San Clemente resident Michael J. Stewart, 68, who operated a Ponzi scheme that defrauded mostly elderly people, was sentenced to 14 years on Monday, Feb. 29 by U.S. District Court Judge Cormac J. Carney. Stewart must also pay more than $9.2 million in restitution to the victims of his crimes.
Stewart owned and was the CEO of Pacific Property Assets based in Long Beach and Irvine. The company renovated, operated and resold apartment complexes in Southern California and Irvine, according to a U.S. District Attorney press release.
“As real estate values were generally increasing until approximately 2007, the properties were refinanced at ever-higher values, which enabled PPA to use the extra refinancing proceeds to not only pay off the original mortgages, but also to make payments on other loans, make payments to investors, to pay other business expenses and to pay Stewart and (John) Packard,” the release stated.
Packard was named as a co-defendant in the case.
When the housing market began to decline in 2007, the PPA eventually lost funds and would have been unable to continue, until Stewart and Packard convinced mostly elderly people to invest retirement savings in the company. Those funds were used to pay off banks, other investors and assorted loans.
One such person was a 74-year-old who poured her entire life savings into the company.
“PPA and a group of related companies filed for bankruptcy in June 2009,” the release stated. “When the bankruptcy was filed, PPA stated that it owed 647 private investors more than $91 million and it owed banks approximately $100 million. The Chapter 11 trustee appointed in the bankruptcy case later estimated the total investor losses at $169 million, and predicted that investors would receive, at best, ‘pennies on the dollar’ through the bankruptcy process.”
Stewart was convicted in August and has remained in federal custody since that time.