Scammer Pleads Guilty to $24 Million Real Estate Ponzi Scheme

A California man pleaded guilty last week to crimes related to a $24 million real estate Ponzi scheme that spanned almost two decades. 

Paul Horton Smith Sr., 59, of Moreno Valley in Riverside County, scammed more than 200 investors and pleaded guilty to one count of wire fraud, the U.S. Attorney’s Office said in a news release.

Operating under companies such as Northstar Communications LLC, Planning Services Inc., and eGate LLC, Smith targeted elderly or retired people, between July 2000 and May 2020. 

He convinced investors to put their money into what he called “Northstar,” misrepresenting it as an annuity or a similar secure real estate investment. Some investors were former clients of Planning Services.

Smith employed various communication channels, including in-person meetings, phone calls, emails and text messages to deceive investors about Northstar’s business. 

He claimed the investment would yield a fixed return, presenting it as a safe venture. However, Smith never actually invested the funds. Instead, he deposited all the money into a non-interest-bearing checking account.

The scheme involved using funds from new investors to cover interest payments to earlier ones and repay those seeking to withdraw their investment. In April 2019, Smith convinced a victim to invest $400,000, promising a 5 percent rate of return. Instead, he redirected the funds to other victims, making attempts to conceal the fraudulent activity by making payments to the initial investor.

More than 100 victims were never repaid, resulting in losses over $13 million. 

A sentencing hearing is scheduled for April 1, where Smith faces a maximum of 20 years in federal prison.

The investigation was conducted by the FBI, with assistance from the United States Securities and Exchange Commission, which had filed a complaint and secured a judgment against Smith and Northstar Communications LLC in 2020.

Real estate Ponzi schemes aren’t new.

Last year, a Los Angeles man was charged with 110 felonies and three special allegations for allegedly running an $8 million Ponzi scheme involving the development of buildings.

Between 2010 and 2020, Jeffrey H. Tamkin allegedly ran the Tamkin Development Corporation and the Public Facilities Investment Corporation, the California Attorney General said in a news release

Tamkin developed buildings for public agencies, and once developed, leased the buildings back to the agencies for a profit. He promised his investors — many of whom were elderly — high interest rates, provided them with investment memoranda and brochures, and personally guaranteed the investments, which many of his victims relied upon. 

The information provided to investors — some of whom he recruited from organizations such as Hillcrest Country Club, the Cedars-Sinai Medical Center, and the Music Center’s Fraternity of Friends — omitted many material facts needed by the investors to determine the security of their funds, the release said.  

—Ted Glanzer

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