Bankrupt businessman Ezri Namvar is being accused of running a Ponzi scheme and stealing money to prop up his failing ventures, according to lawsuits filed in state court and U.S. Bankruptcy Court.
Namvar and his Namco Financial Exchange Corp. are facing at least five Los Angeles Superior Court lawsuits and one bankruptcy lawsuit that allege the Brentwood resident stole money that was meant to be held in what essentially are real estate escrow accounts. Several of Namvar's relatives, including his brothers and father, are named as defendants in three of the suits.
In his first public comments about his business failures and the lawsuits he faces, Namvar told the Business Journal: "There are two sides to every story. One day the truth will come out."
He declined further comment, as did his attorney.
The initial fraud lawsuit was filed in November in state court, but since late January at least five similar suits have been filed by three additional plaintiffs.
The accusations in the fraud complaints are more serious than the roughly two dozen other state court lawsuits filed by creditors of Namvar and his main investment company, Namco Capital Group Inc. Those suits generally claim Namvar and his company owe the creditors money.
Namvar, an immigrant from Iran, amassed a real estate empire that he figured was valued at $2.43 billion in July, although the stated value has declined since then.
Namvar financed his investments in an unusual way. He personally gathered money from members of the Persian Jewish community in and around Beverly Hills, some of whom handed over their life savings and got no hard collateral in return. They and other creditors are owed more than a half-billion dollars, according to bankruptcy court filings.
Namvar stopped paying them apparently last year as the real estate markets skidded. Several creditors threw him and Namco Capital into bankruptcy court in December in an attempt to get orderly repayment.
However, the Ponzi lawsuits go beyond complaints that money wasn't repaid because of business setbacks. They claim money was stolen.
"Based on the allegations in the complaint, if they were true, this could rise to the level of criminal activity," said Andrew Kirsh, a Goodwin Procter attorney who reviewed one of the lawsuits at the Business Journal's request and who is not involved in the cases.
Namco Financial is a so-called qualified intermediary that facilitates the tax deferred exchange of properties in a type of real estate transaction called a "1031 exchange." This transaction allows a property seller to defer paying taxes on gains from a sale by reinvesting the proceeds in another property of equal or greater value within 180 days.
Real estate investors are required to park the proceeds from their initial sales in intermediaries such as Namco Financial until replacement properties can be purchased. These intermediaries typically place money in nationally insured banks or savings institutions.
Generally, the suits allege that money was taken from the 1031 exchange accounts and used to pay off the debts of Namvar and his various entities.
"These cases are significantly different because it is straight theft. There is no excuse. There is no cover that the economy was bad," said David Gabor, a Russ August & Kabat attorney representing Sunnylane Partners LLC, which has filed three related lawsuits against Namvar, Namco Financial and other defendants for allegedly stealing about $1.97 million deposited with Namco Financial.
"What they did, when times got tough they broke into the piggy bank and stole the money and used it elsewhere or just took it," said Gabor.
Christopher Reeder, an attorney with Reeder Lu & Green who represents three of Namvar's brothers and his father, Eilel, said that his clients "don't have any knowledge of any Ponzi scheme or thefts or things of that nature."
He said that the three brothers Sean, Ramin and Tony operate separate businesses from Ezri Namvar and the brothers are creditors of Namco, too.
When asked about the allegations of a Ponzi scheme, Reeder said: "My clients as creditors are interested in the answer to that question as well. We are not going to start making that allegation. We are going to let the process make its way through."
The three Sunnylane lawsuits allege that Security Pacific Bank, a defunct Los Angeles bank that Namvar owned and oversaw as chairman, was the recipient of stolen 1031 exchange money. The bank is named as a defendant in one Sunnylane suit and in two lawsuits filed by other plaintiffs.
The Sunnylane suits also allege that in the second half of 2008 Namvar and his brothers sold real estate assets and put the proceeds into the failing bank in an attempt to save it. The bank, which was hit by rising defaults on real estate loans, was closed by regulators Nov. 7 and acquired by the Pacific Western Bank of San Diego.
Security Pacific, formerly headquartered at 12121 Wilshire Blvd. in a building that houses Namco Capital, was 53 percent owned by Namvar while his brothers Sean and Mousa, and the Namvar Family Trust had a combined 34 percent share.
The Sunnylane suits allege that Namvar put his family members to work at the bank as a "rubber-stamp" for his "illicit activities."
David Barr, a Federal Deposit Insurance Corp. spokesman, said that a standard review of Security Pacific was undertaken, but he couldn't confirm if that process was complete or whether any fraud was discovered.
The Ponzi suits, in total, claim at least $24.4 million was stolen.
The first such suit, filed Nov. 14 by a trustee on behalf of the Leo and Irene Karsin Trust, alleges that Namco Financial stole more than $17.7 million from the trust. The case is the furthest along and represents the greatest amount of money.
Namvar cited his Fifth Amendment right not to incriminate himself when he was deposed in November by attorneys representing the trust, according to sources with knowledge of the case.
The next step in the case will be a case management conference May 27 when a trial date could be set.
Two other suits, filed by Drivers Way Investment LLC and La Crescenta Foothill Investment LLC in state court, include similar allegations of fraud and theft.
Meanwhile, responses to the Sunnylane lawsuits are due around the end of the month.
"We are pursuing leads," Gabor said. "I think everybody is trying to find the money."
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