Now-Defunct Newport Pacific Corp. Sued for Investment Fraud
Newport Pacific Corp., a defunct Orange County development and mortgage investing firm that once built as many as 2,000 apartment units a year, has been sued for fraud in a civil case filed on behalf of more than 70 investors.
The case puts Newport Pacific founder Magdy Hanna--a onetime Anaheim political power broker--atop a list of more than 150 defendants. It alleges that Hanna and a network of affiliated companies and their officers, along with dozens of investment brokers, sold unsophisticated investors millions of dollars of high-risk mortgage notes in the late 1980s and early ‘90s.
Hanna could not be reached for comment but in the past has denied any wrongdoing.
Newport Pacific shut down last year, and Hanna, a figure in the conflict-of-interest scandal that cost Orange County Supervisor Don R. Roth his job in 1993, dropped out of sight.
Hanna, who started Newport Pacific in 1983, specialized in selling limited-partnership investments to finance his apartment developments.
Del Mar attorney Timothy C. Karen, who filed the suit Monday in Orange County Superior Court, said that Hanna and Newport Pacific ultimately ran a Ponzi scheme, diverting most of the funds from investors to their own uses and using some of the money from new investors to pay returns to earlier investors to make them believe their investments were generating profit.
The suit alleges that the brokers and investment sales agents named as plaintiffs did not adequately inform investors about the risks involved and in some cases deliberately withheld information in order to secure investments.
The suit does not specify damages but claims that nearly 400 investors pumped almost $8 million into various Hanna-controlled investment funds.
Hanna was a major political contributor in Anaheim in the 1980s and was one of a number of developers who gave gifts to former Supervisor Roth. Roth was forced to resign after pleading guilty to charges stemming from his failure to report the gifts and then voting on projects that benefited his secret benefactors.
