Cockroaches crawling over the arms of children while they slept. Nonfunctioning air conditioning units during the height of summer. Raw sewage spilling through ceilings. Uncollected trash. Rats and groundhogs roaming inside and outside. Homeless people living in an unlocked basement unit.
Those were some of the conditions described by tenants of Ruskin Place Apartments, a 169-unit, low-income complex in south Kansas City, during a sometimes emotional trial before a Jackson County judge that began and ended Tuesday.
The now-former owners of the complex, an affiliate of KM-T.E.H. Realty, and Michael Fein, one of its major investors, didn’t show up for the trial. That’s been the case since tenants filed their class-action lawsuit against them last year.
At issue is not whether they will be held liable – Judge Joel Fahnestock earlier entered a default judgment against them – but rather how much they will be ordered to pay.
Gregory Leyh, the tenants’ lawyer, asked Fahnestock to send them a message and assess actual damages of more than $11 million, punitive damages of $22 million against KM-T.E.H. and $17 million against Fein.
“They’ve shown a reckless disregard of the health and well-being of these tenants, who, by the way, are not wealthy,” Leyh told Fahnestock. “It’s a low-income property, which is another factor that adds to the reprehensibility of the overall scheme.”
A federal grand jury in St. Louis indicted Fein last month on two charges of bank and wire fraud. A warrant has been issued for his arrest. He’s believed to be out of the country, possibly in Israel, where KM-T.E.H. was founded in 2006.
Through limited liability companies, KM-T.E.H. specializes in acquiring low-income housing units and owns at least 13 apartment buildings in the Kansas City area. It also owns apartment buildings in St. Louis, Tulsa, Indianapolis and Reading, Pennsylvania.
Earlier this year, Fahnestock fined T.E.H. $7,500 a day after finding it in contempt of court for violating court orders and not showing up for scheduled depositions. Coupled with an earlier contempt citation of $1,000 a day, the fines, with interest, amounted to nearly $867,567 as of Tuesday.
KM-T.E.H. Realty 8 LLC, the affiliate that owned Ruskin Place, lost the property when federal mortgage giant Fannie Mae foreclosed on it earlier this year. A New Jersey company bought it out of foreclosure for about $4.2 million.
The Ruskin Place tenants are seeking to hold T.E.H. liable for back rent and security deposits they paid during the roughly five years T.E.H. Realty 8 owned the building. Leyh estimated roughly 460 tenants occupied it during that period.
Five Ruskin Place tenants testified Tuesday about their units’ squalid living conditions and how their complaints to management were routinely ignored.
Tenants Describe Unsafe Living Conditions
Several sobbed as they spoke. Esthela Sandoval, a mother of four children ranging in age from 1 to 7, said she kept the lights on all night in order to lessen the number of cockroaches who would emerge to crawl on her children’s beds.
“It was horrible,” she said. “They were everywhere in every single part of my house. In all of my furniture, my kids’ bed, in my bed, all kinds of furniture. They were just crawling on the walls.”
Sandoval described moldy, dark water from the unit above leaking through a gaping hole in the bathroom ceiling and sewage backing up in the toilet and bathtub.
Kelvin Lopez, who occupied a two-bedroom unit with his parents, said it was unfit to live in. He said the unit directly below had no lock on the door, had a kitchen that appeared to be burnt, and was infested with rats, cockroaches and even possums. Occasionally, homeless people moved in.
He said he had to put a bucket under his bedroom window whenever it rained. It got so bad, he said, that he was forced to move into his parents’ bedroom.
Other problems included roaches, no heat during the winter months and a non-functioning air conditioner during the summer months. None of the problems were fixed, Lopez said.
“They always told us that everybody else also has this problem, and we have to wait so others get theirs fixed first and then we would get ours fixed,” Lopez testified. “And that would always be the excuse.”
Lopez and other tenants said when they inquired about moving to Ruskin Place, they were shown a model apartment but then given a different one.
Raymond Forbes, who did maintenance for T.E.H., said the model apartment was immaculate and had brand new appliances. It was a bait-and-switch strategy to induce people to move to Ruskin Place, he said.
Another tenant, Chris Walter, said he suffered from refractory epilepsy that is triggered by excessive heat. Because his air conditioner didn’t work, he said, he’d have at least six to eight seizures a month, compared with two he normally had. The seizures left him unconscious.
“How callous somebody has to be to not assist a man like Chris Walter, who they knew was having seizures, by merely fixing an air conditioner,” Leyh told Fahnestock. “How callous do they have to be to have cockroaches in Ms. Sandoval’s apartment and do nothing about it. The magnitude of the callousness … is very significant and I think it goes to reprehensibility.”
Kurt Krueger, an economist who testified as an expert witness about T.E.H.’s and Fein’s wealth, said that both had the ability to pay punitive damages.
He said that information in an Israeli court case involving T.E.H. showed the company’s apartment buildings were worth $260 million and its annual cash flow was about $21 million.
In a 2017 deposition, Fein reported owning 3,500 apartment units with a market value Krueger calculated at $105 million.
Fahnestock said she would take the case under advisement and would do her best to rule “as quickly as possible.”
