‘Reformed’ Trader a Fraud, Two O.C. Developers Say
Southern California real estate developers Thomas Brechtel and Randy Jochim used to think everybody deserved a second chance, even convicted Wall Street inside trader Dennis B. Levine.
Now all they have is second thoughts.
Brechtel and Jochim are accusing Levine and his associates of loan fraud, just as the former Drexel Burnham Lambert Inc. executive begins a national book tour touting his rehabilitation.
The two men say they thought Levine could use his contacts in the financial world to help them build luxury homes on a three-acre, oceanfront property in Laguna Niguel.
They paid Levine $35,000 in fees but now claim all he did was introduce them to a string of shady characters who never loaned them any money.
One of the supposed financial sources was a man convicted of business fraud whom Levine had befriended while serving 17 months of a two-year federal prison term for securities fraud, tax evasion and perjury.
“A lot of people say why would you trust Dennis Levine,” Brechtel said. “We trusted him because we thought he deserved a second chance.”
Levine, in his new book, indicates that Brechtel and Jochim weren’t alone in their forgiveness.
“It is an uplifting feeling to realize that there are many fine men and women in the business world who believe that a man should be given a second chance,” Levine writes.
Levine, 39, denied the accusations of the two Southern California developers on Monday, the first day of a book promotion tour.
“I think these allegations are totally without merit,” he said in a phone interview. “No guarantees were ever made regarding these financings, and that’s it.”
“Inside Out: An Insider’s Account of Wall Street” chronicles the life of one of Wall Street’s biggest insider traders. Five years ago, after racking up about $12 million in profits, Levine was convicted of trading on illegal information about corporate takeovers.
Levine’s arrest led prosecutors to former stock speculator Ivan Boesky and other prominent Wall Street professionals who traded stocks on inside information.
In a report broadcast Sunday on the CBS News program “60 Minutes,” Brechtel and Jochim accused Levine of carrying out a so-called advance fee-loan scheme.
An advance fee-loan scheme is one in which people are promised a loan if they pay some money in advance. Once a down payment is made, subsequent loans usually don’t materialize.
Brechtel and Jochim have hired famed San Francisco attorney Melvin Belli to represent them.
“I’d like to go after these bums. It’ll make me happy,” Belli said in an interview Monday.
The “60 Minutes” report accused Levine of failing to tell Brechtel and Jochim that some of the supposed lenders had links to fraudulent enterprises.
One Panama company used by Levine, “60 Minutes” said, is under investigation by the FBI. FBI officials could not be reached for comment.
Brechtel and Jochim paid Levine $10,000 for that referral.
Once the Panama deal fell through, Levine allegedly referred the developers to a Las Vegas man that “60 Minutes” said was connected to the Mafia and who had been convicted of theft in a $700,000 credit card scam involving two Atlantic City, N.J., casinos.
Following his September, 1988, release from prison, Levine started a consulting firm in New York known as the Adasar Group Inc.
Levine said Monday that his current activities are legitimate and that the types of financing he arranges cannot always be accomplished through major banks.
“Our country is mired in the most significant real estate financing crunch in decades,” Levine said. “There are no conventional loans available for the type of financing that Brechtel and Jochim were seeking. As such, they were cognizant of the risk factors in going to unconventional lending sources.”
Brechtel, 33, who lives in the unincorporated community of Coto de Caza, and Jochim, 37, of Diamond Bar, claim they lost more than $400,000--including a non-refundable escrow deposit, travel expenses and financing costs--doing business with Levine and some of the companies he recommended.
Early last year, Brechtel and Jochim became interested in developing property near the Ritz-Carlton hotel in Dana Point. They planned to subdivide the property into seven plots and build luxury homes.
The men described themselves as custom builders, saying they have built custom homes in Diamond Bar and Walnut.
One of Levine’s cousins, who lived in Brechtel’s neighborhood, recommended Levine to the two men, according to Brechtel.
Brechtel and Jochim claim Levine found a lender in a Panama City company called Pan-Global Securities Marketing Corp.
“60 Minutes” reported that Pan-Global has taken advance fees from many companies but never made any loans to them. The program also reported that the U.S. Embassy in Panama and the Commerce Department had warned businesses to stay away from Pan-Global.
Brechtel and Jochim said Levine was greeted in grand fashion upon his arrival at the Panama City airport.
“Custom agents down there said, ‘Welcome back, Mr. Levine.’ He had his own taxi driver who knew him by name,” Brechtel said.
Levine laughed at Brechtel’s description of events.
“When you consider I had only been there once before in my life with another client, I find that inconceivable,” Levine said.
After the deal with Pan-Global was signed, Jochim and Brechtel paid the company $150,000 for a promise of $32 million in financing. Then the three men celebrated.
“Dennis was jumping up and down in the lobby of the Marriott hotel and telling us we had just become millionaires,” Brechtel said.
But the Panama City deal later fell through for undisclosed reasons. When a Las Vegas contact failed to work out either, Levine introduced the two men to a Boca Raton, Fla., firm that promised to finance the Laguna Niguel home development.
Brechtel and Jochim said they paid Levine $25,000 to arrange the new financing, but one of the financiers was a man Levine had met in prison.
“Levine had told me he had met (the man) years ago when he was associated with Drexel (Burnham Lambert),” Brechtel said. “ ’60 Minutes’ found out they met when they were in prison together. We were not aware of that.”
Levine said on “60 Minutes” that “perhaps” he should have told Brechtel and Jochim that he met the financier at Lewisburg Penitentiary in Pennsylvania.
The Florida comptroller’s office shut down the Boca Raton firm in March for allegedly “bilking consumers out of upfront fees for loans that were never made,” “60 Minutes” reported.
The Laguna Niguel deal never closed escrow and the property is once again up for sale.