Mahender Makhijani arrested for $100 million bank fraud

Mahender Makhijani, an Indian national who resides in Corona del Mar, and might resemble a character out of a 1980’s Bollywood gangster movie, was arrested and charged with multiple counts of fraud that could amount to over one hundred million dollars.

If convicted, Makhijani could face up to 30 years in federal prison.

Makhijani has drawn significant media overage over the past year for his numerous debaucheries that include holding several salacious parties and even physical melees between private, armed security guards at not one, but two luxurious Laguna Beach hotels.

The criminal compliant and indictment calls attention to Makhijani’s hedonistic lifestyle including the use of private jets, staying in multiple multi-million dollar homes, luxury apartments, and owning a fleet of luxury vehicles includes a Bentley, Porsche, and Mercedes.

Although not named in the indictment, several sources have named Western Alliance as the victimized.

Western Alliance sued Cantor Group V last August, an entity with links to Makhijani, alleging fraud related to commercial real estate loans and their cash proceeds.

In an April quarterly earnings call, that it believes "recoveries on this loan will be realized in the future from multiple sources," Stephanie Whitlow, Western Alliance's chief marketing officer, wrote in an email.

Makhijani has a long list of grievances, including many civil cases from investors who claimed Makhijani not only defrauded them, but made physical threats against them.

Prosecutors are accusing Makhijani of falsifying loan documents and title insurance reports on multiple properties owned by other investors to make it look as if his company held first liens on the properties.

According to Albro L. Lundy III, a partner and trial lawyer at Baker, Burton, and Lundy, a law firm located in Los Angeles, Makhijani defrauded over 100 individual investors.  

"It was a fraud on banks and individual investors," Lundy told American Banker. "He encumbered properties owned by other investors, and couldn't keep the fraud going because it was similar to a Ponzi scheme."

Zions Bank, in Salt Lake City, and Preferred Bank, in Los Angeles, acted as guarantors on a warehouse line from Western Alliance, according to Lundy.

Zions is seeking to recover $60 million.

In a separate lawsuit, Lundy, a very busy man, sued both Western Alliance and California Bank & Trust - a wholly own division of Zion - alleging loan advances were issued to Cantor V (one of Makhijani’s companies), that were ineligible due to loan agreements. The lawsuit(s) allege the banks made loan advances that were “grossly negligent or with intentional malfeasance.”

Preferred said in February that it downgraded to nonaccrual status a large relationship involving $115 million of loans backed by multifamily and commercial real estate properties.

Preferred states it downgraded, to nonaccrual status, a large business relationship involving $115 million of loans backed by multifamily and commercial properties.

Makhijani had been out of the country for the past month and, for unknown reasons, decided to return when prosecutors arrested him.

Makhijani controlled two Newport Beach companies, Cantor V and Continuum Analytics, that an arbitrator found last month had breached financial agreements.

An arbitrator, retired judge David A. Thompson, awarded $1.34 billion to a Laguna Beach businessman, Mohammad Honarkar, who alleged that Makhijani "fraudulently induced" him into a real estate joint venture.

"The award reflects both the scale of the real estate portfolio involved and the years of litigation required to uncover the full scope of the misconduct," said Aaron May, a partner at the law firm Halpern May Ybarra Gelberg. That dispute arose from a 2021 joint venture in which Honarkar agreed to contribute interests in multiple commercial properties in exchange for a promised $30 million equity contribution and refinancing support from entities affiliated with Makhijani.

About two dozen properties in Southern California, including Hotel Laguna, a well-known Spanish-style hotel on Pacific Coast Highway in Laguna Beach, that were part of Makhijani's fraud on investors have fallen in foreclosure or receivership.

Makhijani continually forged title insurance reports to falsely state his company, Cantor V, was in a first lien position on multiple properties. This allowed him to access a $100 million warehouse line to originate or buy mortgage loans.

The pledged loans and cash proceeds are the collateral pledged to the bank, and Western Alliance believed it had first-lien priority.

The DOJ's 38-page criminal complaint states that a "review of bank records or analysis of such records has confirmed that Makhijani is involved in suspicious movement of funds that appear designed to conceal the source and nature of the funds."

"It was a huge scam," said Lundy, the attorney representing investors. "We are investigating how the banks allowed this to happen."