PORTLAND, Maine — A former Maine legislator waived indictment and pleaded guilty Tuesday in U.S. District Court to equity-skimming, a federal prosecutor said Wednesday.
Adam Mack, 38, of Standish served as a Republican in the Maine House of Representatives from 1997 to 2000.
He was an officer and principal owner of Chartwell Management Co. Inc., a Portland-based residential property management firm, U.S. Attorney for New Hampshire John P. Kacavas said in a news release. Chartwell managed several multifamily residential properties, including Barron’s Hill I in Topsham.
To purchase the Barron’s Hill I property, the property’s owners had obtained mortgage loans subsidized by the U.S. Department of Agriculture Rural Development, according to Kacavas.
In January 2007, Mack misapplied $384,000 that Chartwell was holding for the regulatory agency as security for the mortgage loan, the prosecutor said.
According to Kacavas, Mack used those funds to pay unrelated expenses incurred by other properties and entities in which he and his family had an interest.
According to court documents, borrowers must maintain several types of financial accounts for each subsidized project. Funds can be withdrawn for reserve accounts only for specifically authorized purchases, but there must be a written request to Rural Development, and it must be approved by Rural Development through written authorization.
Barron’s Hill I, referred to as BHI in the documents, was owned by DACO Associates, which was run by Mack’s grandfather and uncle. After Mack’s grandfather died in March 2007, Chartwell managed BHI on behalf of DACO.
BHI took out a reserve account with securities brokerage firm Smith Barney.
“Contrary to regulations, BHI did not maintain the Smith Barney reserve account so that withdrawals required a countersignature from [Rural Development] officials,” read one court document. “Instead, withdrawals from BHI’s Smith Barney reserve account, as a practical matter, could be made with a single signature by any of the account’s authorized signatories.
“As of the beginning of October 2006, approximately $380,000 — principally from Department of Housing and Urban Development rent subsidies — had accumulated in the BHI reserve account at Smith Barney. The funds in the reserve account were owned by BHI,” read the document.
Five checks made between Oct. 20, 2006, and Dec. 11, 2006, were written for a total of $325,000. They were deposited into a previously dormant bank account in the names of Mack’s grandfather and grandmother.
“The credits resulting from the deposit of the unauthorized items from the reserve account typically were then used to meet Chartwell’s expenses or to pay debts arising from several unaffiliated real estate development projects in which the defendant was engaged and owned, in part by [his grandfather] and his family,” the court document said.
That money was returned to the reserve account, but only temporarily.
On Jan. 3, 2007, $326,200 — which was deposited back into the account at the end of 2006 — was withdrawn as well as an additional $57,800 for a total of $384,000. After that check cleared, the account was left with $227.
More than five years later, the $384,000 remains unpaid, read the court document.
Mack faces a maximum sentence of five years in prison and a fine of up to $250,000. He is expected to be sentenced on Jan. 31 and is free on personal recognizance bail.
The Office of Inspector General of the USDA investigated the case, which is being prosecuted by Special Assistant U.S. Attorney Bill Morse from the U.S. attorney’s office for the District of New Hampshire.