Civil Settlement Reached In Real Estate Fraud
WASHINGTON (AP) _ Federal securities regulators said Tuesday they reached a civil settlement in a widespread fraud involving the sale of $238 million worth of real estate mortgages.
The Securities and Exchange Commission, in a civil suit filed in U.S. District Court in San Diego, charged that Gary F. Naiman masterminded the fraudulent sale of real estate mortgages known as trust deeds by his now bankrupt company, Pioneer Mortgage Co.
About 2,500 investors, including elderly people in California, Texas, Florida, and Arizona, put $238 million into the scheme, and so far have received about 10 cents on the dollar, according to local press reports.
Naiman, 56, agreed to settle civil charges without admitting or denying wrongdoing. He has pleaded guilty to related criminal charges and was sentenced to 6 1/2 years in prison, according to his attorney, Robert Rose of San Diego. Naiman contributed $20 million in insurance money, mortgages and partnership interest to the bankruptcy receiver, Rose said.
The SEC’s complaint, filed Thursday but announced Tuesday in Washington, is the last major piece of litigation concerning Naiman in the case, Rose said.
Between 1986 and 1991, Pioneer sold the mortgage securities to investors, pitching them as ``a safe source of monthly retirement income, and a good way to diversify and minimize risk,″ the SEC’s complaint said.
It charged Naiman ``misrepresented and omitted″ key facts about Pioneer’s considerable cash-flow problems and that he attempted to hide rising loan defaults by using Pioneer’s funds. From July 1989 through September 1990 about 90 percent of the mortgage loans were in default, the SEC charged.
The SEC said a federal judge ordered Naiman to repay $164 million plus interest to the investors, but the payment was waived because Naiman lacked the necessary funds, his attorney said.