Prosecutors have begun probing $30,000 in campaign contributions made to L.A.’s mayor by a pair of once high-flying developers now accused of mortgage fraud.
The Los Angeles County district attorney’s office has opened an informal inquiry into $30,000 made to James K. Hahn’s reelection by associates of Beverly Hills developers Mark Alan Abrams and Charles Elliott Fitzgerald.
Abrams and Fitzgerald are under investigation by federal authorities for their alleged role in a $140 million mortgage scam that included $60 million in bad loans dumped on Lehman Brothers Holding Inc.
Deputy District Attorney David Demerjian, who oversees the L.A. district attorney’s public integrity division, confirmed the probe in an interview with MortgageDaily.com.
“At this point we’re not doing a criminal investigation,” Demerjian said. “What we are doing is doing an informal inquiry to determine if we proceed with a criminal investigation. It’s still in the preliminary phase, but a criminal investigation would be down the road if we decide to proceed.”
Demerjian said the district attorney’s office is reviewing documents compiled by the Los Angeles Ethics Commission, which has been looking into possible campaign related violations concerning contributions to candidates arranged by Abrams.
In addition to contributions to Hahn, the probe has also focused on Los Angeles Councilman Tony Cardenas and former Councilman Nick Pacheco, who have been identified as Hahn’s political allies.
Hahn’s office could not be reached for comment. A spokeswoman from his reelection campaign reportedly told the Los Angeles Times that none of the politicians under scrutiny knew of any improper or illegal campaign contributions.
“If Mr. Abrams has done something wrong, then absolutely he should be prosecuted and punished,” Julie Wong, a spokeswoman for Hahn’s campaign, told the paper.
The paper has also reported that Abrams and Fitzgerald allegedly funneled $300,000 to political organizations and causes backed by Hahn.
Abrams lawyer could not be reached to comment. Fitzgerald has reportedly fled the country.
Abrams and Fitzgerald previously operated Beverly Hills Estates Funding, a real estate development firm.
In the fall of 2003 Lehman Brothers Holding Inc. filed a $140 million federal lawsuit against the firm. In the suit, Lehman accused Fitzgerald and Abrams of using phantom buyers, inflated appraisals and other phony documents to obtain $140 million in fraudulent mortgage loans.
The Federal Home Loan Bank of San Francisco purchased $60 million of the loans before Lehman uncovered the alleged fraud. Lehman then repurchased the loans.
Court documents in the civil fraud case allege than Abrams and Fitzgerald crafted the fraud scheme on 86 upscale homes in California. According to the lawsuit, people close to them would buy houses for approximately $1 million, but would then file property transfers claiming the cost was $2 million or more.
Abrams and Fitzgerald would then take out a mortgage based on the inflated rather than the actual price, it is alleged in the Lehman lawsuit.
The pair used proceeds from the scam to pay for extravagant lifestyles that included expensive cars, homes and gambling grips.
RELATED:
Beverly Hills 140-6-0’s
An alleged $140 million mortgage scam involving flashy Beverly Hills real estate developers resulted in some bad loans being dumped on the Federal Home Loan Bank of San Francisco.
