May 24, 2011
Financier Namvar’s conviction reveals community wounds
Once a pillar of the local Iranian Jewish community, businessman and philanthropist Ezri Namvar was a trusted friend to whom many in the community loaned money freely and without fear. Namvar’s reputation, which has been tarnished during the last several years, was dealt another blow on May 19, when Namvar, 59, was convicted on four counts of wire fraud in a downtown Los Angeles federal court.
After only three hours of deliberation, the jury found that Namvar had failed to return $21 million entrusted for safekeeping to his company, Namco Financial Exchange Corp. (NFE), and instead invested the money in risky real estate deals. NFE’s controller, Hamid Tabatabai, 62, was also convicted on four counts of fraud for a scheme with Namvar from March 2008 to August 2008 to defraud five of NFE’s clients of 1031 funds. According to the federal tax code, 1031 funds are profits realized from the sale of a business or investment property that are not immediately liable for capital gains taxes when the money is used to purchase a similar replacement property.
Namvar was indicted in September 2010 on charges that he returned only $4 million of the $27 million in 1031 funds given to his company for safekeeping. The indictment charged that the funds were used by Namvar without authorization for various purposes unrelated to the clients; it also indicated that Namvar, with the help of Tabatabai, used NFE’s clients’ funds to pay off creditors and investors of Namvar’s investment company, Namco Capital Group Inc., as well as Namvar’s personal creditors.
Namvar’s criminal conviction is the latest in a slew of problems he has encountered. In late 2008, two dozen creditors — most of them from Southern California’s Iranian Jewish community — filed an involuntary bankruptcy petition against Namvar and his Namco Capital Group company, accusing him of losing as much as $500 million loaned to him in an alleged Ponzi scheme. That case is still ongoing.
Several Iranian Jews who lost money through Namvar’s actions expressed satisfaction at the jury verdict last week, particularly because Namvar has denied wronging anyone in his own community.
“Many of us victims feel that justice has been served somewhat today with this conviction,” said Abraham Assil, an Iranian Jewish businessman and Namvar creditor. “But we still believe more criminal charges need to be brought against the other Namvar family members involved for their role as accomplices to the criminal actions of Ezri Namvar.”
According to a statement released last week by the U.S. Department of Justice, both Namvar and Tabatabai are facing sentences of up to 80 years in federal prison.
David Peyman, a Los Angeles-based attorney specializing in white-collar criminal defense, said Namvar will more likely face concurrent sentences of about 78 months for each count he was convicted on (a total of about seven years) — because federal sentencing guidelines are driven by the amount lost in each case. At the same time, Peyman said, the judge in the case will have some discretion.
“One of the factors judges always look at in coming to a sentencing decision is deterrence — will their sentence in one case send a message to others,” said Peyman, who has successfully served as a defense attorney in federal criminal securities cases. “That can never be the dominant factor, but it’s always in the mix.”
U.S. District Court Judge Percy Anderson ordered Namvar released on bail and subject to home incarceration with electronic monitoring. Anderson has scheduled a June 1 hearing to determine whether Namvar will be sent back to jail prior to his sentencing, scheduled for Aug. 22.
The U.S. Attorney’s office in downtown Los Angeles and Namvar’s attorney did not return calls for comment on the case. A. David Youssefyeh, a Century City Iranian Jewish attorney representing some of Namvar’s Iranian Jewish creditors, said Namvar’s conviction has been a long time coming for many of his creditors.
“The fact that Ezri Namvar was convicted of fraud is a surprise to no one,” Youssefyeh said. “However, justice is not done yet. Justice will be done when Mr. Namvar is sentenced to prison for the rest of his life.”
In addition to Namvar’s involuntary bankruptcy nearly three years ago, 17 more lawsuits have since been filed against Namvar, Namco, entities owned by Namvar and other Namvar family members, alleging breach of contract and contractual fraud in a case that attorneys estimate involves 300 to 400 creditors — the majority of them Iranian Jews.
Youssefyeh said Namvar’s creditors have been particularly frustrated during the last nearly three years because they have had to endure tremendous financial hardships while Namvar has continued to enjoy a lavish lifestyle and made a concerted effort to hide his assets during the bankruptcy proceedings.
A report released in early 2010 by the trustees in Namvar’s bankruptcy case states that Namco owes more than $500 million to more than 170 secured and unsecured creditors. The report also states that Namco is owed more than $600 million from loans it made to 16 members of Namvar’s family, various limited liability corporations owned by Namvar and to more than 60 individuals and entities. In addition, the report indicates that Namvar gave himself a loan of more than $32 million, and he also gave $50 million to each of his four children.
Many of Namvar’s Iranian Jewish creditors are low- to middle-income couples, individuals or retired seniors who invested their savings with Namvar and his company, hoping to receive higher interest rates than what most banks were offering. Their investments ranged from $10,000 to $300,000, and most said they have lost all hope of regaining their funds.
The Namvar case has bitterly divided Southern California’s tight-knit Iranian Jewish community, with many of the Namvar creditors expressing frustration with the community’s social and religious leadership, whom they accuse of remaining largely silent about Namvar’s culpability.
“Early on, Rabbi David Shofet [of the Nessah Synagogue in Beverly Hills] indicated in a formal letter that if Namvar was proven in court to be a thief, then he and his family must give back the money that they took from people,” said Assil, one of the first creditors to initiate the involuntary bankruptcy proceedings against Namvar. “Today I’d like to see what the rabbi’s statement is to Namvar’s conviction.”
Calls to Nessah Synagogue requesting comment were not returned. Nor were calls made to the West Hollywood-based Iranian American Jewish Federation, an umbrella group for the community.
Under community pressure, in April 2010, Namvar voluntarily quit his post on Nessah’s board.
Some other Namvar victims have strongly defended Shofet and other community rabbis for their efforts to resolve the financial dispute through the beit din, or religious courts. Both Namvar and the creditors rejected this option.
“I can say with certainty, since I have attended many meetings on this matter, that our rabbis — particularly Rav David Shofet — were involved in helping with this case, even before the case was taken into bankruptcy, so as to resolve the matter without causing so much hardship,” said George Haroonian, a Namvar creditor and local Iranian Jewish community activist. “Now some in this community wrongly expect the rabbis to have executive power, which they don’t.”
Several older Iranian Jewish activists said cases involving financial disputes among Jews in Iran traditionally were settled by the community’s leadership, key businessmen and elders — outside the court system — gathering all parties involved and helping out those who had suffered the economic loss, a practice that no longer is feasible in the United States, at least in this instance.
Haroonian said Shofet and other local Iranian rabbis also have been wrongly accused of financial misdeeds through an ongoing smear e-mail campaign.
“Many wrongly thought that the rabbis were financially involved with Namvar, but this has been proven to be a false and vicious rumor — a letter released by the bankruptcy trustees has proven that there was no such involvement by the rabbis,” Haroonian said.
For his part in defending the rabbis and advocating for a more moderate community dialogue and approach regarding the Namvar case, Haroonian said he has also been targeted by the e-mail campaign, falsely accusing him of “collaborating with Namvar.”
“The fact is, my family and I have not gotten back a dime of our money, when a couple of individuals who support this lie [about my family], have gotten back some of their money from Namco,” Haroonian said.
Emotions continue to run high in the community. Representatives of a handful of local nonprofit Iranian Jewish organizations that offer relief to those in need said that over the last few years they have been overwhelmed by calls from Iranian Jews in need as a result of the fraud. With their budgets already hard-hit by the economic downturn, the organizations have been unable to help everyone.
Investment fraud scandals involving two other local Iranian Jews have added to the local community’s difficulties.
In January 2010, the U.S. Securities and Exchange Commission (SEC) filed a lawsuit against John Farahi, 52, a popular Iranian Jewish radio talk-show host, who also served as an investment adviser and stockbroker for local Iranian Jews. That suit alleges that Farahi and his Beverly Hills firm, NewPoint Financial Services Inc., defrauded Iranian American investors of millions of dollars and that Farahi; his company; his wife, Gissou Rastegar Farahi; and the firm’s controller, Elaheh Amouei; misled investors by telling them their funds were being invested in unsecured corporate bonds, FDIC-insured certificates of deposit, government bonds and corporate bonds issued by companies backed by funds from the Troubled Asset Relief Program (TARP).
Also over the last few years, nearly a dozen lawsuits have been filed by various L.A.-area Iranian Jews and other businesses alleging that Beverly Hills Iranian Jewish businessman Joseph Boodaie defrauded them of a combined total of close to $100 million, according to one local attorney. No criminal charges have been filed against Farahi or Boodaie.
Nevertheless, Namvar’s creditors said that Namvar’s criminal conviction would send a message to other Iranian Jewish businessmen seeking to potentially defraud investors. Still, the community will need many years to heal from the fallout from this crisis.