Despite indictment, Pittsburgh landlord expands his business
Donna Goldinger walks through the house, which was cited for numerous violations by the Health Department. It's managed by PGH Capital Management but owned by an overseas investor.
Donna Goldinger points out some of the problems in her Carrick house. She has reported some of them to the Health Department, which found raw sewage flowing into a crawl space, a lack of smoke detectors and other violations. Here, Ms. Goldinger stands near the basement toilet, where the floor, now covered by a board, has collapsed.
Share with others:
A federal indictment hasn't slowed the pace of one of the region's fast-growing landlords, who continues to buy and rent out low-end properties -- often tangling with his tenants -- while shifting ownership of the houses overseas.
In the two years since Squirrel Hill entrepreneur Dov Ratchkauskas was charged in U.S. District Court with wire fraud, his business, Realty Choice Investments, purchased and sold more than 200 properties, selling largely to Israeli investors, and sometimes getting double or triple the purchase price in a matter of days or weeks. The rentals are then owned by the investors but administered by Mr. Ratchkauskas' PGH Capital Management, sometimes leaving regulatory agencies wondering who to contact about code violations.
Attorney Stanley W. Greenfield, who represents Mr. Ratchkauskas in the criminal case, said there is no reason the indictment should affect his client's business. Mr. Ratchkauskas, 46, was indicted in January 2011, accused of signing and transmitting what prosecutors described as fraudulent settlement statements. He has pleaded not guilty.
"He's a legitimate businessman. The government knows that," said Mr. Greenfield. Any alleged violation, he said, "ended with the indictment."
Tenants who knew about the case against Mr. Ratchkauskas said its slow progress left them feeling pessimistic about their chances in disputes with him.
"If the FBI mortgage task force can't get these guys," said one former tenant who asked not to be named, "we don't stand a chance."
Cold and moldy
Kevin Roebuck, a stadium worker who rents from PGH Capital, said he has "no complaints" about the landlord. He rented a home on Merle Street, in the Pittsburgh neighborhood called Chartiers City, through the firm. After he found mold in the basement, the company allowed him to move into another one of its houses.
The mold was apparently still lurking, though, in August, when PGH Capital leased the same house to Anthony Allen and his girlfriend, Tawnya Haymon.
They didn't notice it at first, but when autumn compelled them to shut the windows, the mold proliferated. "It was all around the windows in every room," said Mr. Allen, an unemployed maintenance man. "It was on the baseboards, in the closets."
"Finally, the mold was getting so bad that we lost mattresses, clothing; it was going up the back of the dressers," said Ms. Haymon.
Worse yet, the furnace didn't work. Mr. Allen said that they placed numerous calls, but PGH Capital was "basically giving us the runaround." Ms. Haymon, who works as a residential adviser, told PGH Capital that she wouldn't pay rent until the problems were fixed.
PGH Capital filed a landlord-tenant complaint Nov. 1, saying the couple weren't paying their $800-a-month rent.
The Allegheny County Health Department inspected on Dec. 4, and demanded that the home's owners repair an "inoperable" furnace, clean mold found on several walls, waterproof a leaky foundation, weatherize a door, fix a broken wastewater line and make other improvements. The department declared the house "unfit for human habitation," a designation that does not require evacuation, but allows the tenants to pay rent into an escrow account. That designation was lifted shortly thereafter when the furnace was fixed, although other violations remained.
The Health Department sent its inspection report and findings to PGH Capital's address, noting the owners of record, Jontan Chkroun Netanel and Yehudit Gurfinkel Merave. Documents indicate that they are residents of Israel.
How did a Chartiers City home end up owned by Israelis?
The Merle Street house was the subject of a 2009 foreclosure, and the federal Department of Housing and Urban Development took ownership late that year. HUD sold the property to Mr. Ratchkauskas' Realty Choice Investments for $16,575 on April 6, 2010. Realty Choice sold it to the two Israelis three days later, for $46,000, according to deeds.
Mr. Ratchkauskas declined to comment. "Don't call here anymore ever," he said, before hanging up.
Maximilian F. Beier, an attorney who represents PGH Capital in Common Pleas Court, said he did not know about Merle Street, but said that tenants go through a checklist verifying the condition of the property before moving in. "At the time that the tenant took possession of the property, there would not have been mold, and the furnace would have been working."
On Jan. 10, PGH Capital got a district judge's order evicting the family. A sheriff's deputy came on Jan. 22, sending them scrambling to a relative's apartment in Beaver Falls.
Ms. Haymon called it "the coldest day possible."
Mr. Ratchkauskas and his former business partner, George Kubini, were accused in a Jan. 14, 2011, federal grand jury indictment of wire fraud conspiracy, which means conspiring to use electronic communication to deprive another person of property or services. Prosecutors said the two "purchased properties typically out of foreclosure and then quickly sold those properties at substantial profits." The crime, prosecutors wrote, was that "a financial institution financed the purchase of the homes based on a number of false representations" of the property values. They demanded the forfeiture of $1 million in proceeds from the alleged fraud.
Since then, the case docket has shown almost nothing except a long series of continuances.
At an October status conference, according to notes in the case docket, Assistant U.S. Attorney Brendan Conway told U.S. District Judge Nora Barry Fischer that he did not object to Mr. Kubini's motion for a ninth continuance because of "continuing investigation of alleged tax violations by [Mr. Kubini] as well as new charges pertaining to an additional defendant."
Since then, Judge Fischer has granted 10th continuances to both defendants, setting a March 29 deadline for motions in the case.
Mr. Kubini's attorney could not be reached for comment. Mr. Kubini has pleaded not guilty, and does not appear to be affiliated any longer with Mr. Ratchkauskas' businesses.
In 2011, Mr. Ratchkauskas' Realty Choice Investments bought 66 properties in Allegheny County and sold an identical number, according to deed records. In 2012, the firm bought 149 and sold 140. Deeds suggest that the buyers are mostly Israelis, and that PGH Capital Management administers the properties post-sale.
"That's a perfectly legitimate business. You sell to people who want to buy for investment," Mr. Greenfield said. "You buy it at the best price you can, you fix it up, and you sell."
"What I see him doing is buying houses, rehabilitating those houses, and keeping those houses free of defects, and improving neighborhoods by rehabilitating those houses," Mr. Beier said. "He turns them from the worst property on the street to the best property on the street."
A Health Department spokesman said that agency has no difficulty reaching PGH Capital Management, and generally finds the company responsive to enforcement efforts.
But in the city of Pittsburgh, where PGH Capital manages scores of rental houses and Bureau of Building Inspection rules call for citing the owners -- rather than managers -- of properties with code violations, foreign ownership "makes it hard as far as enforcement," said District Judge Richard King. He said some of the fines he has levied on properties managed by the firm have gone unpaid.
"Clearly [Mr. Ratchkauskas] doesn't have a big picture in mind in terms of protecting or regenerating or revitalizing these neighborhoods," said Pittsburgh Councilman Bruce Kraus, who represents areas up the hill from South Side in which Mr. Ratchkauskas' businesses are active. "It's strictly investment real estate for him."
One house on Alries Street in Carrick was a problem long before Mr. Ratchkauskas' businesses became involved.
From 2008 through 2010, neighbors repeatedly called the city to complain that the house was vacant, falling apart and choked with weeds. Records of a complaint call in June 2010 indicate that in addition to trash and weeds, it had "a broken sewer line that needs to be fixed."
Realty Choice bought it in December 2010, for $30,000, and sold it four months later, for $50,000, to Uri Nachum Pinsky and Orit Pinsky of Israel.
Donna Goldinger moved in four months ago, and soon noticed a smell. "The fumes were so freaking bad that I couldn't stand it," she said. Her 18-month-old granddaughter, Neveah, began coughing, and had to be hospitalized twice, she said.
Then her son's friend entered the downstairs bathroom, and his foot went right through the floor, she said. When they put a light in the hole, they saw wastewater several feet deep in a crawl space under the bathroom.
In mid-November, Ms. Goldinger called the Health Department. An inspection two weeks later and found "raw sewage flowing from rear exterior crawl space door to ground surface," along with an absence of smoke detectors, leaking plumbing, a sagging ceiling and a dead mouse, among other problems. The inspector declared the house unfit for human habitation.
Mr. Beier said PGH Capital was "cited by the Health Department. They responded immediately."
The department filed a complaint with District Judge Richard King, saying that the owners "failed after proper notice to repair the building drain that is causing raw sewage to surface." A subsequent Health Department inspection of Dec. 27 found the violations corrected.
In late January, PGH Capital filed a landlord-tenant complaint against Ms. Goldinger, saying she is behind on her $825-a-month rent. Judge King granted a judgment partially in the company's favor on Tuesday, because the sewage problem has been fixed, but has not evicted Ms. Goldinger.
Ms. Goldinger, who is disabled with a spinal injury, said she "can't afford to move, and they know that." She said the months her family lived with a sewage stench still affect them. "We're still hacking. Our lungs are still sore."
First Published February 10, 2013 12:00 am