The Santa Clara County District Attorney's Office has charged two people with running a real estate scam in Campbell and two alleged victims have filed a $100 million federal civil racketeering suit against them.
Terrance Brown and Antranik Kabajouzian are charged with grand theft and securities fraud in an alleged scheme that bilked 25 victims out of $3.5 million, Deputy District Attorney Katharina Wells said.
Kabajouzian, 35, was arrested on Oct. 22 and held on $3.5 million bail, but Brown, 48, is still at large and prosecutors have issued a warrant, also for $3.5 million, for his arrest, Wells said.
The two were co-founders of the Bay Area Equity Group, located in the Pruneyard Tower high rise in Campbell, Wells said. They used the firm to induce people to buy real estate outside of California, mostly dilapidated homes in Detroit, using their clients' money, Wells said.
The homes were then to be rented with their clients guaranteed a 15 percent return on their investment but many of the homes were empty, dilapidated, uninhabitable and never rented, Wells said.
The titles to some of the homes sold to investors were not transferred and Brown and Kabajouzian allegedly sold some of the homes simultaneously to various investors, according to Wells. On July 17, two of the victims in the alleged scam who contacted prosecutors, Lawrence Brooks and Darlene Leong, filed a $100 million lawsuit in U.S. District Court in San Jose against Brown, Kabajouzian and three other people under the 1961 civil Racketeering (RICO) Act, according to the suit.
The other defendants include Lisa Nava, Adrienne Roche and Derek Schneider, according to the suit. Brooks alleged that he first met with Schneider during a presentation about the equity group at a business luncheon at the Buca Di Beppo restaurant in Campbell on March 16, 2011.
He later met personally with Schneider who allegedly told him that the group offered "turn-key investments in rental properties with guaranteed rents," according to the suit. In April 2011, Brooks said in the suit that he and Leong met with Kabajouzian, who told them the company had "fully refurbished" rental properties in Detroit and that had been "thoroughly researched, refurbished, and currently had rent-paying tenants."
Kabajouzian also claimed that Brooks and Leong, if they invested and bought the homes, would receive a return of at least 15 percent and that the firm's rental protection plan covered the rent if a tenant failed to pay it.
The equity group's website also advertised "guaranteed rents" and promised to reimburse unpaid rents, according to the suit. Based on the representations, Brooks and Leong claimed they bought three Detroit homes for $27,995, $25,995 and $23,995 while Kabajouzian and the company assured them the homes were refurbished and had tenants paying rent.
Kabajouzian then convinced Brooks to transfer about $220,000 from a traditional individual retirement account to a self-directed IRA that would make it easier for them to buy other homes from the equity group.
Brooks transferred the money on January 24, 2012, and that day bought four other homes for a total of $210,000, but by February 2012, the equity group had failed to make the rent payments, the suit alleged.
More than a year later in May 2013, after the plaintiffs learned that some of the homes had been vandalized and some property taxes had not been paid, Brown told Brooks he was "sorry" and would make sure the taxes were paid up, but never did, Brooks alleged.
Later that month, the group sent a letter to Brooks terminating him and Leong as clients, ending their agreements and referring them to a different property management company, according to the suit.
"Plaintiffs allege that defendants are involved in a ponzi scheme wherein investors are guaranteed unusually high returns and the fraudsters use the investors' own money to repay them or they use other investors' money to pay other investors whose returns are due," according to the suit.
But Kabajouzian's San Mateo-based civil attorney Rod Tanner claimed that it was Brown, who he said was once a prominent local certified public accountant and a former accounting professor at De Anza College, not his client, who cheated the investors.
"Brown used my client's company as an instrument for defrauding these people," Tanner said. At most, Kabajouzian might be liable for breach of contract and owes four clients, including Brooks and Leong, less than $100,000 which he has been trying to repay, Tanner said. "I am confident that I can defeat all of the civil claims," Tanner said.
Kabajouzian is being held at the Elmwood Correctional Complex in Milpitas and has been told by his criminal lawyer that the district attorney's case against him is "nonsense" and that he would beat it, Tanner said.