Head of Pioneer Mortgage Admits Widespread Fraud

The head of a San Diego County mortgage investment firm accused of bilking hundreds of retirees out of their life savings pleaded guilty Wednesday to federal fraud and money-laundering charges.

Gary F. Naiman, president and principal owner of Pioneer Mortgage in La Mesa, faces up to 45 years in prison and fines of up to $1.25 million, the U.S. attorney’s office in San Diego said. The three-count guilty plea in U.S. District Court in San Diego also requires Naiman to make restitution to victims, federal prosecutors said.

Although Naiman was indicted for his involvement in a scheme to defraud only one elderly couple, prosecutors said he admitted to charges of engaging in a broad scheme to defraud hundreds of Pioneer investors and others to stave off the firm’s bankruptcy.

About 2,300 investors, many of them retirees from the San Diego Jewish community, lost more than $200 million when the firm collapsed three years ago.

Attracted by the supposed stability of the company and the promise of annual returns of as much as 12%, investors flocked to Pioneer during the 1980s when the real estate market in San Diego flourished. But as the market cooled in the late ‘80s, Naiman claimed that plunging real estate loan rates and tax law changes resulted in huge losses for Pioneer.

Naiman admitted to soliciting new investors without disclosing the true condition of the troubled firm and improperly using those new funds to pay Pioneer’s operating expenses, including making payments to previous investors. He also admitted to systematically transferring money among accounts to create artificial balances to pay Pioneer’s expenses.