SACRAMENTO, CA - An FBI agent investigating a suspected $100 million real estate Ponzi scheme said the man at the center of the probe admitted deceiving his investors.
Lawrence Leland "Lee" Loomis, 52, is the founder of Loomis Wealth Solutions and several related companies that the FBI and IRS believe defrauded hundreds of investors and lenders in a multi-layered investment scheme.
Among the allegations is that Loomis lulled investors in his NARAS fund into thinking their money was safe by sending them false statements indicating a steadily-increasing balance. Loomis' literature promised a 12% annual return.
FBI special agent Kathleen Nicolls said Loomis admitted the NARAS statements were false during an interview on August 15, eleven days before federal agents searched his Roseville offices and Granite Bay home. Agents hauled away hundreds of boxes of documents and dozens of computers.
The revelation came in a civil complaint filed Tuesday in Sacramento federal court seeking to liquidate $462,300 in cash seized by court order last summer from two Washington Mutual bank accounts controlled by Loomis. The civil complaint sets the stage for a possible criminal indictment.
The forfeiture action lays out additional elements of the alleged fraud, including builder bailouts.
Nicolls said Loomis and his associates approached new home and condominium builders in California, Nevada, Arizona, Colorado and Florida and bought distressed properties in bulk at substantial discounts. In an almost simultaneous transaction, Loomis would then sell the properties to his investors at up to double his cost, she said. Bank financing was obtained using inflated appraisals and fraudulent loan documents with Loomis and his associates pocketing the difference, according to Nicolls.
Victims of the scheme told News10 Loomis promised to cover their mortgage, taxes, insurance and homeowners dues by placing tenants in the properties they purchased. In addition they were promised a payment of several hundred dollars a month.
In a classic Ponzi scheme, payments to early investors are covered by new money brought in by subsequent investors. The FBI said the Loomis scheme began collapsing last spring when the payments stopped.
One Sacramento-area woman who asked not to be identified said she and her husband bought four homes and condos in California, Arizona and Florida in 2007 and 2008. She said three of the four were never rented and cash flow from the fourth doesn't cover the expenses. All four properties are now in foreclosure. The couple also invested $350,000 in Loomis' NARAS fund, which they suspect is lost.
The woman told News10 Loomis was extremely convincing while conducting his wealth seminars. "This has really rocked our sense of good judgment. We don't know who to trust," she said.
The purpose of the civil forfeiture suit is to allow victims a chance to claim at least a portion of the money they lost in the alleged fraud.
Although four people associated with Loomis Wealth Solutions face multiple felony charges, Lee Loomis himself has not been charged with a crime.
One of the suspects, Christopher Warren, 26, fled the country aboard a private jet after posting an online confession implicating Loomis Wealth Solutions in fraudulent activity.
During the August 15 interview with the FBI, Loomis admitted knowing Warren engaged in fraud while he worked for Loomis Wealth Solutions. But Loomis told investigators he never reported the fraud because he believed they were isolated incidents.
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2/12/2009: Sacramento Fraud Fugitive a "Big Fat Liar?"
2/11/2009: Sacramento Fraud Fugitive Caught at U.S. Border
2/10/2009: Mortgage Fraud Fugitive Caught in Spain
2/10/2009: Mortgage Fraud Fugitives Pitched Radio Talk Show
2/8/2009: How a Crooked "Flipper" Made $275,000 in One Day
2/6/2009: Second Warrant Issued in $100M Fraud
2/5/2009: Mortgage "Fraudster" Flees on Private Jet
2/2/2009: Mortgage Fraud Insider Apologizes