The city is investigating several landlords — including a top executive of Robert W. Baird & Co. — as possible targets of lawsuits or court actions, City Attorney Grant Langley told a Common Council committee Monday morning.
“We are going after some major players,” Langley told the aldermen, who questioned what the city attorney’s office has done in response to an ongoing Journal Sentinel investigationabout how some landlords have been gaming the system and not paying property taxes and building code fines.
Langley did not disclose details of the investigations except to say his office “will put many of these slumlords on notice that we’re coming after them.”
Later, Langley said there were eight or nine landlords his office has identified for investigation and possible action.
“Herrick is one of them,” he said referring to James H. Herrick, Baird’s managing director and co-head of global trading for the company’s Institutional Equity Services group. Herrick is an owner or has links to at least a half-dozen Limited Liability Companies, some of which own several problem-plagued central city buildings. One apartment building that had been owned by a Herrick LLC was once boarded up by the city for two months because inspectors declared it “unfit for human habitation.”
City officials have acknowledged that until the story was published they were unaware that Herrick was the person behind the LLCs that own the properties. Herrick’s name appears on documents filed with the state as an owner of some of the LLCs. He has sometimes used the address of his five-acre, $1.1 million River Hills home to receive tax bills and some other city correspondence regarding properties owned by the LLCs.
Neither Herrick nor his attorney returned calls for comment Monday.
Langley’s comments came during a 90-minute hearing of the Judiciary & Legislation Committee to discuss a resolution by two aldermen to appoint a task force charged with studying the problems caused by landlords who do not pay their fines or taxes and use LLCs to protect their personal assets and identities from bill collectors, tenants and the city.
In Herrick’s case, LLCs connected to him owed $156,353 in delinquent property taxes until November, when they were paid. The payments came after a reporter hand-delivered a letter to Herrick’s home stating the Journal Sentinel was working on a story about his LLCs.
LLCs citywide owed nearly $3 million in past due fines for building code violations, as of Nov. 7, according to a December Journal Sentinel analysis. In addition, the city Treasurer’s Office told the committee Monday that LLCs owed $7.5 million in back property taxes.
“As a city we look like you don’t have to pay your (property) taxes,” said Ald. Terry Witkowski, one of the two aldermen who proposed the task force. “The big boys don’t.”
Some of the landlords are “in River Hills living in mansions and laughing about it at cocktail parties,” Ald. Michael Murphy, the committee chairman and co-sponsor of the resolution, said toward the end of the 90-minute hearing.
During the hearing, Ald. Robert Bauman lambasted the city and the city attorney’s office, saying that over the years he has heard “nothing but excuses” for how the city deals with problem landlords and the delays in razing dilapidated apartment buildings. “The real teeth are in the City Attorney’s Office — they have the power to go to court,” he said.
Official defends city efforts
Langley was frequently defensive during the hearing saying that his office did not receive credit for work it had done in dealing with problem landlords. He pointed to the $1.25 million racketeering lawsuit his office filed against Mohammad Choudry — for years one of the most notorious landlords in the city.
The suit, filed in October, charges that Choudry repeatedly avoided paying court fines and property taxes while trying to keep secret his ownership interests in properties riddled with building code violations. The city succeeded in having Choudry’s 77 properties placed in receivership so he now has no say in their operation or in the collection of rent.
Choudry was one of several landlords highlighted in an April Journal Sentinel story about how some inner city landlords use LLCs and other techniques to avoid paying taxes and fines while continuing to buy properties at a discount during weekly sheriff’s sales. An official from the Department of Neighborhood Services recently started attending the sales so officials could keep tabs on who is buying the properties.
Though he did not disclose details of the city’s investigation, Langley told the aldermen that similar lawsuits against other landlords may be coming. His office wants to “let the slumlords know we know who they are and (the city wants) to get them out of the business,” Langley said.
Kail Decker, an assistant city attorney who brought the Choudry suit, said “as opposed to going after a particular property” additional suits would “focus on the individual and all the properties that that individual is associated with” through LLCs or other vehicles.
In Choudry’s case the city lawsuit says the landlord or LLCs he’s linked to has spent more than $1.2 million to buy 93 properties since 2002. Municipal Court records show he owes more than $200,000 in fines.
If the city wins on the racketeering allegations, it could seek double the actual damages because it would be “the victim of a criminal enterprise,” Decker has said.
Other landlords may face similar racketeering charges “if the shoe fits,” Decker said.
State legislation sought
City officials told the aldermen they are also looking to Madison for help in battling problem landlords.
Assistant City Attorney Gregg Hagopian said the city is supporting legislation that would allow sheriff sales to be conducted via the internet in order to increase transparency and the number of bidders.
Rep. Evan Goyke (D-Milwaukee) said he would introduce a bill calling for internet sales and other reforms to the system this year. Hagopian said the city also supports banning people who owe back property taxes or fines from buying additional properties at the sales, a prohibition that Goyke said would be part of his legislative package.
The council committee agreed to recommend the creation of the task force or to use an existing council committee to study the issue. Either way, the body would have to issue a report by the end of June.
But even with aggressive action, Ald. Murphy warned it is going to be a never-ending battle.
“There is always another cockroach out there who will take another cockroach’s place,” Murphy said.