The owners of a Southern California real estate investment firm that “effectively became a Ponzi scheme” when the real estate market went into decline and lost $110 million in investor’s money when it went bankrupt in 2009 have been indicted on charges of mail fraud, bank fraud and bankruptcy fraud.

Michael Stewart, 66, of Phoenix, and John Packard, 63, of Long Beach, Calif., were arrested by the FBI this morning, prosecutors with U.S. Attorney’s Office for the Central District of California said.

Stewart and Packard owned Pacific Property Assets, which they launched in 1999 to purchase, renovate, operate, and resell or refinance apartment complexes in Southern California and Arizona. The company typically financed property acquisitions through mortgages, and raised money from private investors to pay for renovations to the properties.

By the end of 2007, PPA could no longer raise money by refinancing its properties with increasingly large mortgages, according to allegations in a 16-count indictment returned last month by a federal grand jury. To keep the company afloat, Stewart and Packard allegedly continued to raise tens of millions of dollars from new investors, using these funds to pay earlier investors, mortgage lenders and themselves, prosecutors said.

When the company filed for bankruptcy in June 2009, PPA owed banks $100 million, and 647 private investors more than $91 million. Private investors received nothing in the bankruptcy proceeding, while banks lost an estimated $24 million. Source: justice.gov.

Show Comments Hide Comments
Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Success!
Thank you for subscribing to Morning Headlines.
Back to top
Only 3 days left to register for Inman Connect Las Vegas before prices go up! Don't miss the premier event for real estate pros.Register Now ×
Limited Time Offer: Get 1 year of Inman Select for $199SUBSCRIBE×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription
×