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On Sept. 23, 1987, a 34-year-old Steven Madeoy stood before U.S. District Judge Harold Greene. “You do not regret your acts, but you regret being prosecuted,” the judge told the defendant, according to press reports, before sentencing him to a 32-month-to-eight-year prison sentence as a ringleader of a high-profile real-estate scheme that ripped off the federal Department of Housing and Urban Development (HUD) for millions of dollars. Federal prosecutors, asking for 15 years, had called him a “morally and ethically bankrupt individual, a predator of the most vicious sort.”

After spending nearly three years in federal prison, Madeoy re-emerged as a real-estate player, and now runs Silver Spring–based Crosstown Properties, which owns properties throughout the District and its suburbs. In 1988, Madeoy was barred from receiving any federal housing money directly or indirectly. His reinstatement request was granted in 1999. Now, almost 20 years later, a man who once pilfered millions in a scam that involved at least 153 District-area properties and led to illegally increased rents and evictions for District tenants once again stands to collect a hefty chunk of HUD money.

The property at issue is a 10-unit apartment building on Dale Drive in Silver Spring that Madeoy is in the process of selling to Montgomery County, which hopes to convert it into housing for chronically homeless substance abusers and the mentally ill. The public debate over the deal—and the press coverage of it—has taken on the dimensions of a classic NIMBY struggle. The back-and-forth between residents and the county has focused on the nearby presence of two schools and a liquor store—things considered to be within unsuitable range of the prospective residents.

What hasn’t been discussed is Madeoy’s criminal history—and that HUD is kicking in $700,000 on the deal.

That’s not to say Madeoy sought out the financing. Rather, Montgomery County exercised its legal option to step in anytime a property within the county limits is sold and match the contract. When Madeoy agreed to sell the building on Dale Drive to four investors for $1.45 million in November—a $400,000 profit over the course of a year—the county decided to step in, with HUD’s assistance. “It’s not anything that we have a decision to make on. It’s really a local decision,” says a HUD spokesperson.

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Now that his wayward days are behind him, Madeoy says that all he asks is that regulations be followed. “There are laws out there. As long as everybody plays by the same set of rules, that’s fine by me,” he says.

It won’t be the first time Madeoy has partnered with one of his former legal adversaries. The U.S. Attorney’s Office for the District of Columbia—the same gang that called him a vicious predator—helped him pull off a lucrative deal in Washington Highlands. In early 2005, the prosecutors applied intense pressure on Dennis Garbis, the owner of a corporation that owned three low-income buildings on the 900 block of Barnaby Street SE. The pressure eventually led to a sale; Madeoy and two other investors picked up the properties under the corporate name Ashford Manor for $4.86 million.

Madeoy and his partners, though, didn’t wait for the buildings to become vacant before applying for a vacancy exemption with the District’s Department of Consumer and Regulatory Affairs (DCRA), which would allow them to ease the condo-conversion process. The exemption was granted. When a Legal Aid attorney pointed out that the properties were not, in fact, vacant, DCRA rescinded the order. The developers paid tenants remaining in two of the buildings $600 each to leave and are now selling condo units. Tenants in the third building are holding out.

But when it comes to the Silver Spring building, it seems not everyone has forgotten about Madeoy’s past. His ’80s-era scam involved straw buyers who would artificially raise the price of properties. “We got a lot of calls from the county trying to determine if we existed,” says Joseph Walker, a District attorney and real-estate investor who was part of the group hoping to buy the property before the county swooped in. The group, he says, does exist.

Tedi Osias, a county spokesperson, says the property itself was more important than the identity of the seller—so long as he’s legal. “He is not on HUD’s exclusion list,” she says.

On May 3, the Montgomery County Housing Opportunity Commission was set to vote on approval of deal—five months after the original closing date, due to the county’s intervention. Though it’s caused his sale to be delayed while he’s paid taxes on a vacant building, Madeoy says he supports the project because homelessness is a serious and overlooked problem in the wealthy county. “It’s just a NIMBY thing—not in my back yard. They don’t want mentally handicapped people in their neighborhood.”

He’s also unsettled about the attention the sale has brought.

“It’s taken a long time for me to get my reputation back. Every time I go into a bank it’s tough for me to get a loan,” Madeoy says. “I have a new life. I buy and sell real estate. That’s it.”

Madeoy says he now avoids the shadier side of the real-estate game. “I don’t allow it near me. I was a kid when I didn’t know what I was looking at,” he says. “Now I know.”CP