Ezri Namvar, the local businessman who is being accused of losing up to $400 million he was handed by fellow members of his West L.A. Persian Jewish community, has settled on a plan to pay back his debts outside of bankruptcy court.
However, some of the investors are growing restive at what they view as the slow pace of progress. What’s more, some fear Namvar may be paying back some investors ahead of others, and they are considering throwing Namvar into involuntary bankruptcy.
Nonetheless, A. David Youssefyeh, a lawyer who is advising about 20 clients who claim they are owed money by Namvar, said he has been working with Namvar to keep the matter out of bankruptcy court. A formal bankruptcy likely would delay and diminish any payments to the investors some of whom are said to have given their life savings to Namvar and are struggling financially.
“I’m working very diligently with Mr. Namvar to come up with a solution to maximize return to all of his creditors, and he’s been cooperating fully with us,” said Youssefyeh, who met with Namvar two weeks ago to discuss progress in creating a special purpose entity into which Namvar would put many of his assets that would be given to his investors.
“I’ve explained to him that the procedure was going way too slow and that people’s livelihoods were at stake. He acknowledged this and said that he will try to work with the group to make things go faster,” he said.
Namvar, 57, of Brentwood, is facing at least 19 lawsuits, including two filed last week. Most allege that he and his L.A.-based holding company and investment entity, Namco Capital Group Inc., haven’t paid back debts. It is unclear how much he owes, but estimates place it at hundreds of millions of dollars, perhaps $400 million.
Many of the investors are Jews who immigrated to West Los Angeles from Iran about the time of the 1979 Islamic revolution there. Some handed over $1 million or more to Namvar, a fellow Persian Jew, with no collateral. The money apparently was invested in an unknown array of Namvar’s local and regional business pursuits, most of them in real estate. Namvar’s business went south when the real estate investments soured during the economic downturn.
Youssefyeh, also a Persian Jew, said Namvar has renewed efforts to create a special purpose entity that would include his assets, those of Namco, and the assets of his wife and children. Those assets would be turned over to investors and apportioned out by a formula.
Plans for such a special purpose entity were first discussed at a Nov. 5 closed-door meeting held by Namvar with Namco investors in the grand ballroom of the Marriott Los Angeles Downtown hotel, which his company owns. The plan stalled, but in the last two weeks, a four-person committee which will oversee the special purpose entity has been solidified. The committee also has hired a lawyer and a forensic accountant.
Namvar and his attorneys did not return calls seeking comment.
‘Out of patience’
But some investors are growing frustrated. In the last two weeks, news of New York financier Bernard Madoff’s alleged $50 billion fraud, which has set back or wiped out the coffers of prominent Jewish charities, has put an already nervous community on high alert.
One Namvar investor, Abraham Assil, a well-known member of L.A.’s Persian Jewish community, said he is considering an involuntary bankruptcy action against Namvar, which would halt Namvar’s out-of-bankruptcy efforts. It takes three creditors to force an involuntary bankruptcy.
“We are discussing it, talking with attorneys and pursuing all options to see what course might be beneficial to the community, particularly those who are destitute and left without their life savings and a means to continue living on a daily basis,” Assil said.
A trust in Assil’s name is suing Namvar and Namco for more than $5 million plus interest that the trust claims it is owed from a $6.7 million investment it made with Namco.
Another issue is fear among some investors that Namvar’s asset sales may benefit some more than others.
Namvar earlier this year sold the 11-story Rox-San Medical Plaza in Beverly Hills for $37 million. According to real estate industry sources, Wilshire Bundy Plaza, the 12121 Wilshire Blvd. property that houses Namco and housed the headquarters of the bank company Namvar owned until it was closed by regulators in November, is currently in escrow. Details of the sale are unclear, but an entity that Namvar controls, Wilbun 7 LLC, owns the office building.
According to a real estate industry source with knowledge of the transaction, the buyer of Wilshire Bundy Plaza is a group of Namvar investors. One of the buyers in the group is Jade Enterprises LLC, which also bought the Rox-San building.
Indeed, Youssefyeh said that his clients’ patience is wearing thin.
“It has come to my attention that certain creditors of Namco are being paid before people who need the money for their personal day-to-day survival,” said Youssefyeh, of the ADY Law Group in Los Angeles. “This is not morally right and it should be stopped. At this point in time, the people who need the money most should be the ones who get paid first.”
While Youssefyeh’s clients are holding off on suing, others are moving forward with their lawsuits. Seong Kim, a Steptoe & Johnson LLP attorney representing investor Ruben Melamed, who is seeking more than $2 million plus interest that he claims he is owed from a $3 million investment with Namvar, is moving forward with the case.
“There are a lot more people running out of patience,” said Kim, who was unable to depose Namvar on Dec. 15; the businessman said beforehand he wouldn’t appear.
But solidifying the four-person committee that will oversee the special purpose entity may help move the process forward.
A Dec. 4 letter to investors from the committee overseeing the special purpose entity is signed by four individuals Nejat Sarshar, Solomon Aghai, Jack Rochel and Sam Kermanian. It is unclear if the committee members are Namco investors or representatives of investors. They couldn’t be reached for comment.
The letter outlined some preliminary details about a plan that would involve larger investors taking “equity positions in lieu of their debt” and servicing debt on some assets to avoid foreclosure. The letter also said that there are about 220 investors who are “owed smaller amounts of money” totaling about $16 million to $17 million. Many of these people’s livelihoods are “dependent on these funds,” the letter said.
Indeed, Assil said that some investors are so economically troubled they don’t have the “means to continue living on a daily basis, you know, food and clothes.
“I am trying to do whatever it is I can to protect many of these people. I hear so many stories I am beginning to forget my own troubles,” said Assil.
Least-worst alternative
Although a bankruptcy proceeding is costly and time consuming, it often is seen as a least-worst alternative in complex situations.
“It becomes almost necessary because you can’t get all the creditors to agree as to how all the things will be divided up so the thing to do is to bring in the referee, which is basically the court,” said Lew Feldman, a Goodwin Procter LLP attorney who isn’t involved in the Namvar proceedings.
However, a Dec. 16 letter from the committee said that it believed an “orderly liquidation” of the assets of Namco and Namvar in lieu of a bankruptcy proceeding “is in the best interests of the (investors).
“A bankruptcy would create substantial delays and significant additional expenses,” the letter said.
The goal of the committee is to get a clear understanding of the assets of Namvar and Namco. That could be an arduous process because Namvar and his company have put together a vast portfolio over decades and they hold properties secretly through multiple limited liability corporations. Sources interviewed by the Business Journal declined to put a dollar amount on the assets of Namvar and Namco. But the information that’s surfaced about Namvar’s known investments hasn’t been good.
Namwest LLC, a Phoenix-based landowner and developer that Namco co-owns, has filed for bankruptcy as a result of the real estate crash; L.A.-based Security Pacific Bank, in whose predecessor Namvar bought a majority share in 1997, was declared insolvent and seized by state regulators Nov. 7 because of bad real estate loans; and Park Fifth, a 76-story condo tower planned for downtown Los Angeles, has stalled as Namvar has been unable to unload his interest in the development.
In the Dec. 4 letter, the committee said that based on initial discussions, it appears that the current value of the assets of Namco and Namvar “fall well short of the liabilities.”
Of course, any involuntary bankruptcy would likely derail the work of the committee. Michael Abrams, a real estate and bankruptcy attorney with De Castro West Chodorow Glickfeld & Nass Inc. who was hired earlier this month by the committee, said he believes the committee and the creation of a special purpose entity would be able to pay back investors more efficiently than a bankruptcy proceeding.
For his part, Youssefyeh said his decision to speak out about Namvar in the Business Journal two weeks ago has been met with a variety of reactions in the Persian Jewish community. The local community, which is largely based in and around Beverly Hills, is known to be very tight-knit, with an emphasis on family relationships and trust.
On Dec. 9, the day after the Business Journal’s publication date of the original article about Namvar’s problems, Youssefyeh was approached in his Century City offices by “a member of the community” who asked that Youssefyeh “speak to Mr. Namvar and air out grievances with him directly, instead of through the media.”
Youssefyeh met with Namvar the next day and has had conversations with him since.
“It was a very cordial meeting, a very professional meeting,” Youssefyeh said. “I aired my grievances with the way the process was being handled.
“I have been both criticized and lauded for what I did,” Youssefyeh said. “But at the end of the day my goal is to maximize returns to my clients and all the creditors in a timely and efficient manner.”
