John Packard, Mail Fraud, California 2015

SANTA ANA, California — One of the owners of a now-defunct Southern California real estate investment firm pleaded guilty today to perpetrating a fraudulent scheme that ended with the bankruptcy of the company, in which investors and banks collectively lost more than $110 million.

John Packard, 64, of Long Beach, pleaded guilty to one count of mail fraud before United States District Judge Cormac J. Carney.

During today’s hearing, Packard admitted bilking investors in Pacific Property Assets (PPA), which had offices in Long Beach and Irvine. Packard and his co-defendant, Phoenix resident Michael J. Stewart, created PPA in 1999 to purchase, renovate, operate and resell or refinance apartment complexes in Southern California and Arizona.

Although PPA’s apartment rental operations were not profitable, it was able to raise cash through refinancing and selling properties. 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, and to pay Stewart and Packard.

By the end of 2007, when the real estate market began to decline and credit became scarce, PPA’s business model was no longer feasible. To keep PPA afloat, from late 2007 through April 2009, Stewart admitted today that he and Packard continued to raise tens of millions of dollars from new investors.

PPA and a group of related companies filed for bankruptcy in June 2009. When the bankruptcy was filed, PPA owed 647 private investors more than $91 million, and it owed banks approximately $100 million. In the bankruptcy proceedings, the private investors received nothing, while banks lost an estimated $24 million.

Packard faces a statutory maximum sentence of 20 years in federal prison when he is sentenced by Judge Carney on May 18, 2015.

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