State authorities have put a receiver in charge of a large Clackamas property management firm, ousted its owner and are hunting for thousands of dollars in missing rents and deposits.
The Oregon Real Estate Agency, which regulates property managers, fear losses from Cascade Community Management could run to several hundred thousand dollars. The agency’s investigation determined that clients who retained Cascade to manage their 500 Portland-area rental units didn’t receive their rental income in June.
The FBI confirmed it is reviewing the matter for possible criminal investigation.
Cody Halsey, 36, of Oregon City, owner of the company since 2007, "accepted complete responsibility," according to the state’s investigative report. Halsey, replaced earlier this month by a court-appointed receiver, told investigators he had fabricated bills, misused tenant security deposit funds and double-billed clients to make up for recent business setbacks.
"The evidence was apparent up front that there was wrongdoing," said Dean Owens, deputy commissioner at the Real Estate Agency. "There were checks being written off of the property management accounts to himself. We’re talking in the $70,000-$80,000 range."
Halsey couldn’t be reached for comment and his attorney, Jack Graham of Salem, didn’t return telephone messages or emails.
Customers of Cascade, meanwhile, are still waiting to hear from the receiver the extent of the losses. Vern Van Horn, for one, calculated he’s out more than $70,000 — the $850 monthly rent on 84 units — just for the month of June.
Richard Rocci, a retired CPA from Portland, doesn’t know the fate of $130,000 in security deposits paid by the tenants in his 85 units.
"There’s a state receiver who’s clammed up," Rocci said. "I sat with him an hour yesterday and I couldn’t get anything out of him. I want to know where we stand."
Cascade is the fourth Oregon property management firm the state has put into receivership over financial irregularities in four years.
In May, state officials revoked the principal broker’s real estate license of Terry Shockley after determining more than $2 million was missing from trust accounts of his company, Property Management Consultants. Shockley was one of the largest landlords in Eugene.
State officials are puzzled by the string of cases involving mismanaged funds.
"When what appears to a good lucrative business gets into these kinds of situations, we ask ourselves the same question, what’s going on?" Owens said.
The agency conducts about 600 audits a year of trust accounts overseen by property managers. It regulates nearly 700 managers.
These are boom times in the property rental business. The rate of homeownership in the U.S. has fallen eight consecutive years from a high of nearly 70 percent to about 63 percent. The real estate crash, the recession and tougher lending standards contributed to the decline.
Many renters are former homeowners who lost their homes to foreclosure and now have such ruined credit they can’t qualify to buy another one.
That means more renters and ever-increasing rents in a tight market such as Portland. Revelations that a large property manager may have been helping himself to their security deposits likely won’t ease renters’ frustration.
Property managers are vested with great authority by their clients. Firms like Cascade often find tenants, maintain the property and grounds, collect rents, pay the bills and even the mortgage payment on behalf of the property owner. In return, they typically earn 8 percent of the rent. Property managers also collect and hold tenants’ security deposits.
The recovery of the housing market put Cascade and Halsey in a bad way, he told investigators. When Halsey bought Cascade eight years ago, it managed about 100 units. He grew it to 1,100 units.
As the economy recovered and housing prices began to soar, several property owners decided to sell their rentals.
"The majority of the decline (at Cascade) is due to the sales market improving," said Tony Sammons, a former Cascade employee. "Now, they’re no longer under water. They can sell."
Halsey told state officials his business had dropped to 533 units by this spring.
A property manager inside Cascade alerted state officials to alleged improprieties.
The manager, Rhiann Doster, told the Real Estate Agency in May that Van Horn asked her to review utility charges for his rental units.
Van Horn’s records showed he had been billed by Cascade for more than $23,500 in charges from the Portland Water Bureau since 2011. The problem was, Van Horn’s rental house was in Milwaukie and didn’t use Portland water.
Halsey and Graham, his lawyer, met with state investigators June 8. Graham said his client spent lavishly on his employees, including leasing them a fleet of high-end automobiles. He lived in a Street of Dreams home in Oregon City and spent a good deal of money on a boat and vacations.
State authorities said they established sufficient evidence to revoke Halsey’s property management license and oust him from the company.
Halsey also owns Noah & Associates Community Management, which manages condominiums and other housing projects for homeowner associations. Sean Pickel, operations manager at Noah, said Friday that his clients’ accounts are intact.
— Jeff Manning and Elliot Njus