TEXARKANA, Texas – A 43-year-old Little Rock, AR man, has been sentenced to federal prison for federal violations in the Eastern District of Texas, announced U.S. Attorney Stephen J. Cox today.
Antonio Otero pleaded guilty on Oct. 29, 2019, to charges of equity skimming and was sentenced to 46 months in federal prison today by U.S. District Judge Robert W. Schroeder III. They also ordered Otero to pay restitution of $2 million to the U.S. Department of Housing and Urban Development.
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, Texas, and was instrumental in the founding and operation. 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 (HUD) The HUD-insured credit provided a favorable interest rate. It 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 if the Magnolia defaulted on the loan. As a condition, Otero and the owners of the Magnolia agreed to a regulatory agreement with HUD. It prohibited them from removing equity from the Magnolia unless they paid the loan, 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 residence, a $27,408 personal mortgage payment, a $12,750 down payment on a private 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 loan repayment, and $30,000 in equity distributions. In total, Otero took personal responsibility for causing a loss to the United States of $2 million.
This case was 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.