OC Register – The co-founder of a failed apartment investment firm plans to plead guilty to federal fraud charges next week in a case in which hundreds of small, mostly elderly investors lost almost $91 million, according to the U.S. Attorney’s Office.
U.S. District Judge Cormac Carney scheduled a hearing Nov. 6 to allow John J. Packard, 64, of Long Beach to change his plea on allegations that Irvine-based Pacific Property Assets was a Ponzi scheme.
In a letter emailed to victims Monday, the U.S. Attorney’s Office states that Packard plans “to enter a plea of guilty.” The prosecutor on the case declined to comment, saying that documents pertaining to the hearing “are under seal.”
Assistant U.S. Attorney Joshua Robbins also declined to say whether Packard is getting a plea deal in which he will become a witness against former Pacific Property Assets CEO Michael J. Stewart, 67, who reportedly had moved from Orange County to Phoenix.
Attorneys for the pair couldn’t be reached for comment.
A federal court indictment charged Packard and Stewart with 16 counts of mail, bank and bankruptcy fraud. The pair pleaded not guilty following their arrests in February.
Trial is set for April 14. If convicted of all charges, Stewart could get up to 320 years in prison.
Stewart and Packard created Pacific Property Assets, or PPA, in the late 1990s to solicit investments to buy, renovate and operate small apartment buildings in Long Beach, Riverside and Phoenix.
The firm collapsed in spring 2009, wiping out most of the money nearly 700 investors entrusted to it. Losses, including underwater mortgages on PPA buildings, reached an estimated $115 million, prosecutors maintain.
Investors expressed outrage that PPA solicited new investments for an “Opportunity Fund” promising to pay up to 30 percent in interest just months prior to the May 2009 default.
Stewart and Packard also began soliciting fresh investments for a new apartment venture following PPA’s bankruptcy, further enraging investors.
Attorneys for creditors argued in bankruptcy court filings that although PPA claimed to be profitable, the firm had been in the red since 2005. The pair was accused of using new investors’ cash to make generous interest payments to existing investors, until the cash ran out.
Meanwhile, they used company funds to buy an interest in a Newport Beach yacht and paid themselves up to $750,000 a year in salaries, plus millions of dollars in additional payments, prosecutors and creditors’ attorneys alleged.
Source: OC Register
