Co-owner of Irvine real estate investment firm pleads guilty to fraud

One owner of an Irvine-based real estate investment company pleaded guilty Thursday to allegations that his firm essentially turned into a Ponzi scheme after the housing market crashed, according to authorities.

John Packard, 64, of Long Beach was convicted of one count of mail fraud in federal court and could face up to 20 years in prison for his part in the case, in which investors lost more than $100 million.

Packard co-owned Pacific Property Assets with Phoenix resident Michael Stewart, who is scheduled for trial in April. The two also ran an office in Long Beach.

Packard and Stewart initially ran the company as a legitimate investment operation, according to the U.S. attorney’s office in Los Angeles. They would raise money to buy and renovate apartment complexes in Southern California and Arizona so they could be resold or refinanced for a profit, prosecutors said. They built a portfolio of more than 100 properties in about 10 years.

But when the housing market crashed in 2007, their business model no longer functioned, prosecutors said. To stay afloat from 2007 through 2009, Packard and Stewart solicited new investors even though their cash went toward paying back loans and earlier investors instead of acquiring new properties, as promised, prosecutors alleged.

“Packard admitted that by October 2008, he and Stewart knew that PPA was dependent on these investor loans to make its monthly debt payments and continue operating, and was unable to raise money through other means,” the U.S. attorney’s office said in a news release.

Despite that, prosecutors said, the two lied about the company’s health to convince investors that their model was still viable.

When PPA filed for bankruptcy in 2009, it owed about $100 million to banks and more than $91 million to 647 private investors, prosecutors said.

The private investors couldn’t recoup any of their money during the bankruptcy, and the banks lost about $24 million of their investments, according to the U.S. attorney’s office.

U.S. District Judge Cormac Carney is scheduled to sentence Packard in May.