The apartment company owned by Jared Kushner, son-in-law and senior adviser to President Donald Trump, said it has rejected a settlement offer from the Maryland Attorney General's office after two years of negotiating over the New York real estate firm's rental practices across the state.
In a statement Wednesday to The Baltimore Sun, Kushner Companies CEO Laurent Morali said the company has cooperated fully with Maryland Attorney General Brian Frosh, a Democrat, after he initiated in 2017 what the New York executive labeled a "politically motivated" investigation.
It is the policy of Frosh's office not to confirm or deny the existence of any investigation. But company officials said in October 2017 that the attorney general was investigating the rental practices of Kushner Companies' Westminster Management.
"We refuse to be extorted by an ambitious Attorney General who clearly cares more about scoring political points than fighting real crime and improving the lives of the people of Maryland," Morali said in the statement Wednesday. "Since purchasing what were financially distressed assets in Maryland 7 years ago, Kushner Companies has invested over $30 million in upgrading these properties to provide safe, clean and affordable housing to its residents. We pride ourselves in our standards for upkeep and maintenance, which is why the properties continue to perform the best in their categories."
Westminster Management owns and manages 21 apartment complexes in Maryland, mostly in the Baltimore region, according to the company's website. The company oversees a total of 10,091 units that generate approximately $85 million in annual net operating income, according to records maintained by Freddie Mac, the government-owned corporation that buys mortgages, packages them and sells them as mortgage-backed securities.
In addition to Dutch Village in Baltimore and the Commons at White Marsh in Baltimore County, Westminster operates apartment buildings in Annapolis, Columbia and Frederick, Md.
"Our office does not confirm or deny the existence of investigations. And the office does not comment on settlement negotiations," said Raquel Coombs, a Frosh spokeswoman. "Our office works hard everyday to protect Maryland consumers."
Frosh's investigation of the company began after articles in The Baltimore Sun and ProPublica detailed rental practices that critics and tenant advocates said violated consumer protection rules for renters. Weeks before the attorney general's office began an investigation, Westminster was sued by tenants who alleged the firm charged them improper fees above state-permitted limits and then unfairly used the threat of eviction to collect.
The allegations are similar to those that the Baltimore-based Public Justice Center asserted in class action claims against two other large rental property managers. Those companies denied any wrongdoing but agreed to settlements of the lawsuits that resulted in nearly $2 million of debt forgiveness for tenants. The Public Justice Center is also representing tenants in the action against Westminster, which is still pending in Baltimore circuit court.
Westminster tenants allege in the lawsuit that the company improperly allocated rent payments to offset allegedly overdue fees for other services, prompting more late fees and threats of eviction, and perpetuating a cycle of debt. The Public Justice Center said Westminster officials charge tenants "excessive, illegal fees, regularly misapply tenants' subsequent payments in part to the illegal fees, and then deem the next rent payments 'late' to justify additional excessive fees."
A Baltimore Sun investigation found that in 2013, the first full year in which the Kushner Companies operated in Maryland, corporate entities affiliated with the firm's apartment complexes had sought the civil arrest of 105 former tenants for failing to appear in court to face allegations of unpaid debt.
Advocates for low-income tenants argue that such aggressive action for unpaid rent amounts to arresting people for being poor. Housing and debt-collection professionals counter that such arrests, called body attachments, can be the only way to get tenants and other debtors to pay money they owe. Kushner officials said the company uses the tactic only as a last resort and that judges must approve such requests when tenants repeatedly fail to appear in court as ordered.
Frosh's office offered a settlement deal in November, alleging the company was violating parts of Maryland's Consumer Protection Act and the state's landlord-tenant laws, according to sources familiar with the offer. Negotiations over the settlement ended last month.
Morali said Kushner Companies has not violated state code.
"The Attorney General's office has been investigating our company for over two years now," Morali said in the statement. "For over two years, we have fully cooperated and complied with the terms of the administrative subpoena and remained fully transparent with the Attorney General's Office in both formal and informal discussions. In fact, upon being given notice of potential issues, we immediately remedied the practices that were in question and offered to resolve any disputes."
The company did not detail which practices it had remedied.
Matthew Hill, a Public Justice Center attorney, said Westminster has not stopped charging fees the nonprofit and tenants contend are unlawful.
"Westminster's practices with respect to fees are illegal in many cases and they have not fully remedied those practices," Hill said.
In 2017, Baltimore County code inspectors cited the Kushner Companies for more than 200 violations, The Sun has reported. Most citations were corrected, resulting in $2,000 in fines. The violations were for mold, insect infestations, mice, rats, window or door leaks, and inadequate air conditioning or heat.
Morali said the company always works quickly to correct any violations.
"Despite the company's efforts to cooperate with the investigation and change in practices, the Attorney General insists on an exorbitant and unprecedented penalty amount," the CEO said. "Additionally, the Attorney General contends that Westminster has committed hundreds of violations when in fact there are only 2 outstanding concerns voiced by him. It is our standard operating procedure that when we are notified of a lawful violation, we work to quickly remedy it."
The Kushner chief executive did not reveal the amount of the penalty Frosh's office sought.
Morali's statement also said, "Kushner Companies has a 35-year track record as a best-in-class manager of property throughout the country."
"In addition to asking for an exorbitant penalty, the Attorney General is seeking to impose a set of rules on our company that has never been applied to any other business in this state's history," he said.
"We are fully committed to upholding all elements of Maryland law and the Maryland Consumer Protection Act. For the sake of the thousands of people in Maryland that we employ directly and indirectly, and the tens of thousands who benefit from the housing we work hard to keep clean, safe and affordable, we ask that we are treated the same as any other company that wishes to do business in this state," Morali said. "That is not consistent with the intent of the politically motivated Attorney General."
Frosh has initiated multiple lawsuits against Trump and his administration over the past two years, prompting cries from Republicans that the Democratic attorney general is "grandstanding."
Jared Kushner stepped down as CEO of the Kushner Companies in 2017 when he became a senior adviser to Trump. He has divested from many properties, but not from Westminster Management, according to federal financial disclosure forms filed with the U.S. Office of Government Ethics.