Rooms Hotels

Hotel broker faces 20 years in prison for sketchy hotel selling scheme

Feb 20, 2013 1:31 am

Skift Take

The hearing is the final piece of a legal storm that started nearly two years ago and at the time rattled the hotel industry, raising a number of red flags regarding the relationship between hotels and brokerage firms.

— Samantha Shankman

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A hotel broker admitted to taking part in a $20 million scheme involving sales of Host Hotels & Resorts Inc. properties to straw buyers, according to federal prosecutors in Virginia.

Jonathan Propp, 48, pleaded guilty today in federal court in Alexandria, Virginia, to conspiring to commit wire fraud. The three-year scheme occurred while Propp was the chief operating officer of Molinaro Koger, an international hotel brokerage firm, according to an e-mailed statement from U.S. Attorney Neil MacBride.

As part of his plea, Propp also admitted to conspiring to steal and launder an additional $15 million from prospective hotel buyers by using money that was being held in escrow to pay the salaries of employees at the brokerage firm, according to the prosecutor’s statement, which said the investigation is continuing.

From 2009 through 2012, Propp conspired with others to illegally sell hotels owned by Bethesda, Maryland-based Host Hotels, the largest U.S. hotel real estate investment trust, to straw buyers, who would then sell the properties to another buyer at a higher price, according to prosecutors. The conspirators pocketed the difference.

Forged signatures

Propp posed as a buyer, forged signatures and obtained a driver’s license for one of the straw buyers, according to prosecutors. He’s scheduled to be sentenced by U.S. District Judge Liam O’Grady on May 31.

Todd Lawyer, 53, of Fairfax, Virginia, also pleaded guilty today to wire fraud conspiracy for his role as a straw buyer, prosecutors said. He’ll be sentenced on May 24.

Both face as long as 20 years in prison.

“We are pleased by the government’s successful prosecution of this fraud,” Host Hotels said in an e-mailed statement.

Propp’s lawyers, Stephen Graff and Thomas Berger, didn’t immediately respond to an e-mail message seeking comment on the plea. Lawyer’s attorney, Lauren Randell, declined to comment.

Host Hotels sued Molinaro Koger and its President Robert Koger for fraud in a Maryland state court, winning a $22.8 million judgment in July. The award was vacated after the parties settled the case on Oct. 9, according to court filings.

The cases are U.S. v. Propp, 12-cr-00523, and U.S. v. Lawyer, 13-cr-00011; U.S. District Court, Eastern District of Virginia (Alexandria).

Editors: Fred Strasser and Stephen Farr.

To contact the reporter on this story: Tom Schoenberg in Washington at tschoenberg@bloomberg.net. To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.

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