San Francisco advisers cheated low-income housing: City attorney

The married couple, Caroline Novak and Igor Lotsvin, run Sage Rhino Capital, an RIA.

The city of San Francisco has sued two financial advisers, a married couple, after one allegedly lied to obtain an affordable housing condominium in the city almost two decades ago.

The lawsuit against Caroline Novak and Igor Lotsvin was filed last Thursday in San Francisco Superior Court.

The two advisers are listed as managing members of an RIA called Sage Rhino Capital, according to the firm’s Form ADV.

Messages left at Sage Rhino Capital for Ms. Novak and Mr. Lotsvin were not returned. According to its Form ADV, the firm has 113 high-net-worth clients and $381.9 million in assets under management.

Both advisers were registered with Merrill Lynch until December 2017. According to their BrokerCheck reports, both resigned from Merrill Lynch at that time for allegedly failing to disclose an outside business activity.

The complaint details how Ms. Novak lied on her initial application in 1999 to obtain a below-market condominium and continued to break the law, according to a statement by the San Francisco Attorney’s office, which recently has been investigating affordable-housing fraud.

Ms. Novak bought the unit as part of a local affordable-housing program, which requires developers to set aside a certain number of units for low- or middle-income households, according to the San Francisco Attorney’s office.

According to the complaint, Ms. Novak falsely stated on her application that she did not already own real property, when in fact she did — a house in nearby San Mateo. Owning property disqualified Ms. Novak from the program.

Over the years, Ms. Novak and her husband, Mr. Lotsvin, illegally rented the apartment that Ms. Novak paid $178,500 for, according to the complaint. The apartment was also allegedly used as security for over $1.5 million in loans and lines of credit, according to the complaint.

Since 2015, the two allegedly kept their unit, in violation of program rules, while they lived elsewhere, in a $2.8 million home in the San Francisco suburbs, according to the complaint.

San Francisco City Attorney Dennis Herrera is seeking a court order preventing the couple from owning the unit in violation of the law and requiring them to sell the property to a new, qualified low-income owner.