Developer Sentenced for Stealing 1031 Exchange Funds
Ezri Namvar, 59, Brentwood, California, a prominent Los Angeles businessman and real estate developer, was sentenced to seven years in federal prison for stealing approximately $21 million from four clients who allowed his "qualified intermediary" company to hold their money in safekeeping before it was reinvested in real estate.
Namvar was sentenced this morning by United States District Judge Percy Anderson, who also ordered Namvar to pay $20,930,648 in restitution.
In May 2011, a federal jury found Namvar guilty of four wire fraud charges.
A second defendant also found guilty of the four wire fraud charges – Hamid Tabatabai, 63, Agoura Hills, California, who was Namvar's right-hand man at the qualified intermediary company – was also sentenced and received a 21-month prison sentence.
The evidence presented at trial showed that four victims entered into agreements to have approximately $25 million deposited with Namvar's company, Namco Financial Exchange Corp. (NFE), which held itself out as a qualified intermediary for real estate transactions commonly called "like-kind exchanges," "tax-free exchanges" or "1031 exchanges." Under exchange agreements with NFE, the money belonging to the victims was to be held in safekeeping so the money would be available upon demand to effectuate 1031 exchanges.
However, instead of holding the money as promised, Namvar, with the assistance of Tabatabai, used the victims' money for a variety of unauthorized and undisclosed purposes, including paying off creditors and investors of Namvar's investment company, Namco Capital Group, Inc. (NCG).
Namvar controlled both Namco companies. Tabatabai was the controller and a vice president of NFE, and he held similar positions of authority at NCG.
The four victims entered into exchange agreements with NFE in 2008, and their money, per the agreements, was wired to NFE over a six-month period.
NFE was forced into bankruptcy proceedings in April 2009.
During the course of the fraudulent scheme, Namvar and Tabatabai fraudulently transferred victims' money from NFE to, among other places, an NCG bank account, where the money was used to pay the expenses and liabilities of NCG.
During the course of the fraudulent scheme, the four victims provided NFE with approximately $25 million in 1031 exchange proceeds, of which only approximately $4 million was returned to or used on behalf of the victims.
"Namvar was the leader of a massive scheme to defraud, one that took in approximately $25 million under false pretenses from the unwitting victims and caused real and severe harm," prosecutors wrote in a sentencing memorandum.
"For example, as a result of this offense, one of the victims' hard-earned retirement and ability to take care of their handicapped daughter has been ruined."
At the sentencing hearing, the mother of the handicapped daughter asked Judge Anderson for a severe sentence and explained to the court that, as a result of the financial loss, the family can no longer afford to pay for her daughter's physical therapy, yet Namvar's children continue to attend private school.
This case is the result of an investigation by the Federal Bureau of Investigation.
Courtesy Mortgage Fraud Blog