A 44-year-old Corona del Mar man suspected of defrauding a bank out of nearly $100 million by manipulating title policies to make collateral that had been pledged to the bank look more valuable than it truly was, was arrested Wednesday on federal charges.
According to an affidavit filed with the complaint, Mahender Makhijani controls Cantor Group V LLC, a Newport Beach-based company with a lending relationship with what was described in the complaint as Bank #1
Under the terms of their agreement, Bank #1 advanced nearly $100 million to Cantor for Cantor to originate or buy loans secured by real estate. Cantor was supposed to then pledge the loans it secured, and their underlying collateral, to Bank #1, paying back the bank from the loans’ proceeds.
Their agreement’s terms required Cantor to only pledge to Bank #1 loans in which Cantor had secured the first lien in the underlying collateral, which would make Bank #1 first in line to foreclose on the underlying property should the loan’s borrower be in default.
By contrast, a second or later lien is worth much less as collateral because Bank #1’s ability to foreclose on the property would be subordinated to other creditors.
Makhijani is accused of manipulating title documents to inflate the value of collateral for the loans, prosecutors said.
Schemes like the one alleged “pose a significant risk to banks the nation’s financial system,” said Ryan Korner, special agent in charge with the Federal Deposit Insurance Corporation Office of Inspector General.