Operator of Defunct Real Estate Firm Pleads Guilty to Mail Fraud

The operator of a now-defunct real estate firm in Orange pleaded guilty Friday to six counts of mail fraud in connection with a wide-ranging real estate scam and faces a potential prison term of 30 years, according to U.S. Atty. Robert C. Bonner.

Daniel N. Bailey, who operated Sierra Realty and Investment Inc., caused more than 2,500 Orange County investors to lose large sums of money, Assistant U.S. Atty. Terree Allan Bowers said.

Bailey’s prosecution was the product of a special task force that has been investigating widespread real estate fraud in Orange County, Bowers added. Also represented on the task force are the Orange County district attorney’s office, the Orange Police Department and the FBI.

“This (prosecution) is a fairly significant development,” said Bowers, who handled the case along with Guy Armes, a deputy district attorney. “It’s a major step forward for this group investigation.”

Bailey and Wife Indicted

Earlier this month, Bailey and his wife, Sandra, were indicted for misleading investors about the value of real estate, the numbers of encumbrances against the properties and the true values of trust deeds, Bonner said.

Investigators determined that Sierra Realty, which has since filed for bankruptcy, carried on its misleading practices throughout Orange County from 1978 through 1982. This month’s indictment, however, focused on the firm’s handling of properties in Villa Park, Corona del Mar and San Clemente, Bonner said.

Typically, Bailey’s firm offered investors second trust deeds on “significantly overappraised” properties, Bowers said, adding that the deeds themselves were actually third and sometimes fourth trust deeds, and thus worth far less than investors had been led to believe.

‘It Got Really Bad’

“As a result of these misrepresentations, people lost a great deal of money,” he said. “Toward the end, it got really bad.”

Many of the holdings offered through Bailey’s firm eventually found their way into so-called “mortgage pools,” where other investors also lost great sums of money, Bowers said. Those dealings are now being investigated by the state attorney general’s office, the Orange County district attorney’s office, the FBI and the U.S. attorney’s office, he said.

In addition to his guilty pleas, Bailey agreed to make restitution of at least $400,000. He is cooperating with investigators probing related real estate fraud in Orange County, and his sentencing has been delayed until Sept. 30, 1987, Bowers said.

Bailey’s wife still faces charges.