A judge in Santa Clara County Superior Court on Thursday sentenced two men to long prison terms for bilking Bay Area investors out of $4.5 million in a real estate investment Ponzi scheme, a prosecutor said.
Judge Shelyna Brown sentenced Terrance Brown, 48, of San Jose, to 15 years in prison and Antranik Kabajouzian, 32, of Morgan Hill, to 10 years and ordered they pay restitution to their victims, Deputy District Attorney Katharina Wells said.
Brown and Kabajouzian pleaded guilty on April 18 to running a Ponzi scheme through their firm the Bay Area Equity Group, making fraudulent representations to victims who thought they were investing in rehabilitated, out-of-state homes being rented by tenants, Wells said.
The two men, based in the Pruneyard office tower in Campbell, told investors that the homes bought with their funds were refurbished with renters living in them and promised them a 15 percent rate of return, prosecutors said.
But most of the homes bought using their clients’ funds were located in Detroit and dilapidated and uninhabitable, in some cases condemned and torn down by the city without the knowledge of the investors, according to Wells.
The equity group typically would buy the rundown homes in Detroit for $5,000, sell them to investors for about $35,000 and then as in a classic Ponzi scheme, use the money from newer investors to pay older investors about $1,000 a month, falsely representing it as rent payments, Wells said.
All of the 40 clients, whose investments ranged from $30,000 to $700,000, lost their money, totaling $4.5 million, Wells said.
The firm’s clients were from all over the Bay Area, she said. Brown was a tax preparer who met many of the victims while doing their tax returns and talked them into investing in the equity company, Wells said.
Brown and Kabajouzian “also made presentations in the community and they had a pretty sophisticated web site,” Wells said.
At one point, an employee of the equity group came forward and reported the scheme to authorities, Wells said. Investors also reported their suspicions of the equity group, Wells said.
“They became aware when they were not receiving the promised rents.”
Authorities seized Kabajouzian’s 2006 Aston Martin luxury sports car, sold it at an auction for $40,000 and assigned the proceeds to the equity group’s investors based on percentage of loss, which did not amount to much, Wells said.
Brown was arrested in late 2013 at a Las Vegas casino, where he had been gambling, she said.