Three sentenced in an Ohio federal court for real estate scheme
The proprietors of the Lorraine Hotel in downtown Toledo have received multi-year prison sentences from a federal judge for orchestrating a $3.9 million fraudulent real-estate investment scheme, while a third person received probation.
U.S. District Judge Jack Zouhary gave Ronald Wilson, whom prosecutors identified as "mastermind of the scheme," a 7 1/2 -year sentence for his convictions for wire fraud, conspiracy to commit wire fraud, mail fraud, bank fraud, and embezzlement of government property. Wife Sherri Wilson received a 3 1/2 -year sentence for the same convictions, while Murphy Feeny, an employee of Sierra Real Estate Services, was sentenced to three years' probation.
Investigators learned that in 2015, Ronald Wilson founded Sierra Real Estate as a real estate management company offering realty, property renovation, and tenant-management services in the Toledo area, according to court records. Sherri Wilson was a partner-owner of Sierra Real Estate, and Feeny was an employee.
That real estate company was one of the principal owners of, and the principal agent for, the Lorraine Hotel, 1117 Jefferson Ave., which was also its base of operations.
The Wilsons and Feeny are accused of urging people, mostly outside of northwest Ohio, to contract with Sierra Real Estate to purchase and renovate rental properties in the Toledo area between September 2016, and April 2019. The victims were told they would retain ownership of the properties and receive rental income while the Wilsons and Feeny would manage the properties.
Limited liability companies were opened for each investor to manage their investments. However, the defendants never transferred ownership and instead maintained control of the LLCs and the victims' funds rather than using investors' funds to complete renovations on properties.
They withheld income, took payments from rehabilitation projects and never completed the ordered work, defrauded an insurance company, and stole U.S. Department of Housing and Urban Development grant money meant to benefit the houses' low-income tenants, according to court records.
The Wilsons opened and controlled more than 100 bank accounts at several financial institutions that received funds and bank deposits from various individuals. Court documents state the resulting losses exceeded $5 million, but after some payments were sent to victims, the net loss was estimated at $3.9 million.
"In addition to the victim investors from around the world, the city of Toledo and its residents continue to suffer. Toledo has struggled mightily to revitalize sections of the city, including removing blighted properties and rehabilitating others, at great cost to its citizens," U.S. Attorney Justin Herdman wrote in court documents. "Yet, many of the properties involved in this case, even including a downtown hotel, have been left derelict and uninhabitable, harming the value of both the properties and the surrounding communities."
Several tenants of those uninhabitable properties have been displaced, the prosecutor said.
Defense attorney John Thebes said Sherri Wilson received a shorter prison term because the judge recognized that her husband took advantage of her and thus she was less culpable in the scheme. She could have been sentenced to between 9 and 11 years in prison under federal sentencing guidelines, while Ronald Wilson had faced a maximum of 17 1/2 years.
Messages left for Ronald Wilson's and Feeny's defense lawyers did not receive responses.
Among claimants are First Mercury Insurance, which paid a $32,000 claim for a fire at 1140 E. Bancroft St. that the Wilsons and Feeny falsely told the insurer was caused by a fuel can stored next to a generator during renovations.
The couple also received $250,790 in federal Housing Choice vouchers through the Lucas Metropolitan Housing Authority that was supposed to benefit Sierra tenants.
"[The] defendants have caused great and lasting harm to a multitude of victims, and have continued the scheme in the form of obstructive conduct even after they were charged for their offenses," Herdman wrote in a sentencing memorandum.
Ronald Wilson also wrote bad checks totaling more than $13,000, prosecutors said. Those included: a $3,150 check from a Fifth Third Bank account to a Sierra account at Key Bank that left the Fifth Third account with a negative balance of $67.91; a Dec. 11, 2018 check from the Sierra account at Key for $10,421 payable to the Lorraine Hotel that was deposited in another account at Fifth Third that had a $233 balance; and five checks from the second Fifth Third account totaling $5,835 the following day. Days later, Key Bank entered charge-backs to that account for the two checks Ronald Wilson had deposited, leaving that account $9,024 in the red.
The couple then used the phantom funds to negotiate other transactions, resulting in illegal proceeds from kited checks, prosecutors said, while investor monies intended for use to renovate properties were diverted to the defendants' "personal enrichment."