Gary Naiman, head of a mortgage investment firm that lost more than $200 million and cost hundreds of elderly investors their life savings, was arrested Thursday on mail fraud and money laundering charges.
Naiman specifically is accused of involvement in a scheme to defraud a retired couple of $500,000, but Assistant U.S. Atty. Patrick Brady said the charges in the indictment are a “small piece of a much larger pie. . . . Further indictments are expected.” He would not elaborate.
Naiman’s arrest caps a three-year investigation by the FBI and the Internal Revenue Service. He was charged with 18 counts of mail fraud counts, each carrying a maximum sentence of five years in prison, and 16 counts of money laundering, each carrying a maximum sentence of 20 years.
Naiman was released from jail late Thursday afternoon after posting $400,000 bond and promising to bring back an undisclosed amount of money from Israel, where he maintained bank accounts.
By tapping strong investor interest in San Diego’s hot real estate market in the 1980s, Naiman’s Pioneer Mortgage in suburban La Mesa collected some $230 million, most of it from members of San Diego’s Jewish community, before the company went bankrupt in early 1991.
The investors were attracted by promises of annual returns of 12% or more on their investments.
To earn the money to pay the interest promised to investors, Naiman made risky loans to developers and other borrowers who typically had been turned down by banks and other conventional lenders.
When San Diego’s real estate market began to cool down in the late 1980s, many of Pioneer’s loans went sour. When the dust settled after Pioneer’s bankruptcy filing, at least $200 million of investor funds had been lost, Brady said.
Investors had been attracted to the apparent dependability and stability of Pioneer, which was founded in 1946 by Naiman’s uncle, Morrie Naiman. Until shortly before the company went bankrupt, Pioneer paid investors “like clockwork,” one investor said. But many of Pioneer’s 2,500 investors ended up being wiped out financially.
Naiman, 56, claimed in the early stages of the bankruptcy that Pioneer’s problems were due to sharply declining real estate values and tax law changes.
But the indictment charges him with illegally using new investment funds to pay off debts to previous investors--the classic description of the scam known as a Ponzi scheme.
The indictment said Naiman “fraudulently transferred” the unnamed couple’s funds from a “relatively safe” account to a partnership controlled by Naiman, which he used to pay off previous debts.
Naiman also “lied to the victims as to the status of their loan,” according to a statement from the U.S. attorney’s office here.
The indictment also charges Naiman with assigning new investors the same real estate collateral he had pledged to earlier backers. Naiman also allegedly laundered money through “various businesses and accounts . . . to continue his fraud and conceal from the victims that their money was gone.”
Naiman, who was heavily involved in Jewish charities as well as religious and social activities, was unavailable for comment Thursday.