TEXARKANA, Texas — A Texarkana doctor and his son have pleaded guilty to federal fraud violations, according to U.S. Attorney Nicholas J. Ganjei.
According to the attorney's office, Dr. Rafael Otero, 68, pleaded guilty to defrauding the U.S. Department of Housing and Urban Development (HUD), an insured mortgage program designed to provide affordable housing for those suffering from diseases like Alzheimer’s.
Dr. Otero could face up to one year in federal prison at sentencing. He has agreed to pay restitution to HUD.
His son, Antonio Otero, pleaded guilty to equity skimming on October 28, 2019, and was sentenced on June 2, 2020, to 46 months in prison. He was also ordered to pay $2 million in restitution to HUD.
According to information presented in court, Dr. Otero was the majority owner of the Magnolia Alzheimer’s Assisted Living facility in Texarkana, and his son, Antonio Otero, was the facility’s administrator.
In order to secure millions of dollars in necessary funding, the Oteros obtained a loan that was insured by HUD. The HUD-insured loan provided a favorable interest rate and did not require the owners of Magnolia to take personal responsibility for the loan in the event of a default. Instead, HUD would suffer the financial loss in the event that Magnolia defaulted on the loan. As a condition of this federal benefit, Magnolia agreed to be bound by a regulatory agreement with HUD that prohibited the owners from receiving money from Magnolia, unless the loan was being paid and Magnolia had surplus cash.
However, instead of paying the HUD-insured loan, and in violation of the regulatory agreement they signed with HUD, the Oteros took hundreds of thousands of dollars from Magnolia. Dr. Otero received more than $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 of camera equipment, a $3,247 watch, $2,520 in landscaping for his personal residence, a $27,408 personal mortgage payment, a $12,750 down payment on a personal vehicle, and $1,540 tickets to the Dallas Cowboys. Additionally, he took money from Magnolia and gave it to other individuals, including $13,000 for cosmetic surgery.
When Dr. Otero learned that his son had been stealing money from Magnolia, Dr. Otero did not report him to authorities or remove him from his position. After Dr. Otero learned of his son’s theft, Antonio Otero stole an additional $62,000 from Magnolia.
