A trio of Los Angeles-area real estate developers were accused by the federal government of taking $1.3 billion of investor funds that was supposed to be used for hard money loans for their own use.
Robert Shapiro, the owner of the Woodbridge Group of Cos., and two other former company executives were accused of conspiracy to commit mail and wire fraud and other violations of federal law in an April 4 indictment unsealed Thursday in the Southern District of Florida.
Shapiro, Dane R. Roseman and Ivan Acevedo were arrested at their homes and pleaded not guilty in federal court in Los Angeles. Roseman and Acevedo were released on bond.
Shapiro — not to be confused with celebrity attorney Robert L. Shapiro — remained in custody. His home was searched at the time of his arrest, but the search warrant remains under seal.
The Securities and Exchange Commission previously accused Woodbridge and Shapiro of civil violations of securities laws in 2017, and filed a new civil complaint against Roseman and Acevedo on April 11. They were accused of violating securities registration, broker-dealer registration and anti-fraud provisions of federal law.
Ryan O’Quinn, Shapiro’s attorney, said his client “denies the allegations in the indictment and will vigorously defend himself in the appropriate forum.”
Roseman’s attorney did not respond to multiple requests for comment Friday, and Acevedo could not be reached for comment.
Prosecutors said the Ponzi scheme was orchestrated from Woodbridge’s offices throughout the United States, including in Sherman Oaks, where it is headquartered, and in Boca Raton, Fla., where it was previously headquartered.
High-pressure sales tactics were used to secure money for what were promised to be “low risk” and “conservative” investments, but in reality the funds were funneled to real estate owned by Shapiro, according to the U.S. attorney’s office.
Woodbridge eventually became financially insolvent, the scheme began to unravel, and Shapiro in 2017 considering filing for bankruptcy, prosecutors said.
Still, he, Roseman and Acevedo continued to sell the fraudulent investments without telling investors Woodbridge was on the verge of collapse, according to the indictment. From October to December of 2017, they brought in more than $52 million in investor money before filing for Chapter 11 bankruptcy in December 2017.
Prosecutors said filing for bankruptcy caused investors to suffer substantial losses on their $1 billion in principal. At least 2,600 victims invested their retirement savings, totaling about $400 million.
Shapiro siphoned off $35 million for his own benefit, according to prosecutors, spending $3.1 million for chartering private planes and travel, $6.7 million on a home, $2.6 million on home improvements, $1.8 million on personal income taxes, $1.4 million for his ex-wife, and more than $672,000 on luxury automobiles.
Roseman received $2.5 million for himself and Acevedo received $1.1 million, prosecutors said.
The Securities and Exchange Commission’s previous enforcement action in 2017 was settled in January for a total of $1 billion in penalties and disgorgement of ill-gotten gains, the agency said. The defendants — Woodbridge, 281 related companies and Shapiro — did not admit or deny the allegations.
Woodbridge, according to the SEC, told investors it would use their money to make so-called hard money loans — a type of expensive, short-term loan that’s secured by property and is often used by house flippers and other property developers. Instead, the SEC alleges, nearly all of the funds went directly into Shapiro’s and Woodbridge’s own projects.
The case has drawn attention because of some of the luxury properties owned by Woodbridge.
A document filed by Woodbridge in its 2017 bankruptcy case said the company, through limited liability companies, owned 138 properties ranging in value from $50,000 to $150 million. A Woodbridge representative said at the time that about 50 of those properties are in the Los Angeles area, and most of the rest in Colorado.
One property that was known to be among Woodbridge’s holdings is the historic Owlwood estate in Holmby Hills, a former home of actor Tony Curtis and singing duo Sonny and Cher.
Woodbridge acquired the property for $90 million and listed it in 2017 at twice that as a development opportunity. The home returned to the market in September 2018 at a reduced $115 million.
In December, another home acquired by Woodbridge, a modern mansion in the Mount Olympus area of Los Angeles, sold for $29.5 million.
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