In the lexicon of Buffalo real estate, few names carry as much baggage as Frank Parlato Jr. For years, he cultivated a paradoxical reputation in the city’s struggling East Side. To the press, he positioned himself as a “Slum-Buster,” a rogue humanitarian turning blighted properties into stepping stones for the American Dream.
But peel back the layers of paint, much like the paint on the houses he sold, and you find something far less structural underneath.
Our review of the “Neighbors Inc.” saga reveals a masterclass in corporate camouflage. It is a story of how a 501(c)(3) non-profit was allegedly utilized not as a vehicle for community uplift, but as a tax-exempt engine room for a private, for-profit realty empire.
The Glass Wall
The heart of the operation was a convenient co-habitation. Neighbors Inc., the non-profit entity ostensibly dedicated to housing the poor, didn’t have its own headquarters. Instead, it operated out of the very same Grant Street offices as Parlato Realty, Frank’s for-profit commercial firm.
This wasn’t just a matter of saving on overhead. According to critics and investigators, this physical overlap was the linchpin of the scheme. It allowed for a fluid, often invisible transfer of resources. Staff time, office space, and resources could be legally claimed as “charitable contributions” or expenses for the non-profit, effectively subsidizing the operations of the commercial brokerage.
It was a “glass wall” arrangement: on one side, a charity soliciting goodwill; on the other, a business collecting the checks.
The “Double-Dip” Trap
The most insidious aspect of the operation wasn’t the tax maneuvering, it was the financing model targeting Buffalo’s most vulnerable residents.
The pitch was seductive. Parlato’s team would identify low-income buyers with poor credit, people who had been locked out of traditional homeownership. The “charity” would step in, offering to clear their existing credit judgments to make them eligible for a mortgage. It sounded like a lifeline.
In reality, it was an anchor.
Once the judgments were cleared, the buyer wasn’t just given a mortgage for the home. They were often saddled with two concurrent mortgages. The first covered the purchase price of the property. The second was a high-interest instrument designed to pay Parlato back for “clearing the debt” and “consulting fees.”
By the time the paperwork was signed, these low-income buyers were leveraged to the hilt, their “affordable” home now secured against debt that often exceeded the property’s actual value. The non-profit didn’t erase their financial precariousness; it monetized it.
Lipstick on a Rotting Pig
If the financing was predatory, the product itself was defective.
The “renovations” touted by the so-called Slum-Buster were frequently little more than stagecraft. Witnesses and former tenants described a “lipstick on a pig” approach to construction.
Wood that was actively rotting wasn’t replaced; it was painted over. Roofs that needed stripping were simply covered with a fresh layer of shingles, trapping moisture and decay underneath. The goal wasn’t structural integrity or long-term habitability. The goal was visual passability, doing just enough to get the property appraised, the loan approved, and the commission cleared.
The Legacy
Frank Parlato’s operation on Grant Street serves as a cautionary tale for the non-profit housing sector. By wrapping a predatory lending and flipping scheme in the flag of a 501(c)(3), the operation diverted resources meant for genuine community stabilization into private pockets.
The “Slum-Buster” didn’t bust the slums. He just gave them a fresh coat of paint and sold them back to the people who could least afford the inevitable collapse.
