Beverly Hills Man Indicted on Housing Fraud : Real estate: Gary Lefkowitz of Culver City-based Citi Equity allegedly defrauded $50 million from projects for affordable homes nationwide.

A federal grand jury Tuesday charged a Beverly Hills real estate syndicator involved in low-income housing projects across the country with defrauding investors, developers and the Internal Revenue Service out of $50 million.

The indictment, filed in U.S. District Court in Minnesota, alleges that Gary Lefkowitz, president of Culver City-based Citi Equity Group, lied to state housing authorities to gain low-income housing tax credits, left builders and property owners with millions of dollars in unpaid bills and took investors’ money for his personal use.

More than $2 million earmarked for low- and moderate-income housing, for example, was diverted to payments on Lefkowitz’s homes in Beverly Hills and Beaver Creek, Colo., according to the indictment. Lefkowitz is accused of using another $2 million in investor funds for clothes, jewelry and art.

“Mr. Lefkowitz is preparing to vigorously defend all charges,” according to a statement issued Tuesday by Citi Equity.

Lefkowitz, who founded Citi Equity in 1984, is expected to turn himself in to federal authorities in Minnesota on Thursday, according to Assistant U.S. Atty. Andrew Luger in Minneapolis, where the 18-month federal investigation began.

“He was committing fraud in order to mastermind what became a very complex scheme to enrich himself,” Luger said.

The size of the alleged scheme shocked proponents of affordable housing, some of whom fear a backlash against the low-income housing tax credit program. The credits are issued to qualifying developers of affordable housing, who then sell them to investors to raise money for projects.

“I don’t think any firm in the country has been charged with this before,” said Ronne Thielen, executive director of the California Tax Credit Allocation Committee, which has approved the use of tax credits for 40,000 units of affordable housing. “It has been one person who has been alleged to be dishonest. But the program will get blamed.”

Lefkowitz’s firm has been involved in the development and acquisition of affordable housing projects since the late 1980s, raising at least $100 million through the sale of limited real estate partnerships, according to the 54-count federal indictment.

But the firm’s roughly 7,000 investors did not know that about $20 million in tax credits they received as part of their investments were obtained illegally by Lefkowitz, prosecutors charge.

In applications with housing authorities in at least five states, Lefkowitz falsely claimed a nonprofit group as a general partner to win credits set aside for such organizations, the indictment says.

Lefkowitz is also charged with embezzling some of the $30 million that Citi Equity raised from investors for construction loans. He is accused of misleading some developers and builders into believing he had commitments for long-term, permanent financing to pay off interim construction loans.

As a result, some of the low-income properties were not completed, and developers and builders have lost or are owed at least $20 million, according to the indictment.

In California, Citi Equity has been involved in up to 10 housing projects, according to Thielen. One construction lender threatened to foreclose on a project in Fresno, but a settlement was reached between the lender and Citi Equity, she said.