Waterbury case continues in Albany federal court

ALBANY — Oswego landlord Douglas Waterbury, court-ordered to have no personal contact with his many tenants or properties as part of an August 2019 federal consent decree, has denied allegations he violated any conditions of it.

Federal prosecutors provided witness statements and other evidence to the contrary, in a U.S. District Court hearing brought against Waterbury by the federal government.

Waterbury settled the original April 2018 U.S. Justice Department Civil Rights lawsuit, which alleged Waterbury had sexually harassed and discriminated against 11 female tenants over an 18-year period, by agreeing to pay the 11 a total of $400,000, pay an additional $50,000 fine, and along with his wife Carol, agree to the restrictions laid out in the August 2019 consent decree. By doing so, Waterbury admitted no guilt whatsoever, nor did the federal court rule on any of the allegations against him.

But by the fall of 2020, the federal government alleged Waterbury had violated a number of the consent decree’s provisions and thereby brought the suit against Waterbury that is now being heard in Albany’s U.S. District Court.

The consent decree at the center of these civil charges permanently prohibits Waterbury from entering the premises at any of his residential rental properties, and for the next five years, prohibits him from any sort of management activities related to those properties. Furthermore, the court ordered those properties must be operated and managed by an independent management company or independent manager. The judge further ruled that Douglas and Carol Waterbury, and any person involved in the management of Waterbury’s properties, including the manager, shall undergo in-person training on the Fair Housing Act, with specific emphasis on discrimination on the basis of sex and sexual harassment.

The Justice Department suit alleges Douglas Waterbury violated the consent decree’s prohibitions in numerous ways including posing as a maintenance man, thereby enabling him to come into close contact with his female tenants, appearing at a number of his properties, and setting up a sham management company of which he was the owner, all with the knowledge of his wife Carol.

These are civil charges, meaning Waterbury can only be further monetarily fined or restricted in his business dealings.

In its Feb. 8 reply to Waterbury’s denial of all allegations, the federal government claims, “the undisputed evidence shows that the defendants (Douglas and Carol Waterbury) have continuously, knowingly, and willfully violated the terms of the consent decree entered by this court, and that these violations have persisted despite repeated demands for compliance. Indeed, the defendants have now conceded the vast majority of the United States’ allegations, and their pattern of noncompliance is clear. Accordingly, the United States respectfully submits that its motion to enforce consent decree and for sanctions should be granted.”

The federal government goes on to say, “the defendants’ opposition, concedes or fails to rebut the vast majority of these factual allegations. Instead, the defendants disingenuously claim to have ‘attempted to cure any deficiencies or alleged violations that have been brought to their attention,’ — as if the flagrant and continuous pattern of violations detailed by the United States consisted only of mere ‘oversights’ that needed to be called to the defendants’ attention.”

In his response of Jan. 11 to the federal government’s claims against him, Douglas Waterbury stated that Lake Ontario Property Management’s (LOPM’s) (the independent rental management firm hired by Waterbury to oversee his properties) failed to rent the majority of the properties in Oswego. He said, “it is my belief that as of June 2021, the vacancy rate for the Oswego properties will increase to 90%. Prior to entering into the consent decree, the subject properties in Oswego were typically fully rented.”

Waterbury requested more information from LOPM concerning rental inquiries and their efforts to rent and lease the subject properties. He is concerned about the impact it has had on the Waterbury’s financial condition. The defendants claim that due to LOPM not fulfilling their obligations under the management agreement they will lose several properties to tax foreclosures and unpaid utilities.

“I note that Ms. Carswell (of LOPM) has stated that these communications impede her ability to manage the subject properties. Ms. Carswell is almost completely non-responsive to attempts to obtain this information, so I am unclear how the requests impede her ability to perform LOPM’s obligations under the management agreement.” Waterbury said.

The Waterbury’s sought to terminate LOPM as the independent manager and retain Romano Property Management, but the plaintiffs denied that request.

Waterbury stated that because of the financial situation they have been put in by LOPM’s mismanagement of the properties, they will have to sell the majority of them. They intend to list and sell the properties as soon as upgrades to make the properties more marketable are completed.

Waterbury said they “have made every attempt to comply with their obligations under the consent decree. We have actively responded to and addressed concerns raised by plaintiff, and provide documents and materials Plaintiff requested in an effort to address concerns.

“At no time have I entered the premises of the subject properties or engaged in property maintenance responsibilities.”

Waterbury concluded “Given the foregoing, I do not believe that sanctions against Defendants are warranted as Defendants believe they are presently in compliance and have cured any purported violations of the consent decree at this time.”

Kevin Caraccioli, attorney for Lake Ontario Property Management, submitted numerous documents, including photographic evidence, video evidence, and tenant witness statements denying most all of Waterbury’s claims.

“Based on my personal knowledge,” Caraccioli stated, “I believe that the declaration of defendant Douglas Waterbury contains demonstrably untruthful statements”. Caraccioli alleges, “almost immediately after execution of the agreement (between Waterbury and LOPM), the defendants began violating its terms.”

Caraccioli goes on to offer his own personal observations and testimony.

“Contrary to the assertions made by Douglas Waterbury that he has not entered the premises of any of the subject properties, I have direct knowledge and have made personal observations of Mr. Waterbury violating the clear terms of the Consent Decree by entering into properties covered therein.

“I note that I was not looking for these violations; the defendants were committing them in plain sight. Based on my reluctance to serve as a witness in a matter potentially involving my client, I requested that the United States rely upon the other ample evidence of the defendants’ actions in support of its motion. I believe it is now necessary for me to offer this evidence to rebut the falsehoods presented by Douglas Waterbury in his declaration.”

Caraccioli goes on to say that on two separate occasions, May 16 and June 14, 2020, he witnessed a red Suburban that he knew to be driven by Douglas Waterbury parked outside of properties located at 58-60 W. Bridge St., Oswego. On both days he observed Waterbury on the premises. He proceeded to take photographic and video evidence of what he witnessed.

“As an officer of the court, I could not ignore these violations, especially having direct knowledge of the contents of the consent decree and the agreement. On June 23 and June 24, 2020, I contacted counsel for the defendants about these and other ongoing violations of the decree and interference with LOPM, including that Douglas Waterbury continued to enter the premises of the properties, defendant Carol Waterbury continued to collect rent, and the defendants still had not transferred any security deposits to LOPM.”

Caraccioli addressed a number of Waterbury’s claims against LOPM’s handling of his properties. As regards the claim that LOPM is responsible for Waterbury’s alleged present financial difficulties, Caraccioli stated, “The defendants wrongly blame LOPM for delinquent property taxes and other expenses. The public record shows that the defendants have a history of failing to pay real property taxes on a timely basis, often resulting in the county or city of Oswego commencing tax foreclosure actions against several of the defendants’ properties in any given year for many years now.”

“The defendants also wrongly blame LOPM for low occupancy rates in their portfolio of rental units. For example, while defendant Douglas Waterbury suggests LOPM is to blame for only ‘15-20’ of the 109 units at Morrisville being occupied, LOPM only just began gaining control over that property and received a total of only 18 leases from the prior managers’ tenures. The defendants also ignore the multitude of other relevant factors potentially affecting their business, including the current COVID-19 pandemic, the State University of New York’s policies regarding remote learning, and defendant Douglas Waterbury’s own notoriety as a result of the instant action and his other alleged publicly-reported conduct.

In addition, upon information and belief, the source of which is the public record and my 30-year legal career practicing in Oswego, New York, I am also aware that defendant Douglas Waterbury has a long history of maintaining his rental units in substandard condition and violating local codes regulating the number of tenants in a unit, among other violations. All of these factors may be in my view, co-existing causes for any purported rental property vacancy rate increase, not the errors or omissions the defendants ascribe to LOPM.”

As both Waterbury and the federal government have now made their cases, barring any further requests from the court, U.S. District Judge Mae A. D’Agostino will rule. No date has been predicted as to when that might happen.

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