1031 Exchange Facilitator Convicted In Escrow Funds Swindle; 4 Victims Left Without $21M In Proceeds From Real Estate Sales Earmarked For Reinvestment

From the Office of the U.S. Attorney (Los Angeles, California):

• Ezri Namvar, a prominent Los Angeles businessman and real estate developer, was found guilty [] of four wire fraud charges 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. [...] The jury convicted a second defendant on the four wire fraud charges. Hamid Tabatabai, 63 of Agoura Hills, was Namvar’s right-hand man at the qualified intermediary company.

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• 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).

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• 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.(1)

For the U.S. Attorney press release, see Prominent L.A. Businessman Convicted On Federal Fraud Charges For Stealing $21 Million Entrusted To His Firm.

Go here for other posts on Section 1031 exchange escrow ripoffs.

(1) In addition to losing their money, the victims also face a stiff Federal income tax bill (a bill they were looking to defer by reinvesting their loot within a certain time frame, in accordance with Section 1031 of the Internal Revenue Code) on the profits from the real estate investment sales that generated the proceeds, with the prospect of having insufficient cash to pay it.