served as the spark that uncovered this entire fraud.”
KC Tenants campaign manager Wilson Vance said justice should have happened a long time ago.
“We should remember as tenants and as members of the community that taking ownership of our collective power works,” Vance said.
A lawsuit filed in Jackson County in October sums up the Israel-based company’s business practices as profiting “at the expense of vulnerable tenants by collecting full rents while refusing to invest in keeping its properties safe and habitable” and retaliating “against its tenants who complain of the substandard conditions.”
Rachel Casey, executive director of the Community Assistance Council, said she hopes people who take advantage of others are somehow held accountable.
“We certainly hope that it leads to people being able to live in humane conditions,” Casey said. “Especially now, when so, so many families are in precarious situations.”
The Federal Housing Finance Agency — Office of Inspector General and the U.S. Department of Housing and Urban Development — Office of Inspector General investigated the case.
This story was originally published August 21, 2020 at 4:56 PM.