While federal investigators examine loans made by Sonoma Valley Bank to Bijan Madjlessi, the Marin County developer is defending himself against criminal charges and a civil lawsuit involving an ill-fated project in Reno.
Last month, he was arrested at his San Rafael office for alleged insurance fraud and released on $750,000 bail. State investigators allege the Mill Valley developer illegally filed two separate insurance claims for a 2008 fire that caused extensive damage at his condo-conversion project in Reno.
The insurance companies claim Madjlessi did not notify them he had filed two claims and collected a total payout of $3.4 million — essentially collecting twice for the same damage.
Madjlessi also is being sued in Marin County by an investor in his Reno development. According to a court transcript, investor Steve Scarpa and his attorney alleged Madjlessi enticed him into investing by exaggerating sales figures at his Nevada real estate development with the use of "straw buyers" — people who appeared to be independent purchasers of his condos but were often family members or business associates who allegedly acted with the developer's financial backing.
They alleged the straw buyers made Madjlessi's project appear more prosperous than was actually the case, according to trial testimony.
Madjlessi declined comment and directed questions to his attorney David Lonich, who denied the allegations.
"The lawsuit is disputed, denied and false," Lonich said. "They are lying."
The grand jury investigation in San Francisco is looking into these allegations, according to the lawsuit filed in Marin County Superior Court by Scarpa.
Several of the alleged straw buyers at the Reno development also purchased units from Madjlessi at the Petaluma and Santa Rosa condo projects that received loans from Sonoma Valley Bank, according to public land records.
Those transactions often attract the attention of criminal investigators, said Ann Fulmer, a bank fraud expert and former white-collar crime prosecutor.
"When the close relationship of the buyer and seller is hidden from the lender, it raises huge red flags," Fulmer said.
Madjlessi's family members and business associates were purchasing the units for their own profit, Lonich said. He denied his client participated in any kind of loan fraud.
"False, false and false," Lonich said.
Madjlessi recently decided not to testify on his own behalf in the Marin County lawsuit because he was concerned about "the risk of self-incrimination" in the grand jury investigation, according to court records.
"It is obvious the Investigation is not complete and that Mr. Madjlessi has no way of knowing what testimony might be used against him at a later time," according to a court document filed by his attorney on June 22.
You can reach Staff Writer Nathan Halverson at 703-1577 or firstname.lastname@example.org.