An advocate for economic opportunities for Hispanics, developer Rudy Mulder preached a gospel that combined good business with doing good.
His specialty was retail development in distressed neighborhoods. Along the way he gained a national reputation as an activist, winning pledges from 7-Eleven Inc. and Ford Motor Co. to increase Hispanic-owned franchises.
Mulder, 38, seemed the classic rags-to-riches story. Born in Mexico, the son of Christian missionaries, he moved to Chicago in 1988 and became one of the few Hispanics in the real estate business. His Urban Investment Trust Inc. claimed a portfolio of properties worth more than $1 billion as recently as two years ago.
Now his company is in shambles, his North Shore estate was sold off for $5.2 million to satisfy a commercial lender and Mulder and his two other Urban Investment executives have been hit with a spate of lawsuits by former partners and investors alleging fraud and breach of contract.
And the woes are mounting. On March 31, Cook County Judge Aaron Jaffe held Mulder and two other company officers in contempt of court for not returning $3.3 million misappropriated in one deal. On April 8 the judge began fining each of them $2,500 a day until they return the money or explain where it went.
Mulder declined to comment, but his lawyer blasted the ruling.
“What Jaffe has done in this case is so over-the-top it’s scary,” said Robert Reda of Chicago-based law firm Fioretti, Des Jardins & Reda Ltd., an attorney representing Urban and its three owners: Mulder, the chairman; John Terzakis, the chief financial officer; and Roxanne Gardner, who resigned as chief executive more than a year ago.
Reda, who has appealed the judge’s ruling, admits some of Urban’s real estate deals failed. But he said the fraud allegations were created to “bully” his clients into a settlement.
“There is no fraud,” Reda said. “This is a witch hunt.”
Some big names involved in the suits include Elzie Higginbottom, chairman of the Illinois Gaming Board; James DiMatteo, former chairman of Dominick’s Supermarkets Inc.; and Hipolito “Paul” Roldan, an affordable-housing developer.
It’s a stunning reversal for Mulder, who rubbed shoulders with such figures as Rev. Jesse Jackson and Treasury Secretary Paul O’Neill. He declined to be interviewed, but in court testimony in one case said his company’s insolvency was “a function of business not going the way it should be, the economy was in there as well, and a variety of issues along that line.”
Terzakis, 44, a low-profile west suburban developer and finance whiz, has tried to put the blame on Mulder. Mulder wasted substantial sums pursuing developments that never went beyond the planning stage, he testified. “There were projects … all over the United States … that we put hundreds of thousands of dollars in for tenants or opportunities that [Rudy] said were there,” Terzakis said. “Then, at the end of the day, those projects were just gone. They never got off the ground.”
Yet one of those suing Mulder says there’s enough blame to go around.
“His major business shortcoming was not that he was trying to rip people off; I don’t think that was ever in Rudy’s heart or mind,” said Roldan, president of Chicago-based Hispanic Housing Development Corp. “He wasn’t able to establish an organization behind him.”
The order compelling Urban to turn over $3.3 million and mounting contempt-of-court fines stem from a case filed last year in Cook County Circuit Court by investors in a $40 million deal, arranged by Urban, to buy an Arlington Heights industrial building from CenterPoint Properties Trust.
Earlier this year, the investors amended their complaint to allege that the Oak Brook-based industrial real estate investment trust joined with Urban in a scheme to inflate the purchase price by providing a false rent roll, tenant list and lease terms.
CenterPoint expects the claims will be dismissed, a spokeswoman said.
Federal lawsuits pending
James Duggan, a retired Lake County apartment-building owner who has lost $3.1 million, claims in a new federal suit that the Arlington Heights deal was part of a wide-ranging scheme that targeted elderly investors in at least five real estate deals in Southern California and the Chicago area.
Another federal suit, filed Jan. 3 by a group that includes private investors from Montana and Florida, alleges fraud in connection with two deals named in the Duggan case and three additional transactions, including the Jeffery Plaza shopping center on the South Side.
Reda denied that his clients personally profited from the deals, saying they have instead lost millions of dollars.
The most recent court case was filed Feb. 6 by DiMatteo, Mulder’s investment partner in a mixed-use North Side development, called Gateway Plaza, which is anchored by Dominick’s and includes an affordable housing building.
The Cook County court case alleges that last year Mulder fraudulently transferred the site of the affordable-housing building, which Mulder didn’t own, to Roldan’s firm, which is developing the structure.
The site is allegedly owned by a venture controlled by DiMatteo and DevCorp North, a non-profit group.
Roldan’s company recklessly disregarded that Mulder lacked the authority to transfer the site, the complaint alleges.
Hispanic Housing took title to the property three days after the firm filed its own Circuit Court lawsuit accusing Mulder of fraudulently transferring the site of a similar proposed project in the 22nd Ward on Chicago’s Southwest Side that never was built.
Roldan would not comment about the litigation, and Reda said his clients are trying to settle the cases.
Mulder, whose mother was from Mexico and father was from the United States, was reared in Mexico and the Dallas area. Growing up, he applied more energy to part-time jobs than to schoolwork, he said in a 1998 interview. After high school, he attended college part-time while working full-time selling real estate. A story circulates that at age 17 he was making $80,000 a year. “That was the basis for how he got started, this capacity to look into peoples’ eyes and persuade them,” Roldan said. “He’s a natural salesman.”
He came to Chicago in 1988 while working for a Dallas-based real estate firm. In the mid-1990s he formed a company with Randall Langer, son of a longtime North Side real estate investor. Their first development: a strip center built in 1995 in Uptown. Mulder translated the values of his strict upbringing into a modern creed of urban renewal that mixed profits with social conscience.
He and Langer won a contract from the CTA to redevelop North Side train stations by teaming with community groups. After a few years Mulder agreed to buy out his partner for $2.5 million.
In 1997 Mulder co-founded Urban with Terzakis, whose father once owned the Danny Boy Oil Co., a chain of local independent gas stations. Their first big break was management of Tribune Co. real estate, including Tribune Tower.
The arrangement lasted about two years, when Tribune decided to bring property management back in-house, a spokesman said.
Urban grew with Mulder as the rainmaker and Terzakis as the behind-the-scenes dealmaker. Its large offices at 401 N. Michigan Ave. prominently featured “Urban” stitched into the carpeting of the reception area.
Advocacy took on a much larger role after Mulder met David Lizarraga, a nationally known economic development activist based in Los Angeles.
In 2000, with the backing of the U.S. Hispanic Chamber of Commerce, Mulder and Lizarraga founded a nationwide non-profit, Latino Initiatives for Next Century. LINC was planned to be part advocacy group, part financier. While lobbying corporations for greater opportunities, the group also said it would line up funding for minority entrepreneurs.
At the outset, Dallas-based 7-Eleven agreed to create as many as 150 Latino-owned franchises by 2003. Terzakis recruited the convenience store chain, a spokeswoman said.
The following year, Ford agreed to add 50 Hispanic-owned dealerships.
Mulder’s stature grew. He became a director of the Congressional Hispanic Caucus Institute, a Washington, D.C., non-profit leadership training group with ties to the Hispanic Congressional Delegation.
In March 2001, Jackson called on Mulder for support when the civil rights leader was under fire for his relationship with a top aide.
“Through the efforts of people like Rev. Jackson and Rainbow/PUSH and a lot of my mother’s prayers, a lot of blessings have come my way,” Mulder said at a press conference.
In July, Mulder was one of 10 Hispanic business leaders to meet with Secretary O’Neill about trade issues.
But LINC has fallen short of its lofty goals. The program with Ford produced just two candidates who are completing a one-year training program, said Osvaldo Garcia Jr., diversity strategy manager for minority dealer operations with the Detroit automaker. A 7-Eleven spokeswoman said LINC provided just a single franchisee.
Lizarraga, the president and chief executive of the East Los Angeles Community Union, known as TELACU, did not return calls.
LINC has severed its ties to Mulder and moved from its Michigan Avenue offices into the ward office of Ald. Ricardo Munoz (22nd). Now under TELACU, the group focuses on scholarships, awarding about $250,000 to 200 college students during the current school year.
Personal finances affected
While Mulder’s prominence was rising, his business declined.
A few weeks after his visit with the Treasury secretary, a $1.5 million loan from Higginbottom, the Gaming Board chairman and high-profile developer, came due. The loan was made in connection with a 1999 sale of a South Side apartment complex to Mulder and Terzakis. A lawsuit filed last year by Higginbottom, president of Chicago-based East Lake Management & Development Corp., sought more than $700,000 from the two men. It has been settled for an undisclosed amount. In March 2001, Urban didn’t pay a nearly $1 million tax bill on the Arlington Heights property.
Three months later, Mulder gave a $13,900 personal check to Langer, his first partner, that was returned for non-sufficient funds. The check was partial payment due Langer under a 1998 buyout agreement. Langer later sued Mulder for breach of contract, winning a $1.5 million judgment last year.
In October, Urban stopped paying rent at 205 N. Michigan Ave., where it had moved its offices in 2000. Mulder and Terzakis guaranteed the rent and are being sued for nearly $320,000.
Last year, Mulder filed for divorce after nearly 17 years of marriage. On July 8, about a month after the divorce was granted, LaSalle Bank filed to foreclose on the North Shore home where his ex-wife was living. LaSalle, a lender to Mulder on commercial projects, was eventually paid and the house was sold.
Another foreclosure suit, filed three days later against another north suburban residence, seeks to collect $464,000 and is still pending.
Ties not severed
Meanwhile, the principals of Urban haven’t exactly gone their separate ways.
Gardner, the former CEO, has started a new firm. Though she was held in contempt, the judge found that she resigned because Mulder and Terzakis “were pushing her towards impending legal action, such as this matter.”
She would not comment on the litigation or her resignation. Yet Gardner, a longtime associate of Terzakis, has continued doing business with him.
Her new company, Chicago-based Property Solutions Group LLC, manages properties partly owned by Terzakis, she said.
And she is also the registered agent for Single Site Solutions Corp., a real estate firm Terzakis formed last year, state records show. Gardner said she still works for Terzakis because it is a “very contractual relationship.” She denied any involvement with Single Site, whose clients include 7-Eleven.
While Terzakis and Mulder try to unwind their deals, they still own real estate together, including a potentially valuable site at the southeast corner of State and Division Streets on the Near North Side, where construction of a retail/office building was halted last year.
Mulder has formed a new company, RJM Holdings Inc., with offices in a downtown building owned by Terzakis. Mulder remarried in November.
And Urban’s financial difficulties have not left Mulder penniless. In a court document filed in July, Mulder listed ownership stakes in 21 real estate assets, aside from the State and Division site. The properties have a market value of $140 million, not including debt. His stake was valued at more than $14 million.
But a Mulder comeback may be difficult.
Said Ald. Munoz: “His inability to deliver on a lot of these projects has left a lot of us holding the bag.”
