The two companies owned by Ron Jaques, who's accused in a lawsuit of embezzling at least $1 million, filed for Chapter 7 bankruptcy on Friday.
Jaques heads Paradigm Property Solutions LLC, out of Meridian, and RentMaster of Rexburg LLC. Those companies manage hundreds of properties across the state.
The companies' problems came to light this month, after some of the property owners who contracted with Paradigm filed a lawsuit against Paradigm and Jaques. They claim he converted, commingled and took the money he was entrusted to have and use without their permission. He's accused of fraud.
The money in question would have come mostly from tenants' rent and security deposits. Paradigm had access to that money to be used for issues such as maintenance and operational costs for the rental properties. The plaintiffs named in the lawsuit own around 200 properties.
Many property owners who contracted with Paradigm are not listed in the recent lawsuit, so it is believed the firm actually managed much more than 200 properties.
RentMaster's website touts that it manages single-family homes, multi-unit complexes and student housing. The Secretary of State's Office lists Jaques as the owner.
There are three liens filed with the secretary of state against Paradigm and RentMaster that specifically name Jaques. The liens are against all of the companies' assets.
Efforts by the Statesman this week to contact Jaques have been unsuccessful.
The plaintiffs in the lawsuit against Paradigm include six limited liability companies that hold property, managed by Eric Uhlenhoff, in the Treasure Valley. Those plaintiffs are represented by Boise attorney Skip Sperry, who told the Statesman on Friday that there are questions around the legality of Jaques' Chapter 7 filing, in part because a judge ordered Thursday that a receiver be put in trust of all assets and that Paradigm's access to accounts be frozen.
That closed out Jaques' ability to make financial choices on behalf of Paradigm, Sperry said.
In a Chapter 7 bankruptcy case, it does not involve the filing of a plan of repayment. Instead, a bankruptcy trustee gathers and sells all non-exempt assets and uses the proceeds to pay creditors.
In Paradigm's bankruptcy filing, Jaques estimated that it would have 1,000-5,000 creditors and liabilities of more than $1 million.
Sperry questioned whether the bankruptcy was filed only in an effort to avoid the receivership and asset freeze.
Meanwhile, tenants across Idaho have raised questions about what can happen to them and whether their property owner even knows about Paradigm's problems.
One of the properties that's not owned by the plaintiffs in the lawsuit is Silverwood Apartments, at 717 11th Ave. S. in Nampa. The apartment building is used by tenants 55 and older, and some of the rents are subsidized.
Sarah Lofthus, 78, has lived in Silverwood for more than 10 years. She said she and her fellow tenants became nervous when they heard about Paradigm. By that time, the city was about to shut off Silverwood's water service because it hadn't been paid, she said — something that would have been Paradigm's responsibility.
Lofthus said tenants couldn't get in contact with Paradigm, and some tenants didn't even know who the property owner was.
"We could not find a phone number for the owner and I had not ever spoken to the owner," she said.
Lofthus pays $605 per month for her two-bedroom apartment and doesn't receive subsidies, but she knows that a lot of the other tenants rely on it.
On Friday, Silverwood tenants received good news. Lofthus said a new property manager arrived though ProCore Property Solutions. She said the new firm is not raising rents or making changes, but just taking over as managers.
"That was a relief," she said. "I think we'll be OK."
As of Friday, Jaques had not been criminally charged as a result of his alleged misdeeds. Meridian Deputy Police Chief Tracy Basterrechea said he could not confirm or deny whether there was an investigation.
"We do not name targets of investigations unless they have been arrested, charged or they are a public safety risk," Basterrechea said in an email. "I would, however, encourage people to contact our agency if they believe they have been defrauded by him or Paradigm Property Solutions, LLC."