Multiple Victim Stabbing and Officer-Involved Shooting
LONG BEACH — Police killed a man after he allegedly stabbed and injured six people on Aug. 7, in the 3200 block of East Artesia Boulevard in Long Beach.
The suspect has been identified as Derrick Lee Hunt, a 28-year-old resident of Long Beach. The motive for this crime remains unclear. Any previous criminal history of Hunt is not being released.
When Long Beach Police Department officers responded to the call at about 8:15 p.m. that night, they found several people had been stabbed. The crime spree started at a multi-unit apartment complex on the north side of the 3200 block of East Artesia, where Hunt stabbed a woman and two men. Hunt then proceeded across Artesia Street and entered a convalescent home on the south side of the street, where he stabbed three women.
Hunt was shot and killed at the scene. A knife was recovered.
Five out of the six victims were taken to local hospitals and the one was treated at the scene for superficial sounds. Anyone with information regarding this incident is urged to call (562) 570-7244 or visit www.lacrimestoppers.org.
San Pedro Town Square Design Firm Chosen
SAN PEDRO — On Aug. 4, the Los Angeles Harbor Commission approved a three-year $2.34 million contract with Populous for the San Pedro Town Square and Ports O’Call Promenade projects. Populous is a renowned Engineering and Design firm with signature sports stadium, waterfront and convention center projects found around the globe.
Design work for both projects will commence immediately and is expected to be complete by the end of 2016. Construction for both projects is currently scheduled to start in mid-2017, and be completed in 2019. The engineering and design work will also include future alignment recommendations for the red car trolley.
Owner of Orange County Real Estate Investment Firm Found Guilty in Fraud Scheme
SANTA ANA — On Aug. 7, the CEO of a now-defunct Southern California real estate investment firm was convicted this afternoon of federal fraud charges for perpetrating a scheme that ended with the bankruptcy of the company and hundreds of investors collectively losing as much as $169 million.
Michael J. Stewart, 68, who lives in in San Clemente, was found guilty of 11 counts of mail fraud following a nine-day jury trial. Stewart owned and was the chief executive of Pacific Property Assets, which had offices in Long Beach and Irvine. Along with co-defendant John Packard, Stewart created Pacific Property Assets in 1999 to purchase, renovate, operate, and resell or refinance apartment complexes in Southern California and Arizona. Typically, the company financed property acquisitions through mortgages, and it raised money from private investors to pay for renovations to the properties. After several years, the company would refinance (or sometimes sell) each property.
Although the company’s apartment rental operations were not profitable, it was able to raise cash through refinancing and selling properties. As real estate values were generally increasing until about 2007, the properties were refinanced at ever-higher values, which enabled Pacific Property Assets to use the extra refinancing proceeds to not only pay off the original mortgages, but also to make payments on other loans, make payments to investors, to pay other business expenses, and to pay Stewart and Packard. In its 10 years of operations, Pacific Property Assets acquired more than 100 real estate properties and raised hundreds of millions of dollars from hundreds of investors. As Stewart told prospective investors, from 2004 to 2007, the company was named three times to Inc. magazine’s list of the fastest growing privately held companies in the United States, was a regional finalist in Ernst & Young’s Entrepreneur of the Year Program, and was listed by the Orange County Business Journal as one of fastest growing businesses in Orange County.
But as the government argued at trial, by the end of 2007, when the real estate market began to decline and credit became scarce, the company’s business model was no longer feasible. As the value of the company’s properties was falling, Pacific Property Assets could no longer raise money by refinancing its properties with increasingly large mortgages or selling properties at a profit. Furthermore, the company faced large debt payments to its mortgage lenders and private investors, while it was continuing to lose money in its business operations. In May 2008, Pacific Property Assets’ controller warned Stewart and Packard that without a new source of funds, the company faced losing as much as $2 million dollars per month. Emails between the owners revealed that they projected that trend to continue.
To keep Pacific Property Assets afloat, from early 2008 through April 2009, Stewart and Packard raised more than $34 million dollars from new investors, many of them elderly and retired persons investing their retirement funds in the company. For example, one 74-year-old investor testified at trial that in early 2009, shortly after her husband died, Stewart’s staff persuaded her to invest virtually all her retirement savings in Pacific Property Assets. The defendants used those new funds to pay earlier investors, mortgage lenders, other company expenses, and Stewart and Packard themselves – including annual salaries for the two co-owners of $750,000 and hundreds of thousands of dollars in additional compensation. Packard testified at trial that in 2008, he and Stewart knew that the company 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 company’s former director of investor relations further testified that during that period, Stewart began to pressure her and others to raise more money from investors.
Evidence introduced at trial also showed that Stewart misrepresented Pacific Property Assets’ financial condition, claiming that its business model was still working and that the company was still financially stable and able to raise money through refinancing. In particular, Stewart created and provided to investors fraudulent financial statements, claiming that the company had made millions of dollars in income in the first half of 2008 (it had actually lost millions), and Stewart arranged with Packard to temporarily deposit $2 million dollars into a company bank account to make the company’s cash position look stronger for investors, then quickly withdrew the funds from the account without reflecting the withdrawal in the balance sheet given to investors. Stewart and Packard also concealed from investors the fact that the business had effectively become a Ponzi scheme, using funds from new investors to pay back earlier investors.
In the last investor offering in early 2009, known as the opportunity fund, Stewart told investors that their funds would be used to purchase new real estate properties. In fact, none of the over $9 million raised was used for that purpose. Instead, the money was used to pay earlier investors and banks, to pay Stewart and Packard, and to pay Pacific Property Assets’ bankruptcy attorney. Stewart continued to raise money from investors until late April 2009, when he abruptly informed investors that the company was suspending their monthly interest payments. Several investors testified at trial that even in mid-April 2009, after the company had begun to default on some of its bank and investor loans, Stewart personally solicited investments from them in the opportunity fund, claiming that the company was financially sound and their funds would be used for new real estate projects.
Pacific Property Assets and a group of related companies filed for bankruptcy in June 2009. When the bankruptcy was filed, the company stated that it owed 647 private investors more than $91 million, and it owed banks approximately $100 million. The Chapter 11 trustee appointed in the bankruptcy case later estimated the total investor losses at $169 million, and predicted that investors would receive, at best, “pennies on the dollar” through the bankruptcy process.
Stewart, who was remanded into custody following the verdicts, faces a statutory maximum sentence of 220 years in federal prison when he is sentenced, Nov. 2.
Pacific Property Assets co-owner Packard pleaded guilty to one count of mail fraud in November 2014 and is scheduled to be sentenced Nov. 9.
Garcetti Signs Gun Safety Ordinance
LOS ANGELES — On Aug. 7, Mayor Eric Garcetti signed into law a gun safety measure that bans the possession of large-capacity magazines inside of city limits. This ordinance prohibits the ownership of magazines that hold more than 10 rounds of ammunition.
The measure was introduced by Los Angeles City Councilman Paul Krekorian and passed on July 28.
This law was initially drafted following the tragedy that occurred at Sandy Hook Elementary School in 2013, which resulted in the deaths of 20 children and 6 adults. Over the past 10 years, more than 1 million people have been killed or injured by guns and, on average, a mass shooting has occurred once every two weeks. This measure will not only help prevent mass tragedies, but also reduce gun violence on streets and in neighborhoods.
As this measure was signed into law, the Los Angeles City Council continues debate on two subsequent gun safety measures.