Former Philly property manager pleads guilty to skimming rent payments

A well-known, former Philadelphia real estate agent and property manager pleaded guilty Thursday to pocketing hundreds of thousands in rent intended for owners whose properties he managed.

Joseph N. Reilly, 68, who appeared somber and contrite during the brief federal court hearing, admitted to diverting funds he was supposedly managing for his clients to cover up his own mounting business expenses. Prosecutors contend the thefts totaled more than $1 million. Reilly and his attorney declined to comment after the hearing.

Reilly made his property management services available through Reilly Real Estate, once headquartered on the 1700 block of South Street. Property owners hired Reilly to collect rent and bill payments from tenants and forward the funds to the appropriate accounts, according to federal and Common Pleas court documents.

At least, that's what was supposed to happen.

Federal prosecutors, in court documents filed earlier this month, said Reilly "devise[d] a scheme to defraud approximately 50 clients," mailing them monthly financial statements altered to make it appear as though he was retaining rental payments from their properties and paying real estate tax and utility bills from the proceeds.

Reilly in 2009 agreed to sign over the deed of his real estate company headquarters to one property owner to whom he owned money. Reilly continued to operate Reilly Real Estate from the office, paying the mortgage in lieu of rent, prosecutors said.

But, in December 2010, Reilly allegedly stopped making those payments, as well. That's also when clients began to complain that he'd stopped paying their properties' utility and tax bills and started mailing out financial statements irregularly, or not at all, according to prosecutors.

A slew of civil lawsuits filed against Reilly in Philadelphia Court of Common Pleas over the past four years detail similar allegations.

One suit, filed in June 2010, claims Reilly rented out a property on the 2000 block of Addison Street for nine months without the owner's permission. Reilly then failed to turn over more than $18,200 in rental and water bill payments he collected from tenants, the suit states.

A second suit, filed five months later on behalf of the owners of a home on the 1900 block of Catharine Street, alleges Reilly withheld nearly two years' worth of tenant rental payments totaling $33,600.

Reilly once had a solid reputation in the industry, according to John Featherman, a realtor and Philly.com columnist.

"I always knew him as the go-to guy that realtors and investors, particularly small-time investors, trusted, if they were going to have a property leased out and didn't want to do management themselves," Featherman said, noting Reilly seemed honest and professional in their past dealings.

Court documents appear to back up claims that Reilly was at one point a well-regarded businessman.

In one lawsuit, filed in July 2011, the owner of a home on the 1600 block of South Street claimed he entered into a property management agreement with Reilly in 1995.

The arrangement apparently progressed without incident until December 2010, when Reilly allegedly stopped turning over monthly distribution checks and financial statements. Reilly had retained more than $22,000 of the owner's funds by March 2011, the suit states.

The property owner further claimed he learned in March that the house was slated to go up for sheriff's sale the next month because its real estate taxes hadn't been paid in four years, despite Reilly's representations to the contrary. The owner was forced to pay the city nearly $28,000 in back taxes and penalties to keep his property, the lawsuit claims.

Similar allegations were made against Reilly in another lawsuit filed on behalf of the owner of two rental properties on the 2900 block of Poplar Street.

The owner claimed he learned that the utility accounts associated with both of his properties were hundreds of dollars in arrears, but only after the Philadelphia Water Department posted a shut-off notice on one of his homes. Again, the discovery came despite the fact that Reilly had indicated he'd deducted monthly bill payments from rental proceeds, the suit states.

The four lawsuits resulted in judgments totaling nearly $250,000 being entered against Reilly, in default because he neither answered to court filings nor appeared at hearings, court documents indicate.

Reilly filed for bankruptcy protection in September 2011, according to court records, forcing some of his creditors to seek relief under the Pennsylvania Real Estate Recovery fund, which was established to reimburse victims of fraud or deceit in transactions involving licensed real estate agents.

The fund in December 2013 distributed $200,000 among 43 claims brought against Reilly and 44 claims brought against his real estate company. Reilly's state Real Estate Commission-issued license was automatically suspended the same year due to the settlement.

U.S. postal inspectors stopped Reilly in December 2012 at the Philadelphia International Airport as he returned from a trip to Dublin, Ireland, where he owned property, prosecutors said.

Reilly admitted during that interview that he started using rental proceeds to cover his own expenses when his business began to falter, according to prosecutors. He reportedly said he used whiteout to conceal overdue balances on copies of bills he presented to property owners.

Reilly was released Wednesday on $20,000 bond and ordered to surrender his passport, to report to pretrial services and to remain within the state. He is now living in an apartment in the Cedar Park section of West Philadelphia.

Reilly faces up to 20 years in prison and a $250,000 fine when he is sentenced Sept. 3 on one count of mail fraud.