A former owner of an assisted living facility in Texarkana has been charged with misdemeanor fraud involving Housing and Urban Development funds.
Rafael Otero is charged in an information filed Wednesday in the Texarkana Division of the Eastern District of Texas. Otero was the majority owner of The Magnolia, an assisted living facility for Alzheimers patients when it obtained a HUD mortgage in 2009 for $4,860,000.
The mortgage was paid at first but after a few months, payments were not made and the HUD mortgage entered default status. Owners are not permitted to earn income or draw payments when a HUD mortgage is in default.
Rafael Otero’s son, Antonio Otero, was the administrator of the facility. Antonio Otero was sentenced to 46 months in federal prison in June 2020 for equity skimming. Antonio Otero used money which should have gone to pay the HUD mortgage on personal expenses.
Rafael Otero allegedly knew his son was lining his pockets but did not act to stop the theft.
“As majority owner of the Magnolia, he had custody, control, or possession of property of the Magnolia. While in this position, the defendant received more than $150,000.00 in compensation and other payments from the Magnolia that he was not authorized to receive and retain. Additionally, he knew that his son, Antonio, was stealing money from the Magnolia; knowledge he failed to act upon, allowing Antonio to continue stealing from the Magnolia. The Magnolia defaulted on the mortgage and HUD paid a mortgage insurance claim in the amount of $6,477,596.92. After selling the note, HUD suffered a loss of $3,654,677.37,” court records state.
Otero is accused of taking payments from the Magnolia when the HUD backed mortgage was in default.
He faces up to a year in federal prison and a fine up to $100,000. Court records show Otero intends to enter into a plea agreement with the government.