A 43-year-old Little Rock, Arkansas man has pleaded guilty to federal violations in the Eastern District of Texas, announced U.S. Attorney Joseph D. Brown last month.
Antonio Otero pleaded guilty to an information charging him with equity skimming before U.S. Magistrate Judge Barry A. Bryant.
According to information presented in court, from before 2011 until October 2015, Otero was the administrator of the Magnolia Alzheimer’s Assisted Living facility in Texarkana and was instrumental in the founding and operation of the facility.
In order to secure millions of dollars in necessary funding, Otero obtained a loan that was insured by the U.S. Department of Housing and Urban Development. The HUD insured loan provided a favorable interest rate and did not require the owners of the Magnolia to take personal responsibility for the loan in the event of a default. Instead, HUD would suffer the financial loss in the event that the Magnolia defaulted on the loan. As a condition of this federal benefit, Otero and the owners of the Magnolia agreed to be bound by a regulatory agreement with HUD that prohibited them from removing equity from the Magnolia unless the loan was being paid and the Magnolia had surplus cash.
Instead of paying the HUD insured loan, Otero engaged in a scheme to skim equity from the Magnolia. For example, Otero took money from the Magnolia to pay for $3,952 of camera equipment, a $3,247 watch, $2,520 in landscaping for his personal residence, a $27,408 personal mortgage payment, a $12,750 down payment on a personal vehicle, and $1,540 tickets to a Dallas Cowboys football game. Additionally, he took money from the Magnolia and gave it to other individuals, including $13,000 for cosmetic surgery, $5,500 for a loan repayment, and $30,000 in equity distributions. In total, Otero took personal responsibility for causing a loss to the United States in the amount of $2 million.
As part of his plea agreement, he has agreed to pay restitution in that amount to the United States.
Under federal statutes, Otero faces up to five years in federal prison at sentencing and restitution to the parties involved. The maximum penalty prescribed by Congress is provided here for information purposes, as the sentencing will be determined by the court based on the advisory sentencing guidelines and other statutory factors. A sentencing hearing will be scheduled after the completion of a presentence investigation by the U.S. Probation Office.
This case is being investigated by the Fort Worth Office of the U.S. Department of Housing and Urban Development’s Office of Inspector General and prosecuted by Assistant U.S. Attorney Jonathan R. Hornok.