Updated 12:05 p.m. Eastern Daylight Time, 22 August 2014
ALEXANDRIA, Virginia—The United States government is pursuing Robert T. Koger, former president and owner of hotel brokerage firm Molinaro Koger, for approximately $40.7 million in restitution for the victims of his crimes.
Koger agreed to restitution for “the full amount of the victims’ losses,” according to his plea agreement filed on 16 January and made public Thursday.
In his declaration to the District Court, Federal Bureau of Investigation Special Agent Charles E. Price II, identified eight victims, including Host Hotels & Resorts, which is owed $20.2 million, according to the U.S. government.
“I have not been able to find or trace the vast majority of the proceeds from Koger’s frauds,” Price states in his declaration. “Koger contends that a majority of the proceeds were spent supporting his business and lavish lifestyle. I have no reason to doubt this assertion. However, Koger also claims that he no longer has any of the stolen proceeds. …
“I have repeatedly proved this assertion to be false.”
View the documents:
• Criminal information
• Plea agreement
• U.S. government’s motion for preliminary order of forfeiture
• U.S. government’s motion for entry of restitution order
• Price’s declaration of forfeiture and restitution
• Court’s judgment
• Order to unseal the case
Hotel News Now will monitor the situation and report any new details.
--------------------------------------------------
Posted 8:39 a.m. Eastern Daylight Time, 20 August 2014
ALEXANDRIA, Virginia—Robert T. Koger, former president and owner of hotel brokerage firm Molinaro Koger, on Tuesday was sentenced to 11 years in prison for a series of fraud schemes involving the sale of several hotel properties.
Koger pleaded guilty on 16 January 2014 to wire fraud and conspiracy to commit wire fraud.
Dana J. Boente, U.S. Attorney for the Eastern District of Virginia; and Timothy A. Gallagher, Acting Assistant Director in Charge of the FBI’s Washington Field Office, revealed the 11-year sentence after Koger was sentenced by U.S. District Judge Liam O’Grady.
Koger and his partners had built a well-known brokerage firm headquartered near Washington, D.C., that engineered more than $19 billion in hotel transactions dating to 1959, when C. Joseph Molinaro founded Joseph Molinaro Associates. Koger joined the firm in the 1990s. In 2010, the company sold 56 hotels worth $1.5 billion, according to its website.
Jai Lalwani and Black Diamond Brokerage Services LLC purchased Molinaro Koger in 2011 from Koger. It took the company’s assets, staff and history to form Molinaro Hotels to “live on the legacy that Joe Molinaro created 50 years ago,” according to the site.
According to court records, the charges arose from three separate schemes executed by Koger, which resulted in losses exceeding $55 million:
- The first scheme involved Koger’s illegal flipping of hotels and promissory notes securing hotels in which Host Hotels and Resorts and others were victims. After Koger was hired by Host as a broker to sell two of its hotels, Koger located legitimate buyers for the properties at a fair market price. Rather than selling the hotels directly to the legitimate buyers, however, Koger recruited straw buyers controlled by him to whom he arranged the sale of the hotels by Host for considerably less than the legitimate buyers had agreed. The straw buyers then immediately turned around and sold the hotels to the legitimate buyers at the higher price previously arranged by Koger. Koger pocketed the difference between the legitimate purchase price and the straw buyer’s price, plus the commissions that Host paid Koger for arranging the “front end” sales with the straw buyers. In a similar manner, Koger defrauded Host by having a straw buyer purchase promissory notes securing European hotel properties in which Host was interested. The straw buyer then resold the notes to Host for considerably more than it paid for them. In total, Koger defrauded Host of more than $22 million, according to government documents.
- The second fraud involved Koger executing a Ponzi scheme to steal and launder funds received from prospective buyers of hotels that were to be held in escrow while Koger negotiated with the hotel’s owners regarding the terms of the sale. Koger received deposits from prospective buyers of hotels that were to be held in escrow while Koger negotiated with the hotel’s owners regarding the terms of the sale. Contrary to his representations to the prospective buyers, Koger was not actually holding their funds in escrow. Instead, he used their funds to pay for personal and business expenses, including to repay prospective buyers whose funds previously were purportedly held in escrow by Koger.
- The third scheme involved Koger defrauding Kiran Patel, a Tampa-based cardiologist and philanthropist, in a deal involving the Wyndham Grand Hotel in Pittsburgh. A management firm that held a promissory note secured by the hotel decided to sell the note, and Patel submitted an offer to buy the note for less than its face value. In what is described in court records as a “walk-away fraud,” Koger used an alias (“Rick Thompson”) to contact Patel about his bid for the hotel’s promissory note. As part of this process, Koger (acting as “Rick Thompson”) falsely claimed to Patel that “Thompson” had submitted a higher bid for the note than Patel’s bid, but “Thompson” then offered to withdraw his bid if Patel paid “Thompson” $2.5 million to walk away from his purportedly higher bid. After Patel paid off “Thompson,” Koger used a different alias (“John Stern”) to contact Patel again about the property. In what is described in court records as a “break-up fraud,” “Stern” falsely offered to buy the hotel from Patel, but then threatened to sue Patel over an alleged breach of contract related to the sale, unless Patel agreed to pay “Stern” $15 million. The entire situation was recounted in a previous Hotel News Now article outlining Koger’s downfall.
In July 2012, the Montgomery County Circuit Court awarded Host Hotels $22,769,700 in the company’s civil litigation against Molinaro Koger, Koger and his front companies based on claims of fraud and breach of fiduciary duty involving these three transactions.
“Koger’s sentencing ensures that he can no longer abuse his trusted position as a broker to defraud his clients. Host is grateful for the government’s investigation and efforts,” said Host’s General Counsel Elizabeth Abdoo in a prepared statement released following the sentencing. “Host will continue to pursue its claims against Koger’s law firm, Fox Rothschild. Our amended complaint filed in Montgomery County Circuit Court alleges that Fox Rothschild engaged in dozens of instances of misrepresentation and affirmative fraudulent concealment over a two-year period—and Robert Koger and Molinaro Koger could not have successfully completed the fraudulent schemes against Host but for the active and willful support of Fox.”
The federal investigation of Koger’s schemes also resulted in three of his co-conspirators pleading guilty: former Molinaro Koger COO Jonathan Propp and Koger business associate Todd Lawyer entered guilty pleas for conspiracy to commit wire fraud, and former Molinaro Koger CIO Richard Harris, III pled guilty to aggravated identity theft.
Host Hotels & Resorts, a publicly traded real estate investment trust, closed Tuesday with a stock price of $22.66 per share, up 14.2% year to date. By comparison, the R.W. Baird/STR Hotel Stock Index has grown 12.9% year to date.
Compiled by Jeff Higley.