WILMINGTON, Del. (CN) — A Delaware man who calls his 15 slum apartment houses the Disabled Disadvantaged Delawareans Foundation is not running "a charitable concern in any sense: it is a mere sham," the state's top fraud prosecutor claims in court.
New Castle County and the city of Wilmington joined Delaware in suing Russell E. Walker aka Scott Walker and his foundation on Oct. 25 in Delaware Chancery Court.
The seven-count lawsuit accuses him of consumer fraud through false promises, misrepresentations and omissions regarding his 15 "tenement houses," which have racked up "an estimated (371) code violations," plus another 117 code violations against his adult children.
Walker began buying rental properties in 2000 and has run as many as 23 at a time; he owns and operates 15 today. He formed the Disabled Disadvantaged Delawareans Foundation (3D) as a nonprofit charity in December 2010, and claimed it is exempt from taxes, though neither the IRS nor the state ever granted it tax-exempt status, the state says.
3D never filed any state corporate tax returns, has not filed any state franchise tax returns since 2011, and Walker himself has not filed state taxes since 2010, the state says.
As a charity, "no part of the net earnings of the corporation shall benefit, or be distributable to its members, trustees, officers, or other private persons," the state says. However, "Upon information and belief, all income derived from the tenement properties inures to the benefit of Mr. Walker, Matthew Walker and Jillian Walker. 3D is not a charitable concern in any sense: it is a mere sham."
Matthew and Jillian are two of Walker's three adult children. They are not named as defendants, though the state says Matthew has racked up 87 code violations, and Jillian another 30. It also says they routinely transfer properties among one another.
Russell Walker and 3D claim their mission is "to deliver housing, employment and counseling services to adults in need — enabling them to live independently," but they provide "no actual services to needy people as they claim," in fact "none of the tenement properties are handicap accessible," according to the 39-page complaint.
The properties are overcrowded with deplorable living conditions. They rent single-family homes to as many as 12 people. "Kitchens, living rooms, dining rooms, hallways, basements, crawl spaces, and garages, often partitioned by shower curtains, blankets, or plywood, have all been rented to tenants by defendants as 'bedrooms.'"
Outside, the properties are littered with trash, debris and hazardous waste. Inside, code violations "include but are not limited to: faulty appliances; faulty electrical, plumbing and heating equipment; obstructed ingress/egress; defective stairs; rooms created in uninhabitable spaces; standing water; missing or inoperable smoke and carbon monoxide detectors; and improper disposal of human fecal matter", all of which pose a danger to the health, safety and welfare of the tenants "and any member of the public who enters," the state says.
It claims that Walker and his adult children target tenants who lack bargaining power because of criminal convictions, poor credit or disabilities. They fraudulently represent that the rental units are in good condition, and enforce "house rules," whose "golden rule is that no law enforcement official or code enforcement employee is to be permitted access to any tenement property at any time," according to the complaint.
Several of the tenements have been declared unfit for human habitation by county and city code enforcement.
Walker has assaulted and threatened to assault tenants who are late on their rent, has illegally turned off electricity, heat and water, and has "submitt(ed) false statements to government support or entitlement providers alleging breach of benefit terms by tenants," the state says.
His repairs leave something to be desired. When raw sewage backed up into a basement, Walker ordered that "a pump be placed over the drain with a hose leading out the basement window and into the backyard, where wads of toilet paper and human feces accumulated," the state says.
Walker is the president, CEO, trustee, executive director, board member, and employee of 3D. The state says his "deceptive and predatory actions pose immediate and significant risks to the health, safety, and welfare of the public, including an estimated 150 vulnerable tenants who are being communally housed in overcrowded, deplorable, unfit and uninhabitable conditions."
Walker did not return phone calls.
The state, city and county seek injunctions imposing numerous conditions, including abatements, appointment of a receiver, no more transfer of properties, penalties of up to $10,000 per violation of the Delaware Consumer Fraud Act, and costs of investigation and suit.