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Iranian Jewish banker Namvar arraigned on federal fraud charges

by Karmel Melamed

September 27, 2010 | 4:08 pm

Ezri Namvar in 2006, photo by Karmel Melamed, all rights reserved.

Earlier today Brentwood Iranian Jewish banker and real estate investor Ezri Namvar was arrainged in U.S. District court in downtown L.A. after being indicted last week by a federal grand jury on five counts of fraud in failing to return $23 million in funds client’s of his Namco Financial Exchange Corp. (NFE) had given him for safekeeping before it was reinvested in real estate.

The indictment filed in U.S. District Court also includes five counts of fraud brought against NFE’s controller 62-year-old Hamid Tabatabai, alleging that both he and Namvar carried out a scheme from March 2008 to August 2008 that defraud five of NFE’s clients of their 1031 funds. According to U.S. federal tax codes, 1031 funds are profits real estate investors have earned on the sale of property where capital gains taxes will be deferred during a set time frame provided the funds are given to a qualified third party and then used to purchase a replacement property.

Namvar’s indictment alleges that he only returned $4 million of the $27 million NFE’s client’s had given his company in their 1031 funds for safekeeping and these funds were used by Namvar without their authorization for various purposes unrelated to the clients. The indictment also alleges 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. or Namvar’s own personal creditors.

Tabatabai surrendered to the F.B.I. and was arraigned on September 23rd at downtown L.A.’s U.S. District Court. Namvar surrendered to the F.B.I. before his arraignment today in the same court. Both men face a maximum of 20 years in federal prison for each count of fraud if convicted.

The U.S. Attorney’s office in downtown L.A. and Namvar’s attorney did not return calls for comment on the case. Yet A. David Youssefyeh, a Century City Iranian Jewish attorney representing some of Namvar’s Iranian Jewish creditors in other civil cases against Namvar, said his clients and other creditors who lost their life savings in Namvar’s other alleged ponzi schemes have expressed satisfaction with the charges brought against Namvar.

“For two years Mr. Namvar has been lounging around in his mansion in Brentwood while they (creditors) have had to pickup what is left of their finances to try to squeeze out a living—for quite a few that has meant being evicted from their home,” said Youssefyeh. “Although the indictment can’t put their lives back together, at least his victims know that Mr. Namvar will not be able to walk away without any consequence to him either”.

Namvar was forced into involuntary bankruptcy in December 2008 and accused by investors of creating a Ponzi scheme that lost as much as $500 million that had been loaned to him — most of it by Los Angeles’ Iranian Jews. The petition followed 17 lawsuits 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 whom are Iranian Jews.

The creditors include investors in Namco Capital Group, those who lent money to Namco and received a personal guarantee from Namvar, lenders to Namco who received a lien on property owed by Namvar or one his entities and those who gave profits from their real estate transactions (1031 funds) to Namvar, according to the lawsuits.

A report released earlier this year by the trustees in Namvar’s bankruptcy case showed 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 small savings with Namvar and his company, hoping to receive higher interest rates than what most banks were offering at the time. Their investments ranged anywhere from $10,000 to $300,000, and most said they had lost all hope of regaining their funds.

Separately, another investment scandal hit the Iranian Jewish community in early January of this year, when 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. The 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). The complaint against Farahi alleges that investors’ money was transferred into personal accounts controlled by Farahi and his wife to build their mansion in Beverly Hills, as well as into risky stock market options that resulted in more than $18 million in losses for investors.

A third alleged Ponzi scheme that rocked the local Iranian Jewish community came to light this year when lawsuits were brought against Joseph Boodaie, also a Beverly Hills Iranian Jewish businessman who lent money and offered community members higher rates of return on their savings than most banks. Last year, nearly a dozen different lawsuits were filed by various L.A.-area Iranian Jews and other businesses alleging that Boodaie had defrauded them of a combined total of close to $100 million, according to one local attorney.

Amidst mounting pressure from local Iranian Jews and the board of the Nessah Synagogue in Beverly Hills, Namvar quit his position of the synagogue’s board this past April. Nessah’s board and the West Hollywood based Iranian American Jewish Federation did not return calls for comment on Namvar’s indictment.

My past stories regarding Namvar can be found here and here.

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