Kushner firm seeks arrests
Company has been most aggressive in state in threatening ex-tenants with jail
The real estate company owned by Jared Kushner, son-in-law and top adviser to President Donald Trump, has been the most aggressive in Maryland in using a controversial debt-collection tactic: getting judges to order the arrest of people who owe the company money.
Since 2013, the first full year in which the Kushner Cos. operated in Maryland, corporate entities affiliated with the firm’s 17 apartment complexes in the state have sought the civil arrest of 105 former tenants for failing to appear in court to face allegations of unpaid debt, The Baltimore Sun has found.
That’s more than any other landlord in the state over that time, an analysis of Maryland District Court data shows. Court records show that 20 former Kushner tenants have been detained.
Industry professionals say such arrests, called body attachments, can be the only way to get tenants to pay the money they owe. Kushner Cos. officials say the New York-based firm employs the tactic as a last resort, and follows industry standards and state law.
But critics say it amounts to jailing people for being poor — and can interfere with their livelihoods, making it more difficult to pay the money they allegedly owe. Moreover, at least some tenants who have been targeted say they did not receive proper notice of the court appearances they were accused of missing.
Advocates for consumer rights have long pushed for legislation to limit body attachments.
“People are being arrested for a debt that they may not even be aware of, or for a court date they may not have been aware of,” said state Sen. William C. Smith, a Montgomery County Democrat. Being arrested, he said, has a “devastating effect.”
Judges approve body attachments to compel tenants to show up at civil proceedings. Landlords say tenants are not arrested for owing money, but for missing at least two court hearings about the alleged arrears.
When a landlord wins a judgment against a tenant, he or she may ask the judge to order the tenant to appear in court to answer questions about assets and employment to determine garnishments. If the tenant fails to appear, the judge may issue another summons to determine why the person shouldn’t be held in contempt.
If the tenant again fails to show up, the landlord can ask the judge to issue a body attachment.
When a tenant is arrested, a judge or commissioner can hold him or her and set a bond. Defendants unwilling or unable to pay the bond can end up in jail.
Attorney General Brian E. Frosh, one of the advocates who has sought to limit the practice, says judges in small claims cases may act on informal evidence from landlords about the alleged debt and their attempts to notify tenants about court hearings. Frosh and others say tenants sometimes may be unaware of a debt because it has been sold to a company whose name they don't recognize, and may miss notice of a court hearing because they have moved.
Jared Kushner was CEO of the Kushner Cos. from 2008 through Jan. 19, when he stepped down to join the Trump administration. He retains ownership of the firm.
Jennifer McLean, chief financial officer of the Kushner Cos., said the firm “follows guidelines consistent with industry standards” and state law when it files legal action. Westminster Management, which oversees Kushner's operations, “only takes legal action against a tenant when absolutely necessary,” McLean said in a statement.
The Kushner Cos. have nearly 9,000 units in Maryland, most of them in Baltimore County. They generate at least $90 million in revenue annually, according to offering circulars from mortgage giant Freddie Mac obtained by The Sun, and at least $30 million in profit, according to financing documents provided to investors who hold the mortgages.
Three of the portfolio’s apartment complexes — Dutch Village in Northeast Baltimore, Carriage Hill in Randallstown and Highland Village in Lansdowne — received $6.1 million in federal rental subsidies since Jan. 1, 2015, according to records obtained through a Freedom of Information Act request. That's money that helps the poor pay rent.
The Housing Choice vouchers from the U.S. Department of Housing and Urban Development have helped 268 tenants pay rent at the Kushner properties, finance records show. Apartments rented for an average of nearly $950.
Kushner affiliates have filed more than 1,200 legal actions in the state since 2013. Judges have awarded a total of $5.4 million in judgments against tenants who owed an average of $4,400, The Sun's analysis shows. That includes the original debts, plus lawyers’ fees, court costs and interest.
In nearly all of those cases, judges have approved the garnishment of tenants' wages and property, actions that have helped the Kushner-controlled companies collect $1 million so far, that data show.
The Sun analyzed data from a searchable database of District Court cases compiled by the Maryland Volunteer Lawyers Service.
Priscilla Moreno, a Baltimore County school bus driver who works part time in video production, narrowly avoided arrest last year. She and her three children were living in Whispering Woods, a Middle River community of 524 apartments, when she received a federal voucher that she thought would help improve her housing. She decided to move out.
Then the Kushner affiliate JK2 Westminster hit her with a $7,100 judgment in 2015. She says it did not credit her security deposit and included charges she disputes.
“They were charging me for things that were carpet cleaning,” said Moreno, 44. “Normal wear and tear.”
The original alleged debt was $4,637.76. With lawyers fees, interest and court costs, it grew to $7,100.
A Baltimore County District Court judge approved a body attachment for Moreno last July. She avoided arrest by filing for federal bankruptcy, a step taken by at least a dozen other former tenants sued by Kushner affiliates.
The body attachment order “was very extreme,” she said. For weeks, she lived in fear that she could be stopped for a traffic violation and end up in jail.
“If you don’t have the money, you have to stay in jail until you pay,” she said.
She filed her bankruptcy paperwork with Baltimore County on Nov. 28. It was the same day that Ivanka Trump tweeted a Forbes magazine cover that featured a photo of her husband, Kushner, and a headline calling him "America's new power broker."
Moreno’s bankruptcy records show she owed debts of $60,000 against an annual income of $31,000.
Kushner has earned $1.5 million from Westminster Management alone, according to federal financial disclosure forms filed with the U.S. Office of Government Ethics. Forbes estimates his family's fortune at $2 billion.
Moreno told the court twice that she never received the notices to appear after she moved out of Whispering Woods.
Smith, the state senator, introduced legislation in the General Assembly this year to limit body attachments. Frosh wrote in support of the bill.
“The Office of the Attorney General has long expressed concern about the courts being used as an instrument to assist debt collectors in collecting what is often questionable debt,” Frosh wrote to the Judicial Proceedings Committee in March.
But with little support among committee members, Smith withdrew the measure. He said state Sen. H. Wayne Norman Jr., an attorney who represents landlords, was his “biggest opponent on the bill.”
“It's a big part of his practice,” Smith said. “It was clear [the bill] was not going to get out of committee.”
Norman, a Harford County Republican, said judges approve body attachments only after tenants repeatedly ignore court orders to show up. “It has nothing to do with owing money,” he said. “It has everything to do with disobeying court orders and disrespecting judges.”
Landlords spend at least $150 to file the paperwork required to compel tenants to appear to negotiate debt repayment, Norman said. He said such tenants drive up the rents for everyone else as well as jeopardize property owners’ ability to pay their mortgages.
If defendants didn't face serious consequences, he asked, “why would anybody obey a court order?”
“The body attachment is the only thing that gets a lot of people’s attention,” he said.
McLean, the Kushner executive, said tenants are given multiple opportunities to argue their case to a judge.
“Specifically, every resident must be physically served and have an opportunity to show up in court before a judge,” she said in a statement. “Second, possession and monetary damages are awarded by the judge after both sides are given an opportunity to state their case. While taking a tenant to court is far from an ideal outcome, that option — and clear rules governing it — must exist as a last resort.”
Baltimore County renters filed a class action lawsuit in 2015 challenging the collection tactics of Sawyer Property Management, one of JK2 Westminster’s partners. Tenants claimed the firms violated the state’s Consumer Protection Rights Act by pursuing money without a debt collector's license.
The Maryland Court of Special Appeals disagreed in November.
“Each complaint failed to state a claim under the Consumer Debt Collection Act or under the Consumer Protection Act,” the court wrote.
Kathy Howard represents landlords as a lobbyist for the Maryland Multi-Housing Association. She said the Kushner Cos.’ practices are not “out of the ordinary” when tenants repeatedly fail to appear at court hearings.
“It doesn't sound like [the company is] running awry of regulations,” Howard said. “It simply is good business.”
The practice is not universal.
“I worked for a firm that did collection work and it had a policy against requesting body attachments,” said Amy Hennen, an attorney with the Maryland Volunteer Lawyers Service. “They don’t want to risk the public relations issue.”
Landlords say they need the option of seeking body attachments to recover debt. They argue that small landlords, in particular, often rely on rent payments to keep paying mortgages on their properties.
Marceline White, executive director of the Maryland Consumer Rights Coalition, challenged that argument. Data show that body attachments are obtained mainly by larger companies.
“When you realize that in these cases, it’s a multimillionaire who is the son-in-law of the president, it begs the question whether they should be spending all this time and money to pursue people who have fallen behind,” White said.
“Obviously, people should be paying their bills. But arresting someone years after seems fairly extreme.”
Michael Millemann is director of the Consumer Protection Clinic at the University of Maryland law school.
“It’s utterly outrageous in 2017 to be locking people up for debt,” he said.
Analysts with the investment research firm Morningstar say property managers must pursue debt. If tenants fail to pay rent, the firm warned investors in an analysis of the financing underlying the Kushner properties, the company could default on its mortgages.
Kushner Cos. acquired most of its Maryland apartment complexes with $371 million in financing from Freddie Mac, the mortgage lending giant created by Congress in the 1970s. The mortgages were then packaged with hundreds of others as interest-bearing securities that Freddie Mac sold to investors.
Freddie Mac documents show that the average occupancy rate for 14 of the complexes stood at 95 percent. Revenues of nearly $90 million brought $30 million in profit after taxes, expenses and mortgage payments, the records show.
For a firm that receives money from HUD and financing from Freddie Mac, Hennen said, garnishing wages and seeking arrests is “harsh.”
“A few hundred dollars can be the difference between making it and collapsing” for tenants, she said. “But certainly the body attachment is probably the worst, because we're talking about what is effectively a debtors’ prison, which is something out of Charles Dickens.”