Local Iranian-Jewish banker and leader acquitted of federal fraud charges

Family members said they watched tears of joy and relief run down the face of Shokrollah Baravarian, an 82-year-old Iranian-Jewish former banker and community activist, on Oct. 31 after a jury in a downtown Los Angeles federal court acquitted him on four charges of conspiring with his clients to defraud the Internal Revenue Service (IRS) of tax revenue.

“For the last 2 1/2 years during the investigation of this case against me and the trial, I have had no peace of mind — I’ve maintained my innocence the entire time because I never did anything illegal, and I never conspired with anyone to do something illegal,” Baravarian told the Journal. “In my case, I believe that in the end, justice prevailed.”

In April, the government’s indictment alleged that Baravarian, a former senior vice president at the Los Angeles branch of Israel-based Mizrahi Tefahot Bank, conspired with three of his Iranian-Jewish clients in the United States to conceal the existence of undeclared bank accounts in Israel. It accused him of opening new accounts for them under pseudonyms and helping them access the funds overseas through loans from the Los Angeles branch of the bank. 

Baravarian’s attorney, Marc Harris, said the government’s case against his client was weak from the start because there was no evidence to show any wrongdoing by Baravarian — who has a doctorate in economics from the University of Tehran — and the bank’s clients all admitted during the trial that they never conspired with him.

“From the beginning, we maintained there were no facts to support the charges laid against Dr. Baravarian,” Harris said. “The paperwork showed, and the clients admitted, that these were legitimate loans that Dr. Baravarian’s clients needed and received to increase their lines of credit for their businesses. Several of the clients took out these ‘back-to-back’ loans secured by collateral held at the bank in Los Angeles, and most of them paid off the loans with U.S. funds, which proved that these were legitimate loans, not some mechanism or device to access hidden foreign accounts.”

Harris said federal prosecutors relied heavily on the testimony of three of Baravarian’s Iranian-Jewish former clients, to whom they had offered leniency if they testified against Baravarian and the bank. One witness had been criminally prosecuted and two others were awaiting final sentencing for tax fraud, Harris said. 

“These witnesses admitted that they lied on their taxes by not disclosing their foreign accounts,” said Harris. “The government’s key witnesses agreed to plead guilty to a conspiracy charge — to implicate the bank and Dr. Baravarian in their criminal conduct — to avoid going to jail. On cross-examination, however, each of the government’s witnesses admitted that they had not conspired with Dr. Baravarian to cheat on their taxes. In fact, the government’s very first customer witness admitted that he did not believe Dr. Baravarian did anything wrong and did not think he deserved to be prosecuted.”

Officials at the U.S. Department of Justice in Los Angeles did not return calls for comment on the Baravarian case. In April, a Justice Department press release indicated that prosecutors had been investigating “the use of undeclared bank accounts globally.”

Harris said at the close of the trial, the court room was tense as everyone waited to hear the jury’s verdict and that as soon as the jury’s “not guilty” verdict was read aloud, Baravarian’s friends and supporters that had packed the courtroom burst out in loud cheers.

Baravarian said the IRS investigation broke his heart because he had established a reputation for himself as an honest individual during his career spanning more than 50 years while working in senior management positions at major banks in Iran, England and in the U.S.

“From a very young age, I was taught that honesty is the best policy, and I have never, ever gone against that belief in my work or personal life,” Baravarian said. “In my life, because of my conservative nature, I have tried never to do anything illegal, and I’ve always tried to do the right thing to help people. Therefore, it was very difficult for me to understand how this difficult situation would befall me.”

Baravarian got his start doing accounting work at the National Iranian Oil Co. at age 17 as part of a program that allowed him to study for his bachelor’s degree in accounting and work part-time simultaneously. He went on to receive a law degree and a doctorate. 

At one time in Iran, Baravarian was president of a major private bank overseeing more than $1 billion in funds, he said. His multiple language skills, education, excellent reputation with clients, as well as extensive work experience in finance, became his salvation when he immigrated to the U.S. in the early 1980s. By 1983, he had gained a senior management position at Mizrahi.

“For many years, it was easier for my Iranian-Jewish clients to come to me for their loans or banking needs because I speak Farsi. They were more comfortable with my background in banking from Iran, and they were familiar with my integrity to help them get good loans for their business,” Baravarian said. 

Baravarian said he worked full-time for 25 years at Mizrahi’s downtown Los Angeles branch and then two years part-time at the bank following his 2009 retirement.

A statement released to the Journal by the West Hollywood-based Iranian American Jewish Federation (IAJF) expressed the community’s long-standing support for Baravarian throughout the ordeal.

“The Iranian-Jewish community welcomes the great news of Dr. Baravarian’s acquittal,” the organization said. “He is a pillar of our community, very well-respected, and we are glad that he is now able to move beyond this.”

Many community leaders said Baravarian also has a stellar reputation among Iranian Jews in Southern California because of his extensive volunteer work within the community. Most notably, he has served on the board of the Iranian-Jewish nonprofit Magbit Foundation, which offers interest-free loans to college students, and volunteered as the president of the IAJF from 2002 to 2006.

Those who had worked with Baravarian said many in his community did not believe the allegations of fraud levied against him by the government but instead gave him encouragement to remain positive during the case.

“There was a strong feeling of surprise and disbelief that lingered in the community about these charges,” said Shahla Javdan, past president of the IAJF. “Both Dr. Baravarian and his wife have played and continue to play essential roles in our charitable organizations.”

Baravarian’s family members praised his close friends for their continued encouragement.

“I don’t know how we could have gone through this ordeal without having the full support we received from the family and friends around us,” said Baravarian’s daughter, Haleh Baravarian Shooshani.

Despite all of the difficulties he encountered with his case, Baravarian said he harbors no ill will toward his former clients who testified against him in this case or the federal prosecutors who brought the criminal charges against him. 

“I have no hatred for them because I’ve learned in my life that hatred only hurts the person with the feelings of hate in his heart, and forgiveness gives a person calm and peace,” he said. “After the trial, I went over to the government’s attorneys, shook their hands and told them I had no ill feelings for them and wish them all the best in life.”

The case against Baravarian came on the heels of other criminal cases against local Iranian-Jewish businessmen who in recent years had been convicted of various federal criminal fraud charges and had defrauded community members of millions of dollars through Ponzi schemes.

In May, Shervin Neman, also known as Shervin Davatgarzadeh, a Century City Iranian-American man, was convicted in federal court of defrauding two people — one of them a former NBA and NFL executive — out of $3 million in a Ponzi scheme. 

In March 2013, John Farahi, a popular Iranian-Jewish radio talk-show host and investment adviser, was sentenced by a U.S. District Court to 10 years in federal prison for operating a multimillion-dollar Ponzi scheme against local Iranian-Americans. Farahi was ordered by the court to pay more than $24 million in restitution to close to 60 victims.

Prior to that, Ezri Namvar, a longtime leading Iranian-Jewish businessman and philanthropist in Los Angeles, was sentenced in October 2011 to seven years in federal prison for stealing $21 million from four clients. Namvar also was ordered by the court to pay back $21 million in restitution to his victims, yet he allegedly bilked investors — who put money into his $2.5 billion real estate portfolio before the 2008 market crash — out of hundreds of millions of dollars.

Iranian-Jewish community leaders and victims have kept quiet about Namvar and other Iranian-Jewish investors charged in recent years with running Ponzi schemes, in keeping with a long-standing community taboo against publicly discussing potentially embarrassing incidents. 

Writer discovers California ‘Gold’ in banking ancestor Isaias Hellman

“Towers of Gold: How One Jewish Immigrant Named Isaias Hellman Created California” by Frances Dinkelspiel (St. Martin’s Press, $29.95)

Searching for ways to deal with the current economic crisis, Treasury Secretary Henry Paulson could take a cue from Isaias Hellman, banker, capitalist and California visionary. More than once during financial panics in the 19th century, when bank runs were a too-frequent and devastating occurrence, Hellman resorted to a dramatic ploy to restore calm and confidence. He stacked massive towers of gold coins on the counter of his Farmers and Merchants Bank in Los Angeles.

Half a million dollars in plain view “was a tonic,” his great-great-granddaughter Frances Dinkelspiel writes in “Towers of Gold: How One Jewish Immigrant Named Isaias Hellman Created California” (St. Martin’s Press). It was a sight that stopped withdrawals cold and even attracted deposits. Everyone, customers and competitors, seemed to trust Hellman’s faith that better times were ahead.

A grand gesture, his towers of gold represented not only Hellman’s keen sense of the public psyche when hard times arose but his own confidence in the opportunities and resources of California. Hellman was an essential part, according to Dinkelspiel, of the generation that built the economic engines and defined the social institutions of California. In that role and company, Hellman was arguably the single most powerful and influential Jew in the United States from the last quarter of the 19th century until his death in 1920.

A fifth-generation Californian and Bay Area journalist, Dinkelspiel grew up with little knowledge of her illustrious ancestor. She discovered in the Hellman papers at the California Historical Society “every reporter’s dream: an unknown story about a critical chapter in the country’s history.”

Sifting through extensive correspondence, ledgers, newspaper clippings and diaries, she realized that Hellman was a titan of his time, “California’s premier financier” when the state shed its isolation and became an economic force.

She soon was on a seven-year quest to re-insert Hellman into California history and expand the record of Jewish immigrant success beyond Levi Strauss (who was just one of several pioneer co-religionists helped by Hellman to build unimaginable fortunes).

Hellman arrived in Los Angeles from Bavaria in 1859, a few months shy of his 17th birthday. Still more Mexican than American and with a population of less than 5,000, Los Angeles was home to maybe 150 Jews, almost all merchants who belonged to a handful of extended families. Accompanied by his younger brother, Herman, and with less than $100 between them, Hellman went to work as a clerk in a cousin’s store.

Within a few years, Hellman was buying his own store, developing commercial property in the center of Los Angeles and going into business with men “who considered themselves the problem solvers” of the region. Men such as John G. Downey, an Irish immigrant and former governor of California, were eager to capitalize on the sterling reputation and business acumen of the 29-year-old when Hellman invited them to become shareholders in the Farmers and Merchants Bank.

Farmers and Merchants proved to be the city’s first successful financial institution. It also became Hellman’s springboard to a West Coast banking empire that by 1915 had resources totaling more than $100 million. The crown jewel in that empire was the Wells Fargo Nevada Bank.

In 1890, Hellman was tapped to save the Nevada Bank, a San Francisco firm that counted the Southern Pacific Railroad among its biggest customers. When capitalist E.H. Harriman decided to spin off the banking business of Wells Fargo, he approached Hellman to take charge of merging two of the state’s oldest establishments and creating one of the West’s largest financial institutions.

While Hellman had family ties to New York and European capitalists (his brother-in-law was Meyer Lehman of the Lehman Brothers commodity house), the roots of Hellman’s success were in his local connections. He persistently partnered with friends and neighbors, Jews and non-Jews, first in Los Angeles and later in San Francisco. As his success grew, he promoted California investment opportunities to Lehman Brothers and other prominent Jewish firms in the East and increased the wealth on both coasts.

As an investor, adviser and leader, Hellman extended his success and influence over several other major industries in California. He partnered with Collis and Henry E. Huntington to develop railroads and trolley lines in Los Angeles and San Francisco. He loaned Charles Canfield and Edward Doheny $500 to purchase the land where they sunk the first free-flowing oil well in Los Angeles.

Hellman was the largest shareholder in the Los Angeles Water Co., a private firm that developed the city’s water system in the 19th century, and personally sold a $14.5 million bond issue for the Spring Valley Water Co. that supplied San Francisco. Having early in his career invested in vineyards, in 1901 Hellman took control of the California wine industry, standardizing the product and elevating the reputation of the industry around the world. In addition, he developed land all over Los Angeles County, owned property in San Francisco and built a vacation retreat at Lake Tahoe that eventually became a state park.

Hellman’s influence on Los Angeles is still evident today. In an instance where capitalism and philanthropy met, Jewish Hellman, Protestant Ozro Childs and Catholic Downey donated 110 acres to the Methodist founders of USC. The land was in the center of the partners’ subdivision at the southwest edge of the city. They also extended the trolley line they owned from downtown to the new campus.

Their generosity gave potential land buyers a destination and a convenient way to get there. The city had a university, and the partners saw their land triple in value.

Hellman helped create another L.A. institution when he advised Harrison Gray Otis to buy out his partner in the Los Angeles Times and then provided the $18,000 loan required to put the paper in Otis’ hands. Otis’ descendants, the Chandler family, sold the massive media company that evolved for $8 billion in 2000.

Hellman’s leadership went beyond the world of finance and business. When Los Angeles’ first synagogue was built in 1872, he was president of Congregation B’nai B’rith, now known as Wilshire Boulevard Temple. He served as a regent of the University of California for more than 30 years and endowed a scholarship fund still supporting students. He took a leading role in the recovery of San Francisco after the 1906 earthquake. Beneficiaries of his philanthropy ranged from Catholic orphans to World War I Jewish European refugees.

While unquestionably Hellman achieved the immigrant’s dream of success and acceptance in America, there were times when he was the target of anti-Jewish sentiments and anti-Semitic behavior. He and his companies also were subject to the wrath of unionists and socialists, progressive reformers and even betrayal by family members. His wealth, influence and fame brought both friends and enemies.

In its plain sense, the biography of Hellman is a story of nearly unfettered opportunity to apply one’s skills and realize one’s ambition. The openness of the American frontier stood in stark contrast to the restrictions on livelihood and residency most Jewish Europeans left behind. At a deeper level, Hellman’s story is a reminder that it took skill, ambition and connections to transform that frontier into part of the United States and create a state that today has a gross domestic product larger than all but eight countries in the world.

Jews were notably among the diverse contributors of those necessary ingredients, as they have continued to be, for example, the Stern, Haas and Goldman families in San Francisco and the Factor, Taper, Casden and Lowy families in Los Angeles.

To her credit, Dinkelspiel presents a well-developed and even-handed portrayal of Hellman and his extended family. The biography maintains a solid historical context in which to understand the perspectives, philosophy and values of a gilded-age capitalist. His German-American-Jewish sense of responsibility to family, community, customers, investors, competitors and the future comes through clearly. Through the vehicle of one man and his networks of family, friends and associates, the foundational place in California history of Jewish immigrants generally is illuminated, as well.

Well-researched and highly readable, “Towers of Gold” makes an important contribution to both the history of the Golden State and the history of Jews in America. It is a very strong case for the veracity of the volume’s subtitle — “How One Jewish Immigrant Named Isaias Hellman Created California” — demonstrating the key role of Hellman in the urban and economic development of California.

It also adds a fresh perspective on the Jewish immigrants from Central Europe who in the mid-19th century joined in the continental expansion of the United States and set down roots in emerging communities. As historian Kevin Starr has noted, frontier California was influenced by “Jewish values and sensibility” in ways unprecedented anywhere else in the nation.

Hellman’s life and accomplishments illustrated that influence, and this biography brings attention to its still-unfolding consequences.

Karen S. Wilson is a doctoral candidate in history at UCLA and curator for the upcoming Autry National Center exhibition on the history of Jews in Los Angeles.