“There’s a cloud over this building now,” says a condo owner who lives in a building that once employed Regent Realty.  Illustration: Arthur E. Giro

Everyone trusted Jay Strauss. To the residents of the 40 condo associations he managed, Strauss was a grandfatherly figure. Short, white-haired, soft-spoken, dressed as for a family portrait in an oxford button-down and a sweater, he faithfully attended board meetings at even the smallest of his client buildings, spinning stories about taking his wife and grandchildren to his vacation home in Arizona. His 20-year-old business, Regent Realty, boasted testimonials from buildings where he had arranged to build a new porch, or repaired a roof. “You trusted the guy,” says Steve Lukasik, whose condo association was a former client of Strauss’s. “You didn’t think ‘used-car salesman.’ You had this personal comfort level with him.”

Many condo owners are busy professionals who don’t have time to mow their lawns, hire a trash collector, fix a leaky roof—or keep track of how much money is in the association’s account. So they hire a management company, such as Regent, to do those jobs. Regent was supposed to collect assessments from residents, deposit that money in the bank, and use it to pay for utility service and building repairs.

For years Strauss apparently did just that, and managed to build a roster of clients consisting mainly of small, multi-unit walkups. But now he sits at the center of one of the most startling local cases of alleged condo management fraud in recent memory, and hundreds of Chicago condo owners who once trusted him are wondering what happened to their money. 

Last December, just before Christmas, Paul Kolenda started having sus­picions about Regent Realty. Kolenda had known Strauss for years, and Regent had managed his old building. When Kolenda moved to 1934 North Washtenaw Avenue and became treasurer of the condo board, he recommended Regent to the other members. Lately, though, Kolenda thought Strauss had been doing a poor job. He was supposed to have ar­ranged the repair of the waterproofing in the parking garage, but moisture was still seeping through the walls. Then a tuck-pointer put a lien on the 63-unit building, complaining he hadn’t been paid. Two days later, a security company called to complain about an overdue bill. To Kolenda, that was the last straw. He called Strauss and fired him. “I told him, ‘Jay, you’re doing a shit job,’” recalls Kolenda. “I want to see a bank statement.”

In early January 2008, Strauss produced a statement for the condominium’s reserve fund, which owners can tap for unbudgeted expenses, such as major repairs. The fund should have contained more than $375,000. According to the bank, it was down to $43. In an e-mail to Kolenda, Strauss explained that Regent kept all its clients’ money in a single account. He wrote: “In order to avoid writing checks to pay Association bills from 40+ checkbooks we use a disbursement account and write checks for all the Associations from that account.” Fine, Kolenda said. So write us a check for all our building’s assets. Strauss hemmed and hawed. “He made up excuses after excuses,” Ko­lenda recalls. “‘I’m sick.’ ‘I had four funerals this week.’” Finally, Kolenda went to the police, filing a report accusing Strauss of stealing the association’s money.

Greg Catenacci, the treasurer of 1500 North Orleans Street, a 12-unit prewar building on the Near North Side, was also having his doubts about Regent Realty. A painter who had worked on the building was ringing doorbells, demanding payment. Catenacci confronted Strauss. The painter hadn’t completed another job, Strauss explained, so Regent wasn’t paying him for any work. “‘You can’t do that,’” Catenacci recalls telling Strauss. “I asked him to transfer $14,000 to our bank account around Christmas.”

Catenacci says Strauss explained that he was in Scottsdale, Arizona, where his wife was receiving treatment at the Mayo Clinic, and he promised to cut the check as soon as he returned to Chicago. But the check never arrived. Neither did the December financial statement, which was due January 10th. Finally, after weeks of “the runaround,” says Catenacci, Strauss promised him his money on January 22nd. But two days later, when Catenacci went to Regent’s offices in Lake View, he says, the company’s bookkeeper couldn’t help him. “She was just saying, ‘Everything’s fine. You guys are overreacting. Jay will be here soon.’” Catenacci managed to collect his insurance papers. The next day, Regent’s office was locked, never to reopen. Chicago Police detective Dennis McLaughlin says several former Regent employees witnessed Strauss and a crew of workmen taking computers and files out of the office. “All that was left were desks and chairs, that’s it,” says McLaughlin.

In April, the Illinois Secretary of State’s Office dissolved Regent Realty after the company failed to pay its annual incorporation fee. By then, Strauss had left the state. He sold his Gold Coast condominium on March 13th, for $650,000, and retired to a Spanish-style villa in Scotts­dale, Arizona. Strauss is accused by former clients of stealing $2.4 million from more than 40 condo associations, but so far, many of his old clients haven’t seen any money. (Strauss, who has not been charged with a criminal offense but has been sued in court, declined to comment for this article. Regent’s former employees either refused to talk about the company or didn’t return phone messages.)

The Regent Realty matter appears to be the worst case of alleged property mismanagement to hit Chicago in years, says Gael Mennecke, executive director of the Association of Condominium, Townhouse and Homeowners Associations. “There have been other instances, but this one is really huge,” says Mennecke.

How huge? After it hit the news, Mennecke’s group scheduled workshops for board members who suddenly realized they had better keep an eye on their managers. “You have boards that rely on their professionals, and think that just because they’ve hired somebody, everything’s fine,” Mennecke said. It’s not fine, because ultimately condo boards, not managers, are legally responsible for a building’s assets.

David Bendoff, a Buffalo Grove real-estate lawyer, has sued condo managers who he claims stole from their clients. While he has never dealt with alleged mismanagement on the scale of Regent, the case does fit a pattern. “This problem doesn’t seem to arise in larger, well-established management companies,” says Bendoff. “This seems to occur in very small, mom-and-pop, one- or two-person operations.” At Regent, Strauss dealt with all the boards personally. That gave him an advantage, says Bendoff.

In the past eight years,  Mark Pearlstein, also an attorney, has seen “four or five” significant cases of alleged condo management fraud. For years, he has been lobbying the state legislature to license property managers. Currently, the Illinois Condominium Property Act requires only that a manager be 21, have no financial crimes on his record, and show “a working knowledge of the fundamentals of community association management,” although there is no test for that. In other words, managers who handle millions of dollars in condo funds are held to a lower professional standard than hairstylists, who must be licensed by the Illinois Department of Professional and Financial Regulation, complete a mandatory cosmetology course, and pass an exam.

The Regent case has brought attention to Pearlstein’s cause. In May, state senator John Cullerton, whose office represents the people in many of the buildings allegedly harmed by Regent, introduced a licensing bill. It would require managers to pass an exam showing familiarity with the condo act, and create a board with the power to yank licenses. The bill, which is pending in the General Assembly, requires prospective property managers to undergo background checks and receive continuing education. It also mandates that condo managers provide fidelity insurance to their clients to insure against theft. “I don’t know if it can prevent an initial theft,” Pearlstein says of the proposed legislation, “but it can prevent anyone who does this from working again.”

Strauss’s apparent financial unraveling began five or so years ago after he—backed by a group of suburban investors—redeveloped a 15-unit building at 4855 North Bernard Street. By September 2005, all 15 units had been sold, but the investors and the bank that gave the project a loan hadn’t received any money. Jay R. Hoffman, the lawyer who represented the investors, says his clients have swallowed their losses. “I don’t think [Strauss] has the money,” he says, “and my clients aren’t able to chase him around for it.”

By this time, Strauss was shifting money from one bank account to another. Many of Regent’s associations deposited their money in Bridgeview Bank. But in April 2007, according to court papers in one of the civil suits, Bridgeview closed those accounts because Regent was kiting checks. Strauss transferred the funds to an account at Corus Bank that only he controlled, and began depositing his clients’ money there, according to the suit.

Regent kept the alleged shell game going by sending out computer-generated financial updates rather than actual bank statements, according to court papers and former clients. Paul Kolenda’s association has joined one of four lawsuits against Regent. According to its complaint, on November 30, 2007, Regent submitted a report listing the building’s assets at $385,526.63. The actual balance? Forty-nine cents, says Kolenda.

Why did Strauss allegedly do it? Court records and interviews with victims suggest two possible motives: He was losing money in real estate, and he was struggling to pay his wife’s medical bills. “In his mind, he needed cash and he was ‘borrowing’ from the associations,” Greg Catenacci suggested. “As soon as he sold a property, or refinanced, he’d pay it back—no harm, no foul.”

In the immediate aftermath of Regent’s collapse, Kolenda’s building, which had received notices of water and gas turnoff, scrambled to pay the bills. Garbage piled up in the dumpster because Regent hadn’t paid the haulers. As it turned out, the association was stuck for $100,000 worth of bills that Regent claimed to have paid, says Kolenda. The board had already hired a new management company, First Property, to oversee the building. But without access to financial records, First Property couldn’t even figure out whom to pay. First Property’s president, Michael Rutkow­­ski, called vendors, asking whether 1934 North Washtenaw owed them money. To settle the bills, the building took out a $150,000 loan.

The building’s lawsuit names Strauss and his wife, Nancy, as defendants, as well as Regent’s treasurer, Donald Doering, and his wife, Linda. After subpoenaing bank records from Bridgeview, the association says, it found that Regent had been transferring money to its own accounts as late as January. “Strauss may have used converted funds of the Association to pay joint bills on Strauss and Nancy Strauss, including medical bills and mortgages and other expenses on real property owned by Strauss and Nancy Strauss,” the lawsuit claims.

Through his attorney, Camille B. Conway, Strauss has pleaded the Fifth to the lawsuit’s charges because of the pending criminal investigation. The Doerings never mounted a defense and have been found in default. They recently put their Wilmette house on the market for $944,900. Police say Doering is cooperating with the criminal investigation into Regent. He did not respond to phone messages left by this magazine.

Associations that suffered smaller losses aren’t suing, because they don’t consider it worth the legal fees. Christina Beer is president of a condo at 223 West Wisconsin Street, which employed Regent. Last year, Beer says, Strauss urged her association to start a reserve fund for building repairs. The board approved a special assessment in June and raised more than $60,000—now gone. Beer filed an insurance claim to recover the money. It turned out the policy— arranged by Strauss—covers fraud only by employees, not contractors, including building managers, and she was able to recover only $25,000. She’s still hoping for justice from the police, but whenever she calls the Financial Crimes Unit, “they’ll just say there’s no update. Honestly, I’ve given up.”

Detective McLaughlin insists that the police have tried their best but have been slowed down because Regent has not complied with a subpoena seeking financial records. As a result, he says, investigators have had to subpoena banks and gather documentation from each of the affected condo associations to build a case—a more time-consuming task. Says McLaughlin: “Assuming I’m not going to have the help of Regent’s records, we have to re-create everything from the owners’ documentation—you know, canceled checks, bills from vendors—and a lot of the owners have had difficulty retrieving their records.” 

Several condo associations, however, say they want to be as helpful as possible but are facing a Catch-22: They don’t know exactly what was paid in or out of their accounts; that’s what they hired Regent to do.    

This past summer, the FBI took the lead on the Regent criminal inquiry, although the Chicago Police Department has retained its investigative role. “That the FBI took on the case shows you that it’s a big case in their eyes,” says Sergeant Phillip Cappitelli of the police department’s Financial Crimes Unit. Virginia Wright, an FBI special agent, would not comment directly on the case, but said it’s common for fraud investigations to take years. “It may take two years to investigate and two years before the U.S. attorney is ready to file charges,” Wright says. “When you’re looking at financial institutions and you have to do a historic case, you have to go back years to determine when the fraud started.”

That leaves some wondering whether Strauss, who is 74 and has been described by one individual who dealt with him as a broken man, will ever be prosecuted. To Kolenda, that would be an injustice. He and his fellow condo owners are in a financial hole that may take years to escape. Regent’s alleged victims didn’t just lose just their savings. Their homes are worth less, too. It’s hard to sell a condo with no reserve fund. “There’s a lot of first-time homebuyers here,” he said. “We’ve got a lot of new parents who are afraid to sell because they don’t know if they’ll get their money. There’s a cloud over this building now.”