Creditors force Ezri Namvar into involuntary bankruptcy
Businessman and philanthropist Ezri Namvar was once a pillar of the local Iranian Jewish community, a trusted friend to whom many in the community loaned freely and without fear.
Now Namvar and his investment company, Namco Capital Group, Inc., are accused of losing as much as $400 million loaned to him.
For the last three months, lawsuits have been filed and extensive negotiations have been taking place to resolve the hundreds of millions of dollars in disputes between Namvar’s creditors and the Brentwood Iranian Jewish businessman. On Dec. 22, two dozen creditors filed an involuntary bankruptcy petition against Namvar and Namco.
The petition follows 17 lawsuits filed against Namvar, Namco, entities owned by Namvar and other Namvar family members alleging breach of contract and contractual fraud in a case that attorneys estimate involves 300 to 400 creditors, the majority of whom are Iranian Jews.
“Disputes happen all the time, but the magnitude of this case is huge,” said A. David Youssefyeh, a local Iranian Jewish attorney who is advising nearly 20 Iranian Jewish creditors in this case, of whom only a small group participated in the filing of the petition. “This case hits people in the community from such a broad socio-economic level — it includes everyone, from students that had entrusted Mr. Namvar with their bar mitzvah money, to retired people who invested their entire life savings in Namco and were paying their living expenses from the interest they received from the company.”
The creditors include investors in Namco Capital Group, those who lent money to Namco and received a personal guarantee from Namvar, lenders to Namco who received a lien on property owed by Namvar or one his entities and those who gave profits from their real estate transactions (1031 funds) to Namvar, according to the lawsuits.
“For 1031 money, the IRS will allow delayed payment of taxes on profits people give to a facilitator, such as Mr. Namvar, to hold for them until they find a substitute property to purchase,” Youssefyeh said. “But now that that money is gone, the people that entrusted Mr. Namvar with the money may potentially have to pay taxes on monies that they don’t have.”
Problems first arose nearly five months ago, when various creditors discovered they were unable to retrieve funds they had invested in Namco or given to Namvar, and that they were also no longer receiving interest payments from monies invested his company, Youssefyeh said.
While some community members filed suits to regain their money, the majority hoped instead to resolve the issue outside of the courts, in the traditional manner of the tight-knit community.
“Back in Iran, whenever a businessman in the Jewish community was unable to pay his creditors, the community leaders would get together and devise a plan to help the businessman get back on his feet financially so that he could repay those debts,” said Ebrahim Yahid, a community activist in his 80s who is a close friend of the Namvar family.
Indeed, such a group was organized after a meeting on Nov. 5 between Namvar and Namco’s Iranian Jewish creditors, according to a statement released to The Jewish Journal by the group on Dec. 16. Namco’s creditors first nominated and then voted to create a provisional committee, including prominent, independent community members. The group planned to trace all of Namvar’s assets and propose solutions to the creditors, according to the statement.
The all-volunteer committee included retired banker and former president of the Iranian American Jewish Federation (IAJF) Solomon Agahi and former IAJF Secretary General Sam Kermanian, as well as businessmen Jack Rochel and Nejat Sarshar. They had their first meeting on Nov. 24, according to the statement, and they were offered full authority by Namvar to resolve the disputes. The committee also hired an independent forensic accountant and attorney.
Nevertheless, talks broke down, and Youssefyeh said he advised his clients to file the bankruptcy petition when his negotiations with the local Iranian Jewish community leaders and Namco’s attorney failed to secure a deal to retrieve their investments for his clients and the nearly 200 other local Iranian Jewish creditors.
Youssefyeh said he became frustrated because Namvar’s paybacks seemed designed to protect the wealthy creditors, rather than the small investors whose life savings had been jeopardized. “What particularly made me mad was that with the $12 [million] to $13 million, Mr. Namvar could pay off 190 people, most of which needed the money for their survival, that had entrusted Mr. Namvar with $200,000 or less,” Youssefyeh said. “But people close to him told me that instead of Mr .Namvar paying off these creditors, Mr. Namvar had earmarked the remaining $17 million that he would receive from the sale of his Wilshire Bundy Plaza building to pay his 1031 obligations first, in order to avoid any potential liability arising from the 1031 funds not being available to the investors.”
Youssefyeh said bankruptcy was the only available option to protect his clients, because it allows the courts to distribute Namvar’s assets and even reverses settlement payments Namvar had made to his more affluent creditors, who have the financial means to proceed with litigation against him.
According to the bankruptcy petition, filed in U.S. Federal Bankruptcy Court in downtown Los Angeles, the dozen creditors include both Iranian Jews and non-Jews, with more than $7 million in claims against Namco Capital Group and $7 million in personal claims against Namvar.
While members of the provisional committee declined to comment on the filing, legal experts said the petition nullifies the committee’s ability to settle the case, giving the courts the responsibility of distributing Namvar and Namco’s assets.
Some community leaders, who asked not to be identified, argued that the bankruptcy petition could hurt the community’s numerous creditors, because they might never receive their money back, since the case could take years to litigate and any available monies could be eaten up by attorneys’ fees as well as other costs.
Youssefyeh defended the bankruptcy petition. “The [provisional] committee had not taken any steps to take control of Mr. Namvar’s assets and in so many words said that they were not qualified to disperse his assets,” he said, adding, “yes, it will be painful and take a long time, but at the end of the day there was no other viable solution that would have frozen the assets, brought all of the preferential transfers and securitization money back into the pot.”
Local Iranian Jews had been investing with Namvar and Namco since the late 1990s. The relationships were based on his family’s reputation for being honorable as well as his success in real estate development, Yahid said.
Some have compared Namvar’s situation to the Bernard Madoff scandal, which involves a Ponzi scheme, but this is unfair, according to Namvar’s friends and community supporters, who say Namvar’s losses are due simply to the economic downturn.
“I know he [Namvar] did not have bad intentions — the economy around the whole world has gone downward, including the real estate market here in Los Angeles, and everyone is hurting, including himself,” Yahid said. “If he really had bad intentions, he would not have welcomed the committee to resolve this case, but would have instead declared immediate bankruptcy himself and destroyed the lives of hundreds in our community.”