Scamster update

Move over Bernie Madoff - A class action lawsuit filed on behalf of 16 investors, mostly Californians, alleges that brokers at Encino-based Marcus & Millichap took part in a conspiracy to purchase small commercial properties, artificially inflate their values and sell them to unsuspecting investors. Also named were a former OC businessman and a Florida businessman. The suit was filed in federal court in San Jose. From the LAT:

The lawsuit alleges that [Paul] Morabito and [Jack] Waelti bought small franchises of Jiffy Lube and Church's Chicken, among others, and the real estate where the businesses were located. They then sold the properties to a subsidiary of Marcus & Millichap and leased them back at rents well above standard market rates, the suit contends. Based on those rents, the brokerage sold the properties to investors at inflated prices, the suit alleges. Morabito and other tenants then closed the businesses, leaving the investors with greatly devalued real estate, according to the suit.

Meanwhile, NPR’s Greg Allen reports that authorities have been uncovering one scam after another in Florida (though there’s plenty of action in California).

In Florida, Ponzi schemes are a perennial bumper crop, in large part because of the many wealthy retirees. Attorney Michael Goldberg, a court-certified expert on Ponzi schemes, is currently helping unravel six scams. It's not that there are more Ponzi schemes now, he says, it's just that more are coming to light. The reason is cash. Few people are making deposits and many are seeking withdrawals. It's a scenario that's disastrous for modern-day Ponzis. "Ponzi schemes need a constant influx of cash. And these redemptions coming out of that have dried up the cash. And that's really why, I think they're being exposed," Goldberg says.

By the way: Only occasional posting today and tomorrow.


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Mark Lacter
Mark Lacter created the LA Biz Observed blog in 2006. He posted until the day before his death on Nov. 13, 2013.
 
Mark Lacter, business writer and editor was 59
The multi-talented Mark Lacter
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