Kuwaiti real estate broker AbdulAziz HouHou and his companies flipped 160 houses in Buffalo between 2013 and 2016. (John Hickey/Buffalo News)

 

https://buffalonews.com/2019/04/28/how-a-kuwaiti-ponzi-scheme-left-a-trail-of-blight-in-buffalo/

 

A Kuwaiti realtor and his multiple companies bought or brokered at least 160 houses in struggling Buffalo neighborhoods as part of an international Ponzi scheme. The realtor and his associates are serving prison time in the $140 million to $240 million scam that extended to Rochester, Detroit, Cleveland, Florida and North Carolina.

More than 6,400 miles away, Kuwaiti realtor AbdulAziz HouHou and associates were hunting for investment properties in the United States.

In Buffalo, they found plenty.

HouHou and his multiple real estate companies bought or brokered at least 160 low-end houses in Black Rock-Riverside, South Buffalo, the West Side, and the city’s East Side – almost all of which were resold to other Kuwaitis.

Almost six years after HouHou’s house-hunting spree began, struggling Buffalo neighborhoods are still contending with the path of blight the Kuwaiti real estate broker left behind, including vacant, dilapidated and foreclosed properties.

HouHou is now in Kuwait’s Central Prison.

He was fined $16 million by a Kuwaiti court and sentenced to 10 years for money laundering and defrauding his fellow Kuwaitis on real estate sales from Buffalo and Rochester to Detroit, Cleveland, Florida and North Carolina.

HouHou’s real estate ventures in Buffalo and other U.S. cities, as described in Kuwaiti court documents, were part of a $140 million to $240 million international fraud and money laundering scam. It enabled HouHou to buy a $350,000 Rolls-Royce and $1 million villa, according to court papers.

It was a Ponzi scheme financed by as many as 2,000 unsuspecting investors who bought as many as 3,000 properties, mostly in the United States, said Ali Al-Attar, an attorney for the Kuwaiti investors.

Now that HouHou is in jail, Kuwaiti officials are asking if anyone in the U.S. was complicit in his scheme. Some Kuwaiti investors have contacted the FBI, which would not say if it is investigating.

The scam has not been reported in the United States until now.

Who is HouHou?

HouHou (pronounced Who-Who) is described by people who have met him as a bright and persuasive man.

With a Kuwaiti mother and Lebanese-born father, HouHou worked in his uncle’s cellphone store in Kuwait City. Then, about 20 years ago, he established his own Kuwaiti company to promote small businesses through social media and social networking.

Working with his wife, Bedour Haidar, who is described on social media as a “life and success coach,” HouHou and his growing firm, BinHouHou Enterprises HMG Group, increasingly focused on real estate, with HouHou in recent years identifying himself as “the broker.”

HouHou’s companies sold properties in Kuwait, Lebanon and other Middle East countries, including Qatar, where HouHou and Haidar represented RE/MAX for several years. The Denver-based company later cut ties with the couple.

In 2013, records show, HouHou began setting up a string of companies in the United States, then buying, selling and brokering U.S. properties, which were promoted at real estate exhibitions investors say are well-regarded in Kuwait.

“It was one of the most advertised real estate companies in the country,” Kuwaiti investor Mubarak Almubarak said of HouHou’s firm.

The sales pitch was effective: High returns on low-risk, low-maintenance “attractive investment properties” on tree-lined streets in Buffalo and other U.S. cities.

HouHou and his companies promised investors 15 percent returns, with a management company taking care of everything from tenant leasing to repairs and rent collection.

In reality, the Kuwaiti investors said, the houses often turned out to be run-down, usually vacant or needing substantial repairs, and in struggling urban neighborhoods. Some were dilapidated the day they were sold; others quickly deteriorated from lack of maintenance, Kuwaitis learned.

Sometimes, the Kuwaiti court found, HouHou and his firms sold the same house to two different investors at the same time. Sometimes they sold houses that weren’t for sale.

Half of the 40 houses HouHou sold in Buffalo on a single day in December 2015 were vacant at the time of sale, according to a Buffalo housing inspections report.

HouHou companies also sold vacant lots, mostly in Florida but also in North Carolina, for future development that never materialized, records show.

No one interviewed by The Buffalo News was aware of HouHou ever being seen in Buffalo or Rochester.

‘The rats live there now’

Buffalo officials expressed sympathy for Kuwaitis who say they were scammed by HouHou, but said their bigger concerns are the neighborhoods where HouHou houses have sat boarded up and vacant, some harboring rodents and feral cats, and deteriorating to the point of being demolished. Some are located in neighborhoods the city and other investors are working to revitalize.

Sixteen became so dilapidated the city demolished them – usually at taxpayer expense.

Nine caught fire.

Squatters were found in at least one.

Many were vacant. Some were stripped by vandals or damaged by frozen pipes.

Of the 160 houses flipped in Buffalo from late 2013 through mid-2016, about a quarter ended up with housing court judgments, and about half ended up in foreclosure, The Buffalo News found.

“It was a mess,” said Michael Dawkins, who lives on Sprenger Avenue, across from one of the houses flipped through HouHou’s brokerage company and maintained by his local property management office. The house sat vacant for years, and, until it was recently sold, was without doors or windows, Dawkins said.

Another, on East Utica Street, was illegally being rented out as an adult boarding house. A Buffalo judge ordered it vacated because of its squalid conditions.

And another, at 25 Mesmer Ave., already in rough shape before HouHou bought it, sat mostly vacant and neglected for years after being flipped to a Kuwaiti investor. Pipes froze, the basement flooded and the house deteriorated to the point that it’s become a neighborhood nuisance.

“The rats live there now,” said neighbor Diann Pohlman.

As of April 1, three-fourths of the properties had been resold – most to other investors – either through city foreclosure auctions or private sales for pennies on the dollar. Nearly 40 percent of all the HouHou properties remain vacant or boarded up, The News found. Work was underway at a dozen or so, while a similar number appear headed for eventual foreclosure or demolition by the City of Buffalo.

“Vacancies in neighborhoods create many problems. Neighbors have been concerned, and have been complaining,” said Louis J. Petrucci, assistant director of Buffalo’s Department of Permits and Inspections Services, referring to properties in HouHou’s scheme.

“No one wants to live next to blight,” said Gary Kirkmire, Petrucci’s counterpart in Rochester, where HouHou and his companies flipped at least as many houses as in Buffalo.

HouHou blames others

The News attempted to contact HouHou in prison, but did not hear back. His lawyers – two in Kuwait and six in the U.S. – either declined comment or did not respond to The News.

In a Kuwaiti court, HouHou denied scamming investors, and instead blamed others in his operation, including his property managers, who he accused of being inept and dishonest.

“He was blaming his ex-partners – saying his ex-partners were stealing from him – or the guys working in his property management companies, and that’s why he couldn’t meet his obligations,” said Jafar Alhashemi, one of the Kuwaiti buyers. “We knew it was a big lie.”

HouHou also accused Kuwaiti investors of not making required tax and maintenance payments.

“We have receipts and bank statements to prove them wrong,” said Qutaibah Alhasan, whose extended family bought houses in Rochester, Cleveland and the Mesmer Avenue property in Buffalo from the HouHou organization.

One victim’s story

Alhashemi said he paid a HouHou firm $103,000 for a two-story house, with commercial space in front, on Ontario Street in Buffalo’s Riverside neighborhood.

Alhashemi later learned he didn’t actually buy anything. Neither HouHou nor any HouHou companies ever owned the Ontario Street property, records show. Yet, Alhashemi said, HouHou’s firm “sold” it to two separate investors within a year’s time. Neither buyer ever received a property deed.

“My property had been sold to someone else before I signed the contract,” Alhashemi said.

Having attended college in Ohio, Alhashemi, 51, who had worked for Kuwait Airways, said he liked the idea of buying an investment property in the United States. Housing prices in the U.S. are much lower than in small, oil-rich Kuwait, he said.

At first, Alhashemi said, he was happy with the purchase. Shortly after the contract was signed, HouHou’s’s firm began forwarding him $1,350 monthly rent payments, he said.

But after nine or 10 months, the promised deed still hadn’t arrived. And the rent payments stopped.

“I called the company in Kuwait,” Alhashemi said. “Their sales people promised to call back, and they didn’t call back.”

As Alhashemi began asking questions, he heard of other investors no longer receiving rents. Then, he said, he learned a second Kuwaiti investor paid HouHou’s real estate firm $84,000 in 2014 for the same Ontario Street property that HouHou sold to him eight months later.

That’s when he knew he had been scammed.

The “rent” payments he received, Alhashemi said, weren’t rent payments after all. More likely, he said, HouHou or his associates used some of the money Alhashemi paid for the house as bogus rental payments to give a false impression to other potential buyers that the investment was worthwhile.

How it worked

When first entering the U.S. real estate market, HouHou’s multiple firms acted primarily as brokers, finding Kuwaiti buyers for houses being sold by others, then assigning the houses to property management companies he established in several cities.

About 80 Buffalo houses were sold this way, including 65 owned by Glebova Realty Group of the Town of Tonawanda, The News found.

Glebova is no longer in business. The company was owned by Maxim Levin, 41, an Amherst resident who pleaded guilty last August to tax evasion and was sentenced in late March to 21 months in federal prison.

Levin did not respond to requests for comment. His defense attorney, Anthony J. Lana, said Levin was not charged in connection with HouHou’s operations. Lana said he didn’t know if any HouHou sales were among the tax evasion cases.

Real estate attorney George A. Berbary, who represented Glebova on some sales, said Glebova was posting properties on a British website that caught the attention of HouHou’s companies. Glebova had no direct contact with HouHou, Lana said.

A similar dynamic was occurring in Rochester, where HouHou’s firms dealt primarily with Woodmall Properties.

Nearly 100 houses owned by Woodmall were sold using HouHou companies as broker, said company co-owner John Nacca said. Almost all of them were fixed up and leased by Woodmall prior to sale, but HouHou’s property management firm wasn’t properly maintaining the houses, Nacca said.

By the beginning of 2015, around the same time Woodmall was ready to cut ties with HouHou’s operation, Nacca said, HouHou’s firms starting buying and selling Rochester properties on their own – bypassing Woodmall,  just as the companies were then bypassing Glebova.

HouHou personally is listed as having directly purchased some 80 Buffalo properties – almost all in 2015 and early 2016 – and flipped most of them to other Kuwaitis, The News found.

In Rochester, The News identified about 120 houses purchased directly by HouHou or his companies, then resold to other Kuwaitis.

Similar sales were occurring in Detroit, Cleveland and Dayton, Ohio, records show.

Vanishing tax payments

After buying HouHou houses, some Kuwaiti investors discovered that their houses had been foreclosed on, and even sold at auction, without their knowledge, attorney Al-Attar said.

That’s what happened to Almubarak, 34, an advertising and marketing specialist who bought the house at 119 Wende St., off East Ferry Street, in January 2014 for about $65,000.

“I didn’t know about it when it happened,” Almubarak said of the foreclosure. “I found out many months later when I was trying to sell the property.”

Almubarak said he bought 119 Wende St. after seeing photos the HouHou organization provided of a well-maintained house on a tree-lined street. The house was renovated and rented, and would net about $10,000 annually, documents the HouHou firm provided claimed.

As with other investors, Almubarak thought things were going well until his rent receipts abruptly stopped about a year in. He said he was told his tenants moved out.

Almubarak contacted another property management team in Buffalo, which visited the Wende Street property, and found it was badly damaged and had been long vacant, he said. He’s no longer sure the photos HouHou’s organization initially showed him were of the house he purchased.

He decided to sell the property, but learned the city had foreclosed on it and sold his house at a tax auction in October 2016.

Almubarak was making tax payments — upwards of $1,000 annually – to the HouHou organization, which was to forward the payments to Buffalo and Erie County, he said. But records show city and county taxes and fees weren’t being paid, and were over $3,000 in arrears over three years, leading to the 2016 foreclosure that Almubarak said occurred without his knowledge.

As was typical with HouHou houses, foreclosure notices along with tax bills went to the HouHou organizations in the U.S. and Kuwait — not to Almubarak, records show. That’s the way the HouHou operation filed paperwork for the houses.

A scheme unravels  

Buffalo officials became aware of HouHou in 2015 – about a year in – when HouHou’s many purchases attracted attention from the city tax assessment office, which notified the city building inspections department, Petrucci and other officials said.

By the same year, the city had begun foreclosing on HouHou properties, filing citations for code violations, working to keep vacant properties boarded up, and, when necessary, getting court orders to demolish them.

“We had their lawyers come in here. We showed them all the violations,” Housing Court Judge Patrick M. Carney recalled.

Soon, HouHou’s lawyers stopped appearing in court, and Kuwaitis were notifying the city that they had been scammed, city officials said.

In early 2017, a group of Kuwaitis filed a complaint with the Kuwait justice agency, prompting an investigation that led to charges against HouHou and six others in his operation.

The following year, some Kuwaiti investors filed a complaint with the FBI. “One of my friends flew to the U.S. and went to an FBI office,” Alhashemi, one of the Kuwaiti buyers, said.

A Rochester real estate agent also contacted the FBI. “We talked about the escalated sales prices and that money was being wired overseas to HouHou but that property owners were not being paid rents,” said agent Carole Snow. She said the conversations occurred over a year ago, and that she later learned federal agents spoke to some tenants about the Kuwaiti properties.

The initial complaints filed with Kuwaiti authorities dealt with investors getting conflicting stories on why rents abruptly stopped. HouHou blamed his management company, which told some Kuwaitis their tenants moved out, others the houses weren’t bringing in enough money to properly maintain the properties, and told others that HouHou was receiving rents and not distributing them, Kuwaiti investors said.

The complaints grew from there.

HouHou personally profited, according to court papers, which said some money from the property sales ended up in his personal accounts, was invested in businesses in London or transferred to family members in Lebanon.

The Kuwaiti court concluded HouHou was running a Ponzi scheme, selling his fellow Kuwaitis houses that weren’t always fit to lease, then using their funds for bogus rent payments to other investors to maintain the appearance of healthy investments to generate future sales, according to court papers and the attorney for the Kuwaiti investors.

Court papers also detail nine different corporations HouHou set up in the United States, as well as multiple bank accounts he and his companies set up in Kuwait to make it difficult to trace where money went, the court concluded.

He was convicted in April 2018 of fraud and money laundering. Six of his associates, including his wife, were also convicted of fraud and each was sentenced to three years in prison.

Back in Buffalo

With his conviction upheld in December 2018 by a Kuwaiti appellate court, HouHou remains in prison.

Kuwaiti investors continue to push their government to help recover their lost funds.

It’s difficult to tell how much money HouHou and his companies made on individual houses.

HouHou paid, on average, $35,500 per house in Buffalo. When selling to Kuwaiti investors, the recorded sale price averaged $42,500, The News found.

But Kuwaitis told The News that their purchase payments always exceeded the sale prices recorded with the Erie County Clerk’s Office. The Kuwaiti buyers said they paid upwards of $100,000 to HouHou’s organizations, sometimes more than twice as much as the real estate documents recorded as the sales price, The News found.

Buffalo, meanwhile, like other cities struck by HouHou’s scam, continues addressing the fallout, dealing with houses like the one at 25 Mesmer Ave., which has sat largely vacant since HouHou bought and flipped it in 2015.

The house is headed for foreclosure, and likely demolition, officials said.

“HouHou never should have sold it,” Alhasan said of the house his family bought from HouHou. “We cannot keep up with the financial burden of this house.”