Tom Williams/AP Photo
Rep. Michael McCaul last month at the Capitol
Rep. Michael McCaul (R-TX), the fourth-richest member of Congress with a fortune of roughly $113 million, earns part of his wealth through alleged predatory landlord practices, according to county court records obtained by the Prospect. McCaul’s commercial real estate companies have pursued at least two dozen lawsuits over breaches of lease agreements.
Most of the businesses were owned by people of color. Tenants complained about leases being granted under false pretenses, poor conditions in the properties, or hardship events forcing their abandonment, including at least one restaurant closed by law during the coronavirus pandemic. But McCaul’s companies aggressively pursued back rent and expenses anyway.
McCaul, the ranking Republican on the House Foreign Affairs Committee, is locked in a tight race in Texas’s Tenth Congressional District, which stretches between slices of Austin and Houston and the rural areas in between. Progressive attorney Mike Siegel lost narrowly to McCaul in 2018. An internal poll recently showed Siegel within striking distance. McCaul’s treatment of tenants could prove a formidable issue.
McCaul’s wealth comes primarily through his wife Linda Mays McCaul, heir to the iHeartMedia radio empire. The couple has partial ownership of several commercial real estate companies, which have track records of aggressively suing tenants for rent, as well as leasing out properties that are not fit for business, forcing tenants to break their leases and expose themselves to litigation.
Even during the COVID-19 pandemic, one of McCaul’s real estate companies is suing a tenant for back rent. Documents from Bexar County Court show that M2G Fossil Creek, one of McCaul’s companies, filed a debt/contract lawsuit against Jose Angel Ramos Garza and his San Antonio–based restaurant Vida Mia on July 9, 2020. This lawsuit came as Texas was suffering from a spike in coronavirus cases; on July 9, the seven-day average of new cases was 8,252 in Texas, according to data from The New York Times.
Garza’s restaurant had been leasing from M2G Fossil Creek since 2015, but when the coronavirus hit, it couldn’t operate as it had before. From March 16, Vida Mia was barred from its usual services after San Antonio “rendered the third declaration of public health emergency regarding COVID-19,” according to a filing from the defense. The filing also states that Vida Mia has been making partial payments on its rent, and that the lawsuit “was caused by an act of God over which Defendants had no control.” But M2G nonetheless considered the lack of full payment a breach of the lease, and is suing for $205,350.31 in past rent, future rent, and other charges, as well as legal fees and court costs.
M2G Fossil Creek is one of several commercial real estate companies connected to the McCaul family. M2G Real Estate, M2G Principal Development I, M2G Oaks LLC, and M2G Marshall Road Ltd. are all also partially owned by Maychild Ltd., in which McCaul’s wife and her siblings have equal 25 percent shares. McCaul has declared the asset from Maychild Ltd. on his most recent financial disclosure to Congress, as well as disclosures since 2007 (tax year 2006), listing it as a spouse-owned asset worth more than $1 million.
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The case between M2G Fossil Creek and Vida Mia is still pending in Bexar County Court, Texas. But Garza is not the first restaurateur to be sued over back rent due to an extenuating disaster.
In 2018, M2G Principal Development I sued Isabel Quintanilla after Hurricane Harvey hit and he had to leave his business, Taquito’s Mexican Restaurant of Spring Branch, Texas. Court documents state that Quintanilla’s employees were unable to staff the restaurant because they were dealing with the hurricane, and at the same time he had to care for his ill mother.
When Quintanilla told M2G Principal Development I that he had to abandon the lease due to “unforeseeable circumstances” and would search for someone to sublet the building, he was locked out the very next day. Quintanilla did find a subletter, according to the court filings, but M2G refused to consider this alternative.
Quintanilla lost the case in 2019 and owes the company more than $54,000 in addition to legal fees and court costs, which are subject to interest.
Maychild’s companies have a long history of litigation against tenants in the Bexar County courts. The companies have filed 24 different lawsuits against their tenants since 1999. At least four tenants have fought back in court, including Quintanilla. Other cases where tenants defended themselves in court involved the conditions of the rental properties. The cases are largely unbalanced, with Maychild, backed by prodigious financial resources, going up against struggling individual business owners.
In 2003, Uni Plus Uniform vacated its rental storefront two years into a ten-year lease, when the shop’s construction problems made it too difficult to conduct its business. A court document says the shop’s ceiling and windows leaked, there was cracking in the walls and floor, and the building was shifting. A customer also slipped and fell in the store as a result of its poor condition.
The issues were brought to M2G Real Estate’s attention—at that time, it was operating under the name B&M Real Estate Ltd.—but repairs weren’t made. Uni Plus Uniform owner Mark Hernandez told the court, “In my opinion, it became inconceivable to safely operate the subject business within the subject premises.” An internal email also showed that the company’s employees knew repairs were needed: “Somebody needs to own-up [sic] and fix it so that we can avoid a lawsuit.”
Hernandez’s case went into private mediation and then was dismissed with prejudice in 2004 with each side only saddled with its own legal fees.
Pete Escalante Gutierrez found himself in a similar position in 2013, when problems with air-conditioning and plumbing made it impossible for his business, Fast Cash Refund Express, to operate. These issues were unknown to Gutierrez when he signed on to his lease with M2G Real Estate, and the problems were not addressed. M2G had also promised Gutierrez that other tenants would populate the strip mall where Fast Cash was located, but that never materialized. The “extremely disagreeable smell” described in the lawsuit became part of the reason why Gutierrez had to abandon his lease.
Despite these issues, M2G sued Gutierrez for unpaid rent and expenses. The landlord won, and collected almost $50,000 from Gutierrez, as well as $15,000 for M2G’s legal fees.
While it’s possible that McCaul doesn’t know how he and his family are earning their income from these business operations, it does not negate the fact that these companies are using the legal system to aggressively pursue small-business owners in his home state, even when the company may be responsible for poor rental conditions, or when natural disasters and global pandemics strike.
Rep. McCaul’s office has not yet responded to a request for comment.
