A prominent Brentwood businessman's numerous ventures have soured in recent months, imperiling perhaps hundreds of millions of dollars handed to him personally by many in L.A.'s tight-knit Persian Jewish community.
Ezri Namvar and his Los Angeles investment company, Namco Capital Group Inc., are facing at least 17 Superior Court lawsuits accusing them of failing to pay back investors. But that's not all of Namvar's troubles. Security Pacific Bank, which Namvar bought in 1997, failed last month; 11 Arizona real estate ventures tied to him recently filed for bankruptcy, and he's been unable to sell his big stake in the mammoth downtown Park Fifth condominium development, which, if built, would be the tallest such building west of Chicago.
"He's sort of in a bit of a financial freefall," said Seong Kim, a Steptoe & Johnson attorney representing an investor who's suing Namvar.
While many business chiefs are in trouble in this recession, Namvar, who's been bedeviled by the downturn in the real estate market, stands out. That's partly because his holdings are sizable and numerous but mainly because of the way he raised money. Namvar, 57, an immigrant from Iran, got a good deal of his money from fellow Persian Jews who live in and around Beverly Hills.
Said Kim: "Namvar has borrowed hundreds of millions in the Iranian community."
The lawsuits allege that Namco has been unable to pay back investors who gave him anywhere from $200,000 up to nearly $18 million each. The losses, according to attorneys representing the plaintiffs, have caused many to lose their life savings.
Investors typically got a two-page promissory note that essentially said Namco would pay them back with interest up to 8 percent. Some were personally guaranteed by Namvar. Investors have no collateral or recourse, except to sue.
The investors would not talk, at least not on the record, but several lawyers did.
Attorneys working on cases against Namvar estimate the total amount owed to the mostly Persian investors at around $400 million, although they don't know for sure. About 300 to 400 investors are owed money.
Namvar is not a large public figure in L.A.'s wider business community, but he and his investment company had amassed an impressive portfolio over the last several decades, holding many properties secretly through multiple limited liability corporations, according to A. David Youssefyeh, an attorney with Los Angeles firm ADY Law Group who is advising 10 clients who claim they are owed money by Namvar but have not sued.
Also, little is known about where Namco placed each investor's money. Apparently few investors asked many questions and trusted Namvar.
"People wanted to be associated with someone who is successful and is making a lot of money. There is a trust factor that you are giving your money to someone in the community and not a stranger," said Youssefyeh. "We have no idea where the money has gone it wasn't (for) a specific investment."
When asked why so many people turned over such large amounts of money with little security and perhaps no knowledge of where the money was destined, Youssefyeh, who is also a Persian Jew, said: "A lot of the people who gave them money are my parents' and grandparents' generation who are much older and also not as familiar with sophisticated investing.
"It was much easier for them to just look at this as a savings account. No one ever thought the company wouldn't be able to pay the money back. People who got personal guarantees thought Ezri was worth hundreds of millions of dollars so (they thought) what do they have to worry about," said Youssefyeh.
Kim, who is Korean American, said the practice has cropped up in the local Korean community, though never on the scale of Namvar's business.
"I've seen this before in the Korean community where people lend money on a napkin agreement," Kim said. "Things go wrong, but not this big."
Namvar did not return calls seeking interviews, and one of his attorneys, Timothy Neufeld, also declined to comment. Several other members of his legal team, including Namco's in-house counsel, did not return calls either.
Namvar has kept a very low profile lately. But he has not filed for bankruptcy protection, which could hurt his investors attempts to be made whole. Also, Namvar held a closed-door meeting Nov. 5 with Namco investors in the grand ballroom of the downtown Marriott Hotel, which his company owns.
According to a confidential letter dated Nov. 7 that recapped the meeting, Namvar proposed a payback plan in which he would place his assets, those of Namco and the assets of his wife and children, into a special purpose entity. That entity would be turned over to the Namco investors seeking payment. In return, Namvar asked for a 120-day moratorium on pending and threatened litigation.
However, little seems to have changed since the meeting and it remains unclear if the offer is still on the table.
Kim said he is trying to work out an agreement to his client's lawsuit. But Youssefyeh said he is urging his 10 clients who have loaned Namvar a total of about $5 million to litigate. So far, they are resisting.
"It's a cultural thing, they don't want to sue someone they know within the community," Youssefyeh said.
Namvar has made other efforts to repay his debts.
Notably, he is seeking to unload his interest in Park Fifth. The $1.3 billion project was approved this summer and would include luxury condos, a hotel and retail at property adjacent to Pershing Square downtown. The 732-unit project was slated to break ground in October 2007, but has been delayed as the joint venture grapples with financial problems.
Lead developer David Houk said Namco's interest in the 76-story tower is being shopped around. "We are working hard to find replacement partners because they want out," Houk said.
Houk, who heads L.A.-based Houk Development Co., is the majority shareholder in the Park Fifth Associates joint venture that owns the development site. In 2006, Houk brought on Namco Capital as an equity partner.
Initially, Namco was to have been a larger shareholder in the venture than Houk's company, but during the process of finalizing the partnership deal, Namvar sold half of his company's interest to an entity of Africa Israel Investments Ltd., an Israeli investment company.
"Their obligation in the joint venture is to supply capital and financing for the project," Houk said. "Ezri stopped being able to do that some time ago, starting about a year ago."
Houk said he is in "serious discussions" to replace both partners.
However, it's unclear in the current real estate market what Namco's stake would fetch or whether it can be sold for an attractive price.
Africa Israel, a publicly traded company with interests in construction, real estate and other businesses, did not return calls seeking comment.
Houk acknowledged that it is even possible the entire Park Fifth project could be sold, but that's something he wants to avoid. "I don't want to sell, I'd like to stay and finish what I've spent the last 30 years working on," he said.
Namvar's problems go beyond his alleged inability to pay back the individual investors in the L.A. area.
Among the plaintiffs in the 17 lawsuits is General Electric Capital Corp., the large finance unit of General Electric Co. It accuses Namvar of defaulting on an $86.8 million loan he took out when he purchased the 469-room downtown Marriott last year for $115 million. GE Capital's attorney on the case, Steven Winick, declined to comment.
Another suit, filed by a trustee on behalf of the Leo and Irene Karsin Trust, alleges that another of Namvar's entities, Namco Financial Exchange Corp., ran an illegitimate 1031 tax-deferred exchange company, stealing over $17.7 million from the trust. 1031 exchanges allow real estate investors to sell properties and buy new comparable ones in an exchange. This allows investors to defer paying capital gains at the time of sale.
The suit alleges that instead of putting 1031 exchange proceeds into a savings institutions or insured bank as agreed upon, Namvar was running a Ponzi scheme, "which was intended to, and did, bilk unsuspecting investors out of millions of dollars of deposited funds to provide Namvar with capital to engage in other risky investments."
As if Namvar needed more problems, his bank, Security Pacific, was declared insolvent and closed by state regulators on Nov. 7 the same day Namco released its letter to investors recapping the meeting at the hotel.
The bank had a large portion of its loans in acquisition, development and construction of real estate projects in the Los Angeles area and Inland Empire, said FDIC spokesman David Barr. The bank's four branches and deposits were acquired by Pacific Western Bank of San Diego.
The doomed bank, which had total assets of $561 million as of Oct. 17, ranked 74th out of 75 banks on the Business Journal's September list of the most profitable L.A. County-based banks. Security Pacific posted a negative 13.2 percent return on assets in the second quarter, a loss great enough to kill most banks.
Namvar has been a part of the banking world since at least 1997, when he and his family acquired the majority interest in an Ontario community bank originally named Golden Pacific Bank, according to a 2003 Securities and Exchange Commission filing.
Namvar changed the bank's name in 2005 to Security Pacific Bank. He acquired the name of the once powerful Los Angeles banking institution, which had been retired after Bank of America purchased Security Pacific National Bank in 1992.
Namvar's four-branch Security Pacific was a family affair; he was the chairman and his brother Sean was a director. The bank was headquartered at Wilshire Bundy Plaza, the 12121 Wilshire Blvd. property that also houses Namco and is owned by WILBUN 7 LLC, an entity that Namvar controls.
Namvar had a 53 percent voting share of the bank's holding company while his brothers Sean, Mousa and the Namvar Family Trust had a combined 34 percent share, according to Security Pacific Bancorp's 2007 annual report to the Federal Reserve.
Also, H. David Nahai, one of the bank's directors and general manager of the Los Angeles Department of Water and Power, had less than a 1 percent share. Calls to the DWP and the offices of Nahai's former law firm were not returned.
"Having the bank was an important part of his good standing in the community and losing it has the equal and opposite effect," said a longtime friend and business associate of Namvar who asked not to be identified because of ongoing business dealings.
Desert of woe
Moreover, one of Namco's troubled ventures, Namwest LLC, a Phoenix-based landowner and developer, has filed for bankruptcy as a result of the real estate crash, according to its chief executive. Ten related entities also filed for Chapter 11 bankruptcy protection in Arizona between Sept. 22 and Oct. 20.
Namwest is heavily invested in the Arizona residential real estate market, one of the worst in the nation.
Longtime Phoenix homebuilder Mike McBride, the Namwest chief executive and a partner in the company with Namco, said that the bankruptcy filing is an attempt to reorganize the company.
"We have good assets. We fully expect to come out," said McBride, who added that he currently has little contact with Namvar and only speaks to him "now and again."
Namwest, founded five years ago, owns a hotel in upstate New York and about 10 projects in Arizona, including several pieces of land entitled for residential development and a handful of mixed-use sites, said McBride.
"(We have) a ton of development land in Arizona," said McBride, who declined to be specific but ballparked Namwest's land ownership in the state at "hundreds of acres."
One of the company's developments, the Brownstones at Tempe, a 65-unit condo development, is nearing completion. However, the Daily News-Sun of Sun City has reported that a handful of Namwest housing developments, built under the Namwest Communities name, have remained unfinished since the company filed for bankruptcy.
"It's just been lending, it has kind of dried up, banks have had their troubles," McBride said.
Both Youssefyeh and Kim believe their clients' investments were funneled to Namwest. However, the attorneys said it's been difficult to ascertain where investors' money wound up because of the rudimentary nature of the agreements that people signed with Namco.
"They have personal guarantees from Namvar but (the loans are) not secured by other assets it's unconventional," said Kim, who is representing investor Ruben Melamed, who is seeking more than $2 million plus interest that he claims he is owed from a $3 million investment he made with Namvar.
Namvar's main company, Namco Capital, is a holding company and investing entity for a variety of Namvar's real estate and financial interests. Namvar is the chairman and chief executive officer of the company, which is described by associates as a family business that includes several of Namvar's brothers and his father, who are named in several of the lawsuits.
Though little is officially published about Namco, it was incorporated in 1988, according to documents filed with the California Secretary of State's Office. A 1995 story in Liquidation Alert, a defunct publication that covered the savings and loan crisis, said that Namco planned to lend $100 million at a Resolution Trust Company loan auction. The story described Namco as a "California mortgage bank."
The story said that Namco had "originated $5 billion of commercial mortgages since 1979" and was willing to make both mortgage and equity investments.
Among the local properties that had been acquired by Namvar or his company, besides the Marriott, are the Hotel Angeleno in Brentwood and the 11-story Rox-San Medical Plaza in Beverly Hills, according to real estate brokers familiar with his portfolio.
Namvar's recent troubles have forced him to start disposing of assets, starting at least two months ago, when Namco sold the Rox-San building to Jade Enterprises for $37 million, according to a broker familiar with the transaction.
Namvar is apparently exploring multiple options to pay his investors. In a proposal made a few months ago, he offered to apply debts he has with a Youssefyeh client to a down payment on a condo at a 30-story Tel Aviv residential building. The client didn't accept the offer for the unit at NAM Tower, a luxury project under construction that Namvar has an interest in, the attorney said.
Because most of the suits have recently been filed, depositions are still months away from beginning, according to several attorneys.
However, some plaintiffs have begun to move quickly. Last month at least two plaintiffs requested and were granted prejudgment writs of attachment, which allow the plaintiffs to obtain liens in advance of trials on real property held by Namco or Namvar, according to one attorney who had obtained a writ on behalf of a client.
"We had to show there was a potential property wouldn't be there by the time we went to the trial," said the attorney, who declined to comment on the record because he had not been authorized by his client to comment.
Namvar studied electrical engineering in the United States and moved here in advance of the rest of his family, which emigrated from Iran after the 1979 revolution there, according to those who know the family. Many other Jews in Iran did the same, and they created the large Persian Jewish community in and around Beverly Hills.
Kim, the lawyer, has met Namvar a handful of times in conjunction with his client's lawsuit and described him as "cordial," adding: "He's very suave, he's a good salesman, I would say." Namvar is also said to be an avid backgammon player.
Namvar and his family are devastated by his business trouble, which has sullied their reputation in a community that emphasizes cultural connections and trust, according to Namvar's unnamed longtime friend and business associate.
"In addition to the legal issues there is the issue of pride and standing in the Persian Jewish community, which I think really upsets them," said the businessman, who asked not to be identified. "Business is a really fickle mistress."
However, Namco's unraveling has created a firestorm of gossip in the local community of Persian Jews. This might be the most painful thing of all, according to the unnamed friend and associate. "It's hard to walk around with your head held high," he said.
Indeed, emotions are such that on more than one occasion, sources said, Namvar has been threatened by irate investors who've stormed his Namco offices at Wilshire Bundy Plaza.
Perhaps that explains the secrecy that surrounds Namvar; though he attended the closed-door meeting with investors at the Marriott, he mostly stays at home these days, rarely leaving his 10,000-square-foot Brentwood mansion, several people said. Houk, for example, said he's not spoken to Namvar in four months.
Namvar's mansion, which is just off of Sunset Boulevard on a quiet, anonymous street, is guarded by three tall gates. One recent Saturday night, at dusk, only a few lights were on in the second floor.
"He claims it's just the real estate meltdown," Youssefyeh said. "He's had conversations with the investors or town hall type meetings. He's told them, 'Hey, the real estate market crashed. What can I do?'"
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