TEXARKANA, Texas – A doctor in Texarkana, Texas, pleaded guilty today to a federal fraud offense, Acting US District Attorney for the Eastern District of Texas, Nicholas J. Ganjei, announced.
Dr Rafael Otero, 68, pleaded guilty to an information accusing him of defrauding the US Department of Housing and Urban Development (HUD) before US magistrate Caroline M. Craven. In his plea agreement, Dr. Otero agreed to pay restitution to HUD.
“Dr. Otero and his son Antonio Otero operated a HUD-insured mortgage program designed to provide affordable housing to people with illnesses like Alzheimer’s disease,” Acting US Attorney Nicholas Ganjei said. “They left the HUD insured mortgage loan unpaid, the Oteros took hundreds of thousands of dollars. As a result of their actions, American taxpayers ultimately suffered a loss of over $ 3.6 million.”
According to information presented to the court, Dr. Otero was the majority owner of Magnolia Alzheimer’s Assisted Living facility in Texarkana, Texas, and his son, Antonio Otero, was the facility administrator. In order to secure millions of dollars in needed funding, the Oteros secured a loan insured by HUD. The HUD-insured loan offered a favorable interest rate and did not require Magnolia owners to take personal responsibility for the loan in the event of default. Instead, HUD would suffer the financial loss in the event that Magnolia defaults on the loan. As a condition of this federal benefit, Magnolia agreed to be bound by a regulatory agreement with the HUD that prohibited homeowners from receiving money from Magnolia, unless the loan was repaid and Magnolia had excess cash flow. .
But instead of paying the HUD insured loan, and in violation of the regulatory agreement they signed with the HUD, the Oteros took hundreds of thousands of dollars from Magnolia. Dr. Otero received over $ 150,000 from Magnolia in unauthorized compensation and other payments. Antonio Otero took even more money from Magnolia, using it to pay for $ 3,952 for photo equipment, a watch of $ 3,247, $ 2,520 in landscaping for his personal residence, a personal mortgage payment of 27,408 $ 12,750 down payment on a personal vehicle and $ 1,540 in Dallas Cowboys tickets. In addition, he took money from Magnolia and gave it to others, including $ 13,000 for cosmetic surgery. When Dr Otero learned that his son had stolen money from Magnolia, Dr Otero did not report him to the authorities or remove him from his post. After Dr. Otero learned of his son’s theft, Antonio Otero stole an additional $ 62,000 from Magnolia.
Under federal law, Dr. Otero faces up to one year in federal prison upon conviction. The legal sentence prescribed by Congress is provided here for your information, as the sentence will be determined by the court based on the sentencing advisory guidelines and other statutory factors. A sentencing hearing will be scheduled after the completion of an investigation into the submission by the United States Probation Office.
Antonio Otero pleaded guilty to skimming on October 28, 2019 and was sentenced on June 2, 2020 to 46 months in prison by US District Judge Robert W. Schroeder III. Judge Schroeder also ordered Antonio Otero to pay HUD $ 2 million in restitution.
This case was investigated by the United States Department of Housing and Urban Development, Office of the Inspector General. The case was continued by US Deputy Prosecutor Jonathan R. Hornok.