-8-
family residences. Gradually, the company shifted to junior deeds
on larger residential and commercial loans, including hotels,
resorts, and undeveloped land in California and Arizona.
Accordingly, in 1990, certain borrowers had not been making
their monthly payments; rather than foreclose on the properties or
notify the Pioneer Mortgage investors, G. Naiman used new
investors’ money to fund the continued flow of purported interest
payments.4 The end result was a financial house of cards dependent
on the influx of new investment dollars. The house of cards could
not survive in the long run.
On January 2, 1992, petitioners filed a civil lawsuit against
G. Naiman and other defendants for, among other things, intentional
misrepresentation, fraudulent concealment, breach of fiduciary
duty, and aiding and abetting/conspiracy.5 A jury verdict was
rendered in favor of petitioners on April 30, 1993. The jury also
awarded punitive damages. On May 12, 1994, G. Naiman was indicted
in Federal Court on charges of mail fraud and money laundering. G.
Naiman pleaded guilty to a scheme to defraud Pioneer Mortgage
4 Newspaper articles portray G. Naiman’s activities as a
typical “Ponzi” scheme. Such a scheme involves a pyramiding
technique by which the earlier investors receive their returns
from the principal of their own funds and from the principal of
later investors.
5 Petitioners’ suit was consolidated with some 850 other
lawsuits filed by Pioneer Mortgage investors seeking return of
investment funds and damages in Mertyle H. Owens Trust v. San
Diego Trust & Savings Bank, Consolidated Case No. 633381, in
Superior Court of California, County of San Diego.
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Last modified: May 25, 2011