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As a civilian employee of the U.S. Army in North St. Louis, David Richardson began investing his money in real estate by amassing a portfolio of rental properties in the city and county that he hoped, one day, would provide him a healthy nest egg.
He acquired a string of 15 properties, ranging from single-family homes to multiunit apartment buildings, and managed them alone for a time, lining up tenants, collecting rents and either paying someone to do repairs or performing maintenance, such as painting, himself. Many of properties were in low-income neighborhoods, and they were spread throughout the city. His mortgages cost him about $7,000 per month, but at an occupancy rate of 90 percent, his properties brought in double that amount, Richardson says, leaving plenty to pay the bills and keep a cushion for additional expenses that might pop up.
Then he hired someone to manage the properties for him -- in January 1997 -- and at first, things were going so well he bought four more buildings. But by the end of that year, the condition of his properties, as well as his cash flow, had begun to head south. He moved out of state in the middle of that year to take a job with the U.S. Army in Huntsville, Ala., after the Army closed its offices on Goodfellow Boulevard in St. Louis. As an absentee landlord, he began getting repeated pleas for money from the person he'd hired to manage his real-estate holdings. His bank account started to dwindle, and by the fall of 1998, his mortgage payments were months behind.
But the story of David Richardson's real-estate problems -- and his accusations of financial mismanagement that led to the foreclosures of most of his properties -- is no run-of-the-mill dispute over a business deal gone sour. The person he entrusted to manage his rental properties, Leo J. Hayes, is also a Roman Catholic priest.
Hayes, a 62-year-old priest in the Diocese of Belleville, worked for 25 years as the prison chaplain at the Menard Correctional Center, the largest maximum-security prison in Illinois. He witnessed the execution of John Wayne Gacy, and Hayes says the notorious serial killer was his "altar boy" at prison Mass. Hayes retired from his job at the prison in January. He continues to serve as pastor at three small parishes in Ava, Ill.
Father Hayes is also a longtime landlord in his own right who, in his spare time, owned and managed numerous properties in South St. Louis that at one point included about 90 apartment units. One of the properties the priest owned was a 13-unit building at Cleveland and Thurman avenues in South St. Louis where two balconies collapsed in separate incidents in April 1998, injuring six people -- four seriously -- and prompting a citywide inspection of 194 other buildings with cantilevered balconies. Hayes' building was subsequently torn down.
Hayes says he began buying residential properties in 1980 with his earnings from the prison. He figured he could buy rental properties that would also help the poor through low-income rentals, but he says, he had no desire to do it as a nonprofit.
When Richardson began looking for someone to manage his properties, an acquaintance referred him to Mary Ann Caton, saying she had 20 years' experience and was managing property for him. Caton, in turn, introduced Richardson to Leo Hayes. What Richardson didn't know at the time was that Caton and Hayes were partners in the Garden Manor Shaw Neighborhood Apartments, and he didn't know Hayes was a priest.
In any case, Richardson and Hayes agreed on a management contract. Under the agreement, Hayes would collect 5 percent of all rents plus one month's rent for every new tenant he placed in one of Richardson's buildings. Even he admits that at the time he took on Richardson's properties, cash flow was sufficient. "When he came to us, his properties were making money," Hayes says. "He was collecting enough money to pay all the bills and to pay me. For some reason, that changed."
It changed for the worse. By the fall of 1998, a year-and-a-half after Hayes took on management duties for Richardson's properties, most of the mortgages were at least a few months in arrears and other bills were not being paid. Richardson says he got repeated demands for money from Hayes, yet he did not receive regular management reports spelling out where all the money was going. In 1998, he sent Hayes about $13,000 to pay the bills. Whenever he requested an accounting, Richardson says, the priest brushed him off and told him, "We're managing your property for free."
By December, the situation had grown so dire that at Hayes' urging, Richardson agreed to sell all of his properties to the Jallen Group, which promised to pay off all the outstanding mortgages and taxes on the properties in exchange for the deeds. A sale contract was signed on Dec. 5, 1998 -- and Hayes says his dealings with Richardson's properties ended there and then.
But Jallen was no stranger to Hayes. The company operated out of Hayes' building on Russell, the same building that served as Garden Manor's offices. One of Jallen's two partners was Mary Ann Caton, the very same woman who was Hayes' partner in Garden Manor and who introduced Dave Richardson to the priest. Jallen, meanwhile, continued to collect the rents on Richardson's properties but never made mortgage payments and withdrew $8,000 from Richardson's business account without paying the bills. And during that time, Hayes still had the authority to sign checks on Richardson's business account and still had the checkbook.