Further fallout from Koger-Host case

Former Molinaro Koger COO Jonathan Propp pled guilty in federal court on Tuesday to conspiring to commit wire fraud as part of a three-year, US$20 million “straw buyer” scheme involving the sale of Host Hotels & Resorts properties, according to a Bloomberg report.

Host Hotels in July won a US$22.8 million judgment against Molinaro Koger and its President Robert Koger for fraud involving the same property sales. The award was vacated after the parties settled the case, according to court filings.

As part of his plea in an Alexandria, Virginia court, Propp also admitted to conspiring to steal and launder an additional US$15 million from prospective hotel buyers by using money 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.

In a statement to HOTELS Magazine, a spokeswoman for Host Hotels said, ““We are pleased by the government’s successful prosecution of this fraud. However, because the investigation is ongoing, it would not be appropriate for us to comment any further.”

From 2009 through 2012, Propp sold hotels to straw buyers, who would then sell the properties to another buyer at a higher price, according to prosecutors. The conspirators pocketed the difference. Todd Lawyer of Fairfax, Virginia, also pleaded guilty Tuesday to wire fraud conspiracy for his role as a straw buyer.

Both Propp and Lawyer are scheduled to be sentenced on May 31 and face up to 20 years in prison.