Univest Investors Reeling After Alleged ‘Betrayal’ : Scandal: Lender comes under scrutiny. His lawyer defends his actions.
Joel Burakoff knew the Malibu beach house would be empty after the weekend. So on a Monday morning in late August, he climbed the low perimeter wall and let himself in.
Burakoff was no ordinary intruder, but a distraught businessman. As chairman and treasurer of Univest Home Loan Inc., a troubled mortgage-lending and investment firm, he was facing the fury of a legal firestorm.
Although not yet public, a state audit had uncovered the diversion of investor funds to one of Burakoff’s personal accounts. Monthly interest checks were bouncing, and mortified investors soon would learn that dozens of loans they thought they had funded didn’t exist. The attorney general was about to sue Burakoff and Univest President Ruth Yonemoto, and prosecutors soon would open a criminal probe.
The investors included a number of Burakoff’s personal friends. Now, at the beach house of one of them, he would try to cancel the day of reckoning. Leaving farewell notes to family and friends, Burakoff swallowed something that left him unconscious.
He probably would have died had a weekend visitor not gone home without her purse. The housekeeper, who usually came to clean the place on Thursday, instead was sent Monday to retrieve the purse. She found Burakoff inside, unconscious.
Burakoff was rushed to a hospital and survived. But many clients said they may never recover--not from the financial loss, nor from their sense of being conned by a trusted friend.
Although it may be months before the accountants and lawyers complete their post-mortem, losses are expected to run into the millions of dollars. As they wait hopefully for news about what will be salvaged, investors are wondering how it could have happened.
Some of the alleged victims had been Burakoff’s holiday companions. Many had been guests at his daughter’s wedding last winter at the Riviera Country Club. Others were fellow members of the Friars Club in Beverly Hills, where Burakoff, a member of the board of directors, was a fixture at the gin rummy and poker tables. All remember Burakoff’s trademark big cigars, the hugs and handshakes, the million-candlepower smile.
“To know the man is to like him,” said Friar Jesse White, the lonely Maytag repairman of TV commercials who figures his loss at $400,000.
“He knew how to make you feel like you were special,” said Lillian Grant, who said she lost more than $90,000. Burakoff would say: “ ‘Don’t worry, honey. You know I’m on your side,’ ” Grant recalled. “If you put your money in his hands, he was going to take personal interest to make sure nothing happened to it.”
Many saw no sign of disaster in their frequent contact with Burakoff--who they said assured them that all was well right up to the bitter end.
What happened “is inconceivable, if you know the guy,” remarked Nathan Goller, who said he learned of the debacle only after Burakoff’s attempted suicide at Goller’s beach house.
Burakoff was “my closest friend,” said Goller, who estimates his loss at $500,000. He was “very endearing, very nice. I don’t think there was a mean bone in his body.”
Burakoff was so close to Shyrlee Schor and her husband that he was best man at their wedding. “This was somebody you took into your heart,” said Schor, an Encino resident.
“There isn’t a soul who met him or knew him who didn’t love him. . . . He had a propensity for letting you think he was your best friend--he was that charming.”
Now, “I feel betrayed, devastated,” Schor said. “What was he thinking about? We can’t imagine. Was he laughing? Was he thinking what fools we were? What was going on in his mind?”
Many of the investors are affluent. They will have to scale back retirement plans but have not been left destitute. Rene Ross of Encino, who is living in a motel, said she wishes she could say the same.
Ross said she lost more than $100,000 in principal, along with $2,100 per month in interest payments she was using to pay her rent.
“This man [Burakoff] has put me in the street,” Ross said.
“Joel, quote-unquote, was my dearest friend. . . . He would send me flowers, birthday cards. And, of course, I would send him birthday cards, too,” Ross said.
“I even sent him a gift a couple of times. . . . It’s pretty sick.”
Burakoff is said to be under a doctor’s care and has been unavailable for comment. Without elaborating, his attorney, George Buehler, said that Burakoff did his best “to see that none of the investors lost any money.”
Univest linked some of Los Angeles’ poorest and toniest precincts--matching low-income borrowers who were desperate for loans with middle-class and wealthy investors seeking big returns on their money.
Known in the trade as a “hard-money lender,” Univest was about the only game in town for inner-city residents who were deemed poor credit risks. These customers often were business owners or homeowners to whom no one else would lend and had no choice but to accept the burden of 12% to 16% interest. On the other side, investors, eager to earn such generous returns, funded the loans. Univest made its money by charging the borrowers hefty fees and commissions, and charging investors a monthly fee to service their loans.
For the investors, making second- and third-mortgage loans to poor people was an inherently risky proposition. During the ‘80s, when real estate prices were soaring, it was not such a gamble. If a borrower defaulted and the property was foreclosed, it might bring enough money to pay off the first mortgage and the junior loans as well.
That changed in the ‘90s as real estate values plunged. Struggling borrowers were more likely to walk away from their homes, wiping out the junior lenders.
But if the business had gone south, investors said, Burakoff did not let on. Sometimes payments were late or paperwork was missing, but Burakoff always had an explanation.
He began spending more time playing cards at the Friars Club than at his office, according to some investors.
He “probably had to leave work from the strain of taking all these anxious phone calls and making up stories to placate people,” Goller said. “And he had inventive stories about some of these loans.
“He should have been a screenwriter, there were so many stories.”
At some point, according to court papers and interviews, Univest began taking from Peter to pay Paul. Instead of funding new loans as promised, money received from investors allegedly was used to make monthly interest payments due other investors and to keep them in the dark about what had happened to their investments. In fact, some of the investments were “phantom” loans--loans that, unknown to investors, had never been made, or real loans that had been fully paid by borrowers, without the payoff being sent to the investors.
After their August checks bounced, some investors said they discovered their signatures had been forged in the past on loan payoff checks. The checks had been issued to them by Univest, but purportedly had never reached them. Instead, the checks allegedly were fraudulently endorsed and deposited in the bank account of J & K Investments, which Burakoff controlled.
At least two lawsuits have been filed against First Charter Bank of Beverly Hills, where Univest and J & K maintained accounts. One of the suits, a class action, contends the pattern of endorsements to J & K was so suspicious that the bank should have acted to stop the “conversion of [investors’] property.”
“We believe that at all times we have acted properly,” said First Charter President Peter Bustetter in an interview with The Times. “We’re confident . . . that this is going to be resolved in our favor.”
Some investors acknowledged the riskiness of Univest’s ventures, but said they had never considered dishonesty part of the risk.
People invest in second trust deeds “because they’re greedy,” said Mike Camras, a lawyer and Univest investor and a business associate of Burakoff’s brother Saul.
“They want the high yield [these] investments produce. . . . If you lose money because your borrower defaults . . . and you can’t sell [the property] for what you have in it, that’s the name of the game,” Camras said.
“What we didn’t bargain for was that Univest was going to get into economic trouble and they were going to start dipping into the till.”
In hindsight, however, the faith placed in Univest seems striking, given past problems of the firm and former principal Kevin S. Merritt.
Merritt was Burakoff’s longtime partner in Univest and other real estate and lending firms. In 1991, in a sweeping criminal complaint, Merritt was charged by the Los Angeles district attorney with cheating low-income homeowners, including Univest clients, out of money and property.
Merritt was then the subject of at least 175 civil lawsuits. Merritt, who says he is innocent of the 18 felony charges, has yet to be tried.
Burakoff avoided most--but not all--of Merritt’s legal problems.
For example, a lawsuit filed against Burakoff and Merritt in 1987 accused them of stealing a dying woman’s interest in a Los Angeles house, then selling it to an unsuspecting couple. The elderly woman supposedly signed a deed transferring her interest in the property as a gift. But according to the lawsuit filed in Los Angeles Superior Court, the signature was a forgery. The woman was lying in a coma in an Orange County hospital on the day she supposedly signed.
Burakoff and Merritt denied the claim and eventually settled the case without admitting wrongdoing.
After the criminal charges were filed four years ago, prosecutors said they understood that Merritt had left Univest. In a conscious effort to warn the public about the firm, prosecutors had made a point of mentioning Univest in the criminal complaint and in a news release outlining the charges against Merritt.
Speaking on condition of anonymity, an official marveled at how little impact the warning had. “Can you believe that Univest would stay in business,” he said, and even “kept the same damn name?”
Some investors said that they weren’t aware of Merritt or his connection to Burakoff or Univest. Others said they knew Burakoff had been in business with Merritt, but they hadn’t been concerned.
The recent Univest audit by the state Department of Real Estate raised doubts about whether Merritt had severed his connections with the firm. According to the audit, Burakoff and Merritt still held equal 45% shares in the company; Yonemoto owned 10%.
Moreover, according to the audit report, Burakoff told the state auditor that J & K stood for Joel Burakoff and Kevin Merritt--although, according to Burakoff, Merritt for years had had nothing to do with J & K.
Donald Marks, Merritt’s lawyer, said: “The only statement that I can make right now is that . . . Kevin was not involved in any wrongdoing, if there was any” at Univest.
Besides the lawsuits against First Charter, investors in the next few months are expected to file additional claims against Univest executives and staff. About 100 investors attended a meeting last week at the Sportsmen’s Lodge in Studio City to get information and discuss legal strategy.
“It was a betrayal of trust,” said Renee Miller, an investor who attended the meeting. ""He took advantage of his friends.”