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Thursday, Jun 8, 2023

Namvar Victims Say They’re Being Ripped Off Again

First they were ripped off by Ponzi schemer Ezri Namvar. Now the people who entrusted hundreds of millions to the Brentwood real estate investor say they’re being ripped off again – this time by the lawyers and accountants whose job was to get their money back.

The professionals who have worked on the bankruptcy case of Namvar and his Namco Capital Group Inc. are asking to be paid more than $60 million. That’s more than the estimated $53 million payout for Namvar’s victims.

So last week the creditors filed a protest with the bankruptcy court over the professionals’ final bill, calling the tab disturbing and asking the sum to be reduced. The objection lists the total figure at $65 million, though the Business Journal estimates the total is closer to $61 million.

“This number is simply shocking,” attorneys for the creditors committee wrote in the court filing. “The professionals will be paid in full and yet the unsecured creditors in these cases will only receive an approximate 5 percent distribution (and possibly less than that).”

In interviews with the Business Journal, creditors said they felt betrayed by the system. Some now question whether pushing Namvar into involuntary bankruptcy has left them with less than they might have recouped had they allowed him to sort things out.

He was later convicted of wire fraud and is now two years into a seven-year sentence at a federal prison in Taft, near Bakersfield.

Namvar became known as the “Bernie Madoff of Beverly Hills” for running a real estate investment business that turned into a Ponzi scheme as his investments soured.

“The people are being screwed left and right,” said Elliott Sharaby, a Baltimore developer who says Namvar owes him more than $6 million. “The only people who win are the lawyers. Bankruptcy wasn’t the right move.”

On Jan. 28, a bankruptcy judge in downtown Los Angeles will hear from the opposing parties then decide whether to approve the fees over the objection of the creditors.

R. Todd Neilson, the trustee for the Namvar’s estate, said he understands the creditors’ frustration. But he also said it took time and effort to sort through the wreckage of Namvar’s complex business empire, so the objection is unfair.

“It’s like coming in a few days after the battle of Gettysburg and saying, ‘Why’d you shoot so many bullets?’” said Neilson, a former FBI agent at now a director at Century City consultancy Berkeley Research Group. “My response is: You should have been there. We didn’t shoot any more bullets than we needed.”

Still, creditors see a tiny payout and a huge legal bill as an insult and a betrayal – the second one they’ve endured since Namvar’s empire began to collapse in 2008.

Most of the creditors are Persian Jews who trusted Namvar with their savings for college or retirement. Namvar, himself a Persian Jew and the son of a respected investor and lender who fled Iran after the 1979 revolution there, personally solicited investments based on his family reputation. Because they invested in the form of unsecured loans to Namvar, the creditors have no regulatory agency or insurer to fall back on. That leaves bankruptcy court as their last option, but they feel ill-used by the system.

They complain that the professionals’ fees are too high and that the bankruptcy trustees sold off several Namvar properties when real estate prices had crashed rather than holding on and waiting for prices to recover.

“The system does not serve ordinary people,” said George Harounian, a local investor who said he entrusted $400,000 to Namvar – his wife’s cousin. “It serves people who are hovering around the case like those birds.”


“You said it, not me.”

In December 2008, Namvar told investors he was working on plans to pay back them back without going to bankruptcy court. At meetings that month, he disclosed plans to create a special purpose entity that would distribute his personal and corporate assets to investors.

Namvar and some of his investors made the case that going to bankruptcy court would mean smaller returns to creditors, in part because of the cost of professional fees.

Right move

But a handful of creditors, led by local investor Abraham Assil, pushed Namvar into involuntary bankruptcy instead. With more than $2 billion in claims at one point, Namvar’s is one of L.A.’s biggest bankruptcies in decades.

Even in hindsight, Assil said that was the right move. He alleges that Namvar had no intention of repaying investors and was only buying time as he sold off assets and stashed money with family and friends.

The bankruptcy trustees said as much in a February 2010 report that found Namvar made several questionable transactions in the months leading up to the bankruptcy filing with the goal of making a select few creditors whole.

“Here, at least we might get a dime,” Assil said. “We would have gotten nothing. And I believed in the system, in the United States government.”

But he doesn’t believe anymore.

“I didn’t know there would be people in the system who were bigger thieves than Namvar was,” he said.

Above all, Assil and other creditors say the bankruptcy trustees should not have sold an office building at Wilshire Boulevard and Bundy Drive in Brentwood. The building was sold in 2010 to Santa Monica real estate investment trust Douglas Emmett Inc. for $111 million.

Creditors say the building was sold at the bottom of the real estate market and that it could have fetched a much higher price had the trustees held on to the property.

But Namvar trustee Neilson said the estate didn’t have enough cash to cover mortgage payments on the building so it would have gone into foreclosure.

“We would have lost that property,” Neilson said. “Unless we would have been able to put up substantial sums of money, we would not have been able to keep the property. The money was not there.”

Settling up

The bankruptcy plan approved in October estimates creditors are owed $700 million, and that they’ll receive just pennies on the dollar – 5.6 percent or 7.3 percent, depending on whether they are owed money by the Namvar estate or Namco Capital. That’s a pot of just $53 million.

With that much going to creditors, $61 million going to professionals and another $4 million going to tax collectors or to a handful of secured creditors, the bankruptcy plan assumes the estate will recover about $118 million of the $700 million owed.

Neilson said the sum recovered could grow. He expects to collect a tax refund of about $8 million from the Internal Revenue Service and said the estate is still suing members of the Namvar family for hundreds of millions of dollars, though it’s not certain how much – if anything – those cases will yield.

“How much are we going to get? I don’t know,” he said. “But I assure you we’ll get something.”

Neilson said he expects creditors to get at least an initial payment sometime this year.

The professional fees in the case through November add up to $61.2 million, according to a Business Journal review of court documents. The biggest single biller is Century City law firm Pachulski Stang Ziehl & Jones, with $16 million.

Neilson, along with his current and previous firms – Berkeley Research and LECG, a defunct Emeryville consultancy – have billed just north of $10 million.

Attorneys at Pachulski Stang and other firms did not return calls for comment.

Neilson noted that attorneys have had to file dozens of lawsuits, few of which have been quick or easy to resolve.

“With very few exceptions, people fought and fought,” Neilson said. “And when they fight, it costs money.”

Neilson also said he’s sympathetic to the plight of Namvar’s creditors, many of whom entrusted Namvar with their life savings.

“This has been a tragedy of immense proportions for everyone involved,” he said. “I feel for what they’re saying, and I understand their frustrations. But we didn’t spend any money that we didn’t have to.”

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