California Real Estate Fraud Report

An escrow officer has been convicted of two counts each of felony grand theft and felony identity theft by an Alameda County jury.

Former Financial Title escrow officer Wonda Kidd, 58, was convicted for her vital role for aiding and abetting a “massive” Vallejo-based real estate fraud scheme, according to prosecutors. She faces up to five years in  state prison when she is sentenced. Co-conspirator and accused mastermind Karim Akil, 42, already pleaded guilty to grand theft charges in 2008 and is currently serving a three-year sentence in state prison.

Read the Full Article in the Times Herald.

Another story from the Lifestyles of the Rich and Shameless:

Bankrupt Brentwood businessman Ezri Namvar is facing five L.A. Superior Court lawsuits and one bankruptcy lawsuit accusing him of running a Ponzi scheme and stealing money from escrow accounts to keep his various businesses afloat. Several of the suits name several of Namvar’s relatives as defendants as well.

Namvar’s primary firm, Namco Financial, operated Namco Financial as a qualified intermediary, meaning that it facilitated the tax deferred exchange of properties in 1031 exchanges.

Namvar made his fortune in real estate investments by borrowing money from fellow Persian Jews in Beverly Hills, many of whom trusted Namvar and turned over their life savings, without receiving any collateral in return. Those monies are now most likely entirely gone.

Read the Full Article in the Los Angeles Business Journal.

According to a civil lawsuit filed on February 9, commercial titan Marcus & Millichap, its own agents, two of their associates and several subsidiaries of Marcus & Millichap and the associates perpetrated a massive real estate fraud scam against more than a dozen victims beginning in 2004 and continuing until 2008, when the scheme collapsed. Collectively, they are accused of causing losses that exceed $50 million involving 22 properties.

The Marcus & Millichap defendants are the Marcus & Millichap Company; Marcus & Millichap Real Estate Investment Services, Inc.; Marcus & Millichap Real Estate Investment Brokerage Company; Sovereign Investment Company; Sovereign Scranton, LLC; Sovereign CC, LLC; and Sovereign JF, LLC. Their defendant agents are Glen Kunofksy, Marcus Muirhead, Alexander Mickle, Sean Perkin, Donald Emas, Andrew Lesher, Stewart Weston, Brice Head, Daizy Gomez and Bret King.

The associate-defendants are Paul A. Morabito and Jack Waelti. Their “alter ego” shell companies are too numerous to list, but include Eureka Petroleum Inc.; Tibarom LLC; Tibarom NY LLC; Tibarom PA LLC (Morbito’s firms) and QSR Group LLC; QSR Group One LLC; and QSR Group II LLC, aka QSR Group Two LLC.

In a nutshell, attorneys for the victims-plaintiffs claim that the various defendants set up a sophisticated “real estate scam” that began with contacting the owners of Jiffy Lube and Church’s Chicken franchises around the country and offering to purchase both the franchises and the properties. The sold properties were put in the name of shell companies controlled by Morabito or Waelti, which were then “flipped” into Marcus & Millichap subsidiaries such as Sovereign Scranton. Dummy sale/leaseback agreements were then written that inflated both the value of the properties at sale, as well as the leasebacks.

The properties were then listed by Marcus & Millichap agents and marketed to 1031 investors (note: in a 1031 exchange, previously called a Starker exchange, investors may defer capital gains taxes by purchasing new investment property within 180 days of selling the previous property). Critical to the lawsuit was that the complex and ongoing relationships between the various defendants was not disclosed to the victims; in fact, the victims were repeatedly told by their own Marcus & Millichap agents that the corresponding Marcus & Millichap agents were experts in the lease agreements and that the investments were safe.

Attorneys for the plaintiffs are accusing the defendants of violating the Racketeer Influenced and Corrupt Organizations Act (“RICO”), negligent misrepresentation, fraudulent concealment, unjust enrichment and imposition of a constructive trust, money had and received, and violation of two sections of California’s Business and Professions Code.

PGP Valuation, Inc., a nationwide appraisal firm specializing in commercial and industrial properties, was also named in the lawsuit. In a future article, readers will learn the critical role appraisals play in real estate fraud.

Note: this article is also published on Examiner.com

A San Jose-based company that specialized in assisting real estate investors defer paying capital gains taxes by utilizing 1031 exchanges is under investigation and its officers under a cloud of scrutiny by the Santa Clara County District Attorney’s Office.

The offices of Vesta Strategies and the homes of Chicago businessmen John Terzakis and Robert Estupinian were searched and both are no accusing each other of embezzling $4.5 million from the company and its clients, who are unlikely to recover any of their money.

Read the Full Article in the San Jose Mercury News.