Former Riverdale owner agrees to $500,000 fine

He admits skimming apartments' profits

June 30, 2000|By Joe Nawrozki | Joe Nawrozki,SUN STAFF

Florida-based real estate baron Richard M. Schlesinger has agreed to pay $500,000 to the federal government after he admitted skimming profits from the now demolished Riverdale Village Apartments complex in Essex.

By agreeing to the settlement, Schlesinger avoids standing trial in U.S. District Court in Baltimore on charges that he skimmed profits from Riverdale and failed to properly maintain the property, which fell into disrepair and became a slum.

As part of the agreement reached this week, Schlesinger is barred nationwide from participation in federal housing programs.

U.S. District Court Judge Andre M. Davis characterized Schlesinger's mismanagement of Riverdale, in eastern Baltimore County, as "contemptuous neglect" this year and ordered him to pay an additional $185,000 to the government for misuse of funds.

Schlesinger, who lives in a multimillion-dollar oceanfront mansion in Palm Beach, Fla., did not return telephone calls yesterday to his home and his offices in Connecticut, New York and Florida.

The 64-acre tract on Eastern Boulevard where Riverdale once stood is part of the Essex-Middle River revitalization plan that has outraged many residents because of a county-imposed property condemnation. Opponents are attempting to reverse County Executive C. A. Dutch Ruppersberger's plan by forcing the condemnation law to referendum.

Possible uses for the space created by Riverdale's demolition include single-family houses, businesses and a large sports and neighborhood center, county officials say.

Federal officials, who reached the agreement with Schlesinger Wednesday, would not comment on a separate criminal investigation of Schlesinger's business dealings. He also faces $600,000 in unpaid BGE utility bills and $300,000 in fines for county building code violations.

The federal investigation that led to the lawsuit against Schlesinger determined that as of January 1995, he faced $126 million in unpaid judgments.

The federal and county investigations began in September 1997 after a series of articles in The Sun detailed the troubled Schlesinger property and the misery of hundreds of Riverdale tenants, some of whom lived over basements filled with open sewage.

At the time Riverdale was deemed uninhabitable, doors were falling off hinges, plumbing and electricity were failing, and many residents complained of leaking roofs.

The suit was filed by Perry F. Sekus of the Maryland U.S. attorney's civil division. He declined to comment yesterday.

Andrew Cuomo, U.S. secretary of Housing and Urban Development, said the government's action against Schlesinger "sends a clear message to landlords that those who receive federal funds must play by the rules or they will lose out in the end."

Riverdale was part of HUD's now-defunct Coinsurance Program, in which private lenders were given leeway to underwrite federal mortgage insurance by sharing with the government the financial risk associated with a defaulted loan. The program ended in 1990, but a number of multifamily housing projects that were originated under it remain across the country.

Riverdale was a World War II-era complex of 542 units, and Ruppersberger lived there for two years as a child while his father was in the Army.

Schlesinger bought the property in 1985 and used one of his companies, Ceebraid-Signal Management Group Inc., to manage it. Two of his other companies, Down-To-Earth Landscaping and Topside Roofing Corp., were supposed to provide services to Riverdale.

Schlesinger failed to follow the provisions of his $5.6 million mortgage assumed under the National Housing Act and administered by HUD.

One of the violations, the government proved, was that though Schlesinger said his companies did work at Riverdale, there was not adequate documentation to verify those claims.

The government also showed that Schlesinger did not adequately document expenditures and fees at Riverdale.

Before the Riverdale demolition began in April 1998, many of the tenants were moved to the nearby Villages of Tall Trees, another worn World War II-era apartment complex.

Tall Trees is now targeted for razing and conversion to a public park.

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