A federal judge sentenced the head of a defunct Southern California real estate investment firm to 14 years in prison for running a Ponzi scheme that lost as much as $169 million for hundreds of investors, the U.S. attorney's office said.
U.S. District Judge Cormac J. Carney on Monday also ordered Michael J. Stewart, a 68-year-old San Clemente resident, to pay 120 victims $9.2 million in restitution.
Stewart and his partner John Packard founded Pacific Property Assets in 1999 and bought, renovated and sold apartments in Southern California and Arizona.
As property values soared in the early 2000s, the firm -- which had offices in Irvine and Long Beach -- refinanced mortgages and sold properties, using the proceeds to pay investors and business expenses, the U.S. attorney's office said. But by late 2007, the real estate market was faltering and the company was unable to refinance properties or sell buildings at a profit.
Prosecutors alleged Stewart misrepresented the company’s financial condition to new investors and used their money to pay off previous investors, lenders and Stewart and Packard's salaries.
The company filed for bankruptcy protection in June 2009.
“While all investments carry some risks, victims who were lured into this scheme in 2008 and 2009 faced a guaranteed loss of their funds,” U.S Atty. Eileen M. Decker said in a statement. “Investors are entitled to know how their money is being spent and the true financial state of a company, but Mr. Stewart did everything in his power to conceal the truth.”
A jury convicted Stewart last year of 11 counts of mail fraud. Packard has pleaded guilty to one count of mail fraud and is scheduled to be sentenced in late March.