Michael J. Stewart, 68, former chief executive officer of a defunct Southern California real estate investment firm and resident of San Clemente, was found guilty of 11 charges of mail fraud on Friday by a jury in U.S. District Court.
According to a Department of Justice news release, Stewart owned and was the chief executive of Pacific Property Assets, which had offices in Long Beach and Irvine. With co-defendant John Packard, Stewart created PPA in 1999 to resell or refinance apartment complexes in Southern California and Arizona.
“In its 10 years of operations, PPA acquired more than 100 real estate properties and raised hundreds of millions of dollars from hundreds of investors,” the release stated.
When the company filed bankruptcy, PPA stated it owed 647 private investors more than $91 million, and it owed banks approximately $100 million.
The company financed property through mortgages and raised money from investors to pay for renovations to the properties. After several years, PPA would refinance for each property.
As PPA failed to make sufficient earnings in 2008 through April 2009, Stewart and Packard raised more than $34 million dollars from new investors, many of them “elderly and retired persons” investing their retirement funds in the company, the release stated. One such investor was 74 years old and sunk money into the company shortly after her husband passed away. Stewart’s staff persuaded her to invest virtually all her retirement savings in PPA, the release stated.
“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,” the release stated.
The San Clemente Times emailed attorneys for Stewart and the DOJ regarding his involvement with San Clemente investors, but they did not specify if any victims of the scam lived in the city.
Stewart will be sentenced in District Court on Nov. 2. He faces a maximum sentence of 220 years in federal prison.