During a sometimes emotional hearing in November 2009 at the U.S. Bankruptcy Court in Sacramento, a beleaguered Abolghassem “Abe” Alizadeh defended himself as an honest businessman victimized by a bad economy and an inability to secure favorable financing for his companies.
He recited his up-by-the-bootstraps history, coming from Iran to the United States as a teenager with “no money, no parents” and little knowledge of the English language. Starting in college at Chico State as a Jack in the Box dishwasher, he worked his way up to own his own franchise in 1986 and never looked back.
Twenty years later, he had forged a billion-dollar empire of Northern California real estate developments and restaurants with 4,000 employees. Alizadeh’s holdings included two upscale restaurants in Roseville, as well as Sonic Drive-Ins, TGI Fridays and Jack in the Box outlets.
But it had begun to crumble in 2008, when he sought bankruptcy protection for his flagship commercial property development partnership, Kobra Properties. In 2009, he sought the same protection for Kobra Associates Inc., which included a maze of companies that owned a string of 70 Jack in the Boxes from Fresno to Redding. All of these entities were run out of two suites of offices in Roseville.
“You were not focused, Abe, from what we’re seeing,” Beverly McFarland, Chapter 11 trustee for the bankrupt restaurants, told him at the November 2009 hearing.
By then, Alizadeh knew he was also facing a federal investigation, in which IRS and FBI agents were inquiring into his dealings with institutional lenders.
Last week, the years-long investigation of Alizadeh culminated with a federal grand jury indictment accusing him of cheating Bank of the West, Central Pacific Bank and the Bank of Sacramento out of at least $20 million in six loan transactions.
Alizadeh, 56, of Granite Bay, and Mary Sue Weaver, 62, a senior commercial escrow officer who formerly lived in Roseville, are charged in the 21-count indictment with concocting a complex scheme to falsely inflate the price that Alizadeh paid for six properties in order to secure larger loan amounts between June 2004 and April 2008. According to the indictment, Alizadeh submitted paperwork to the three federally insured banks showing he paid a total of $39.6 million for the properties, when the actual purchase prices totaled $22.1 million. The difference, which he is accused of pocketing, was about $17.4 million.
Alizadeh and Weaver were arraigned Friday in Sacramento federal court, pleaded not guilty to all counts, and were released on bonds of $3.5 million and $2 million, respectively, secured by property owned by them and members of their families. They are represented by two of Sacramento’s most prominent criminal defense lawyers: Alizadeh attorney Malcolm Segal and Weaver attorney William Portanova.
Four of the loans covered by the indictment were from Central Pacific Bank, the primary subsidiary of Central Pacific Financial Corp., a publicly traded, Hawaii-based company. The commercial properties involved were:
▪ A parcel of land in the Arena Corporate Center, an office project south of Sleep Train Arena on East Commerce Way in North Natomas.
▪ A parcel in Alta Sierra Estates, off Highway 49 between Auburn and Grass Valley in Nevada County.
▪ A piece of property at the northeast corner of Blue Oaks Boulevard and Woodcreek Oaks Boulevard in Roseville.
▪ Two parcels in The Promenade at Sacramento Gateway, a regional mall near Truxel Road and Gateway Park Boulevard in North Natomas.
A fifth loan, from San Francisco-based Bank of the West, involved Loomis Marketplace, 65 acres along Interstate 80 at Horseshoe Bar Road in Placer County.
The sixth loan came from the Bank of Sacramento for a parcel in Missouri Flat Village, a shopping center in Placerville.
In each transaction, according to the indictment, a copy of the fraudulent purchase contract submitted to the bank was also furnished to the appraiser “in order to influence the appraisal of the property to support the inflated purported sale price.”
The banks loaned Kobra Properties between 60 and 70 percent of the property’s inflated value, as calculated based on the false purchase price and appraisals. Prior to closing, the banks wired the loan proceeds to an escrow account controlled by Placer Title Co., where Weaver was employed as an escrow officer.
He wrote checks to Placer Title in the amount of the purported down payment on the property but, in reality, Kobra “was not making a down payment, or was making a smaller down payment than claimed,” the indictment says.
“Weaver delayed the deposit of some or all of Kobra Properties’ down payment checks until after escrow closed, (then) disbursed funds from Placer Title’s escrow accounts to Kobra” which, in turn, “used those funds to cover its purported down payment check or checks, which Weaver would then deposit.”
In this way, the indictment alleges, “Kobra Properties made it appear as though it was making a substantial down payment when, in fact, it was using escrow funds and not making a down payment in the amount claimed.”
In some cases, to ensure that Kobra could cover its checks at the close of escrow, the indictment says that Weaver temporarily moved money out of accounts belonging to other Placer Title customers and into a Kobra account. It further states that Weaver overrode the Placer Title software used to create settlement statements, enabling her to create documents that concealed from the seller the inflated amounts in the transactions.
In order to delay repayment of the loans, maintain control of the property and evade detection of the phony purchase price, the indictment states that Alizadeh periodically obtained a loan extension from the bank, which Weaver processed, making sure the extensions were recorded at the county recorder’s office.
In Thursday’s news conference, U.S. Attorney Benjamin Wagner said there was some evidence of kickbacks to Weaver, but he did not elaborate. He said the investigation is ongoing.
In a prepared statement last week, Placer Title Chief Executive Officer Marsha Emmett emphasized that “at no time were (customers’) trust funds in jeopardy. ... The client trust account that Placer manages for all of its customers’ transactions was and is protected by our insurance, fidelity bonds, significant company cash reserves and our underwriters.”
Weaver, who was with the company 17 years, resigned Dec. 30, 2008, after being placed on administrative leave 10 days earlier, according to Placer Title’s general counsel Pat Laffin.
About that same time, Weaver retained Portanova. Less than a month later, Alizadeh retained Segal as federal agents amped up their investigation.
The defendants are due back in federal court Tuesday, when a date is expected to be set for a status conference with U.S. District Judge Kimberly J. Mueller.
Call The Bee’s Denny Walsh, (916) 321-1189.