WATCHDOG

Baird exec to sell problem properties

Cary Spivak, and Kevin Crowe
Milwaukee Journal Sentinel

James H. Herrick, a top executive at Robert W. Baird & Co. Inc., is "actively working to sell" some of the problem central city properties owned by Herrick's entities, the Milwaukee-based financial services company said.

In its statement, issued in response to questions about Herrick's central city holdings, Baird said:

This rental property at 4470 N. Hopkins St. is owned by an LLC connected to James H. Herrick, an executive with Robert W. Baird & Co. Inc.

"Mr. Herrick has realized that, even with having others manage the properties, attending to the needs of multi-tenant residential properties can be demanding.  Given that, he’s actively working to sell the properties noted in (news) stories to new owners. "

The statement, issued by spokesman John Rumpf on Friday, did not specify exactly which buildings would be sold and also did not say whether Herrick LLC properties that were not written about in the Journal Sentinel would also be sold.

Baird and Herrick,  the company's co-head of global trading for Baird’s institutional equity services group, have attracted unwanted attention from Mayor Tom Barrett and several aldermen since the Journal Sentinel disclosed in December that Herrick  was an owner of  at least six limited liability companies owning Milwaukee rental properties, some of which had been targeted by city building inspectors for a wide range of code violations, including insect infestations, lack of smoke detectors and an inadequate number of storm windows.

The disclosure was part of an ongoing Journal Sentinel investigation into how some landlords game the system to avoid paying taxes and/or fines for building code violations.

James H. Herrick at a reception in Minneapolis on Jan. 1, 2003.

Barrett has since talked to Steven Booth, Baird's chief executive officer, about Herrick's holdings and a Common Council committee was charged with looking into problems caused by bad landlords. In addition, City Attorney Grant Langley has said that Herrick is one of a handful of landlords being investigated by his office.

Herrick, like many other landlords and other businesses, is full or part owner of  LLCs that own rental properties. LLCs are structured to allow owners to keep their identities secret and to keep their personal assets out of reach from creditors.

Baird and Herrick's attorney have declined to say whether any other people — including other Baird executives — have invested in any of his LLCs.

Gregory Lutz, a Baird institutional investment officer, confirmed Thursday that he is an owner of the LLC that owns apartment buildings at 4470 and 4475 N. Hopkins St. His name appears as an owner of 4470-4475 North Hopkins LLC on records filed with the county Register of Deeds and the Financial Industry Regulatory Authority.

Residents of those buildings have complained about bed bugs, lack of storm windows and one woman has told reporters she was unable to drain or use her kitchen sink because the pipes were disconnected. City building inspectors last month cited both buildings for a lack of operating smoke and carbon monoxide detectors and for having roaches at 4475 N. Hopkins.

Lutz described himself as a “silent partner." He declined to comment about how he got involved in the LLC or to say whether he was concerned about the condition of the buildings, which he said he has visited. He declined further comment saying the Journal Sentinel’s coverage of Herrick “makes me a little nervous.”

A second investor, Betony Buzdum, owner of the Jailhouse Restaurant, a popular eatery in Jackson, hung up on a reporter after telling him,  “I have nothing to say to you." Buzdum of Shorewood was listed as an owner of Pyramid Investment Properties LLC, which owns buildings near North Ave. a few blocks west of Lisbon Ave., on a deed that was signed and notarized in April.

Company 'disappointed'

In its statement, Baird said it knew about and was concerned about Lutz's investment in the LLC.

"We are disappointed that the earlier problems occurred in the first place and/or were not addressed in a timely manner," the company said. "Our understanding is that the outstanding issues noted in the stories have been addressed.  With multi-tenant properties, new needs can come up at any time and we’ve been assured that any that do will be promptly addressed."

Since early December, city building inspectors have cited Herrick LLCs for more than 100 violations of the building code. Numerous violations have been fixed, Department of Neighborhood Services records show.

Violations discovered in eight buildings include failure to provide adequate heat, a lack of smoke and carbon monoxide detectors and orders to eliminate rats, mice and roaches, records show.

Among the violations that have been repaired are orders to provide heat of at least 67 degrees in two buildings and to repair or replace a fire alarm system in one. All told, inspectors cited the companies more than a dozen times for violations relating to smoke detectors, fire extinguishers or carbon monoxide detectors.

In an email statement, Sean Sweeney, Herrick's attorney, said: "Any known issues at the properties have already been remedied or are in the process of being addressed by property management in a timely manner.”

Herrick's companies have spent more than $1 million to "significantly renovate and maintain" three of his properties, according to the Baird statement.

'Step in the right direction'

Mayor Barrett's top aide said Friday that he was pleased to hear Herrick, who lives in a $1.1 million River Hills estate, was planning to sell his city properties.

"That is certainly a step in the right direction," Patrick Curley, Barrett's chief of staff, said Friday.

In discussions with Booth, the Baird CEO, the mayor expressed his dismay about the condition of buildings owned by Herrick LLCs.

"The mayor has been very clear about taxpayer concerns related to (Herrick's) LLCs and about his personal concerns," Curley said.

Barrett and Baird have "agreed to work to resolve those concerns," Curley said adding "having responsible owners with responsible management is a priority of the mayor."

In its statement, Baird said the company "has had direct, constructive dialogue with the Mayor on this matter that is ongoing."

Last month Barrett expressed his dismay about Herrick's holdings and about the executive's failure to disclose to regulators the names of all the LLCs in which he has an ownership stake. At the time, Sweeney said, Herrick was not required to list the holdings because he was a passive investor.

Since then, however, Baird — which files the information with regulators based on information provided by the broker — has amended Herrick's filing with the Financial Industry Regulatory Authority.

Herrick's original filing listed just two LLCs that invest in real estate, although the spellings and names of those companies did not match state records. The filing, which is used as the basis for  FINRA's BrokerCheck report, now lists 11 LLCs that were formed from 2003 to 2016.

The filing notes that the LLCs invest in real estate and employs property managers to oversee the holdings. Herrick noted in the filing, "I spend a few hours per week, primarily during non-working hours, overseeing these investments as needed."