December 13, 2011
Iranian Jewish Businessman Farahi indicted for ponzi scheme
Los Angeles area Iranian Jewish radio talk show host and financial investment manager, John Farahi last week was charged in U.S. Federal District Court in downtown Los Angeles with allegedly defrauding more than 100 local Iranian American investors and various financial institutions of nearly $20 million through an elaborate Ponzi scheme he carried out for nearly five years.
The 41-count indictment stated that 54-year-old Farahi misled investors by telling them their funds were being invested by his Beverly Hills firm, NewPoint Financial Services Inc., 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). Yet the indictment alleges that Farahi did not make these investments for his clients but instead used the funds to make Ponzi payments to his firm’s earlier clients, traded in high-risk future options trading and used the funds for his own personal use and to support his family’s lavish lifestyle.
“Starting in 2008 Farahi allegedly failed to tell NewPoint Financial Services investors that he had lost at least $15 million through his undisclosed options trading— even as he continued to solicit investors for NewPoint Financial Services,” indicated a recently released U.S. Department of Justice statement about the case.
In addition, the indictment states that since 2003, Farahi used his radio program, “The Economy Today,” featured on the Studio City-based Farsi-language Radio Iran KIRN 670 AM, to target members of L.A.’s Iranian American community— many of whom were Iranian Jews, recommending they make appointments at his firm. According to the indictment, Farahi also allegedly lied to major banks about his financial condition in order to drawn funds from lines credit he had with the banks.
In April 2009, following the U.S. Securities and Exchange Commission (SEC) investigation into Farahi and his firm, the indictment states that Farahi allegedly conspired with his Century City attorney, David Tamman, to cover up his fraud scheme from the SEC. As a result Tamman was also recently indicted for his alleged involvement with the cover up of Farahi’s supposed Ponzi scheme.
According to U.S. Federal statutes, if convicted on all 41 criminal counts, Farahi could face a maximum sentence of more than 700 years in federal prison and Tamman could face a maximum sentence of 190 years in federal prison.
Farahi’s indictment has only added to the local Iranian Jewish community’s embarrassment as it comes on the heals of the recent conviction of Ezri Namvar, another local Iranian Jewish investment banker and real estate developer. Namvar was sentenced in October to seven years in federal prison for stealing about $20 million from four clients who had given money to his company to facilitate1031 exchanges— transactions in which property sellers defer paying taxes by parking proceeds with an intermediary until they find another property to buy.
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. While that case is still ongoing, a substantial number of local Iranian Jewish victims of Namvar’s alleged scheme have been financially devastated.
A. David Youssefyeh, a local Iranian Jewish attorney representing nearly a dozen former Namvar investors, said Farahi’s indictment has only further shaken the trust among the tight-knit local Iranian Jewish community who once closed business deals with handshakes alone.
“Farahi’s indictment is another blow to our community, but hopefully out of all of this we will rise with even higher ethical standards in our business dealings, said Youssefyeh. “Although 99.9 percent of our community has had no issues in their business dealings, hopefully Mr. Namvar’s conviction and Mr. Farahi’s indictment will be warning to those who may be tempted to take the easy road in the future”.
In January 2010 the SEC filed a lawsuit against Farahi, his company, his wife, Gissou Rastegar Farahi, and the firm’s controller, Elaheh Amouei for allegedly misleading and defrauding individuals working with his financial investment firm. While the SEC suit has been placed on hold pending the current criminal charges against Farahi, the suit alleged that Farahi’s investors’ money was transferred into personal accounts controlled by Farahi and his wife to build their mansion in Beverly Hills.
Both Farahi and his wife moved in high-end social circles within the local Iranian Jewish community and were involved in organizing fundraising events at the West Hollywood-based Temple Beth El, which is owned and operated by the Iranian American Jewish Federation (IAJF). Farahi’s wife, a former IAJF board member, also helped organize high-profile fundraising events in the community for Hilary Clinton’s 2008 presidential bid.
The Justice Department statement indicated that after voluntarily surrendering to authorities and being arraigned on December 9th, Farahi was taken into custody. A spokesperson for the Justice Department indicated that bail was denied for Farahi who still remains in custody.