Inside The $1.34-billion Real Estate Scandal That Rocked Sleepy Laguna Beach

When Laguna Beach existent property mogul Mohammad Honarkar sewage into financial problem during nan pandemic, he turned to a section investor for thief — but it didn’t move retired arsenic he planned.

The associated task he formed pinch nan investor soon collapsed. Amid nan fallout, Honarkar mislaid possession of astir of his properties, including nan historical Hotel Laguna, wherever a public scuffle had surgery out successful 2023 betwixt his information squad and guards moving for nan partner who wrested power of nan landmark.

Three years later, Honarkar is claiming vindication aft winning a $1.34-billion arbitration award against nan investor, Mahender Makhijani, 44, of Corona del Mar, who was arrested June 10 by national authorities for alleged slope fraud involving a $100-million indebtedness default.

Makhijani was successful custody past week and is owed to participate a plea July 6. His criminal defense attorneys declined to remark past week.

The high-profile Laguna Beach business conflict has roiled nan able seaside community, wherever Honarkar owned an area portfolio that included hotels, shops, restaurants and picnic rentals that were taken complete by Makhijani and his associates successful what Honarkar’s attorneys person described arsenic 1 of nan largest commercialized existent property scandals successful Southern California history.

“I don’t callback thing for illustration that ever happening wherever group felt nan request for equipped guards successful a twelve properties passim Laguna Beach,” said Heidi Miller, 71, a shopkeeper who rented from Honarkar and has lived successful nan organization for decades. “It was for illustration a dispute takeover. It’s conscionable been really tragic and sad for Laguna Beach.”

Footage of Corona del Mar businessman Mahender Makhijani, captured during a May 2023 confrontation astatine Hotel Laguna, is included successful a title successful nan U.S. District Court.

(Department of Justice)

While Makhijani is not good known extracurricular Orange County existent property circles, nan Indian migrant built up a thriving distressed-assets business complete nan past decade that attracted salient Southern California existent property investors.

Makhijani’s business fueled a lifestyle, prosecutors said, that included 2 multimillion-dollar homes successful Corona del Mar, a luxury flat successful Newport Beach and exotic vehicles that included a Bentley, Porsche and Mercedes G-Wagon. Prosecutors person not afloat traced his assets, which they believed are not held successful his sanction and immoderate of which whitethorn beryllium successful India.

However, national authorities say, Makhijani’s business was built connected thing much sinister: threats of unit against anyone who crossed him.

The businessman employed an array of ammunition companies and strawmen to motion documents connected his behalf existent and fake, and to guidelines successful for him arsenic operators of his companies, according to an affidavit revenge by a national supplier successful support of nan criminal complaint.

Makhijani told an subordinate he wanted to insulate himself from litigation, because “they were sharks successful nan distressed world who took advantage of people,” nan affidavit stated.

Prosecutors allege that Makhijani arranged for 1 of his labor to supply bogus collateral for a $100-million commercialized indebtedness by falsifying documents professing to show nan slope — Arizona-based Western Alliance — had first lien authorities if nan indebtedness went bad, nan affidavit said.

“When criminals are allowed to deceive lenders, nan spillover effects tin harm consumers and businesses,” First Assistant U.S. Atty. Bill Essayli said successful a connection announcing nan June 10 arrest.

A erstwhile Makhijani worker — who claimed he was threatened pinch decease if he crossed nan businessman — said that nan defrauded slope would “bend nan rules” for Makhijani owed to its narration pinch him, according to nan affidavit. The slope was not accused of immoderate wrongdoing.

A institution spokesperson said, “Western Alliance was nan unfortunate of fraud.”

The worker besides told prosecutors that Makhijani hosted parties pinch activity workers and narcotics that were attended by existent aliases erstwhile slope workers, nan affidavit states. It does not place nan institution.

The affidavit cites a conflict Makhijani had pinch a “businessman” arsenic grounds of really he “used unit and threats successful anterior business dealings.”

Though nan businessman is not identified, nan specifications of nan conflict lucifer Honarkar’s case.

“Obviously I consciousness justness yet came true. I went done a really difficult clip to beryllium my case,” said Honarkar, 68, who is hoping he tin get immoderate of his properties back, including nan Hotel Laguna, now successful foreclosure.

Honarkar, an Iranian migrant who graduated from UC Irvine successful 1983, made his first luck pinch a cellular telephone retailer he founded and sold to Verizon Wireless successful 2016. He past amassed his existent property portfolio.

After buying nan Hotel Laguna successful 2019, Honarkar had group astir renovating nan the Mediterranean-style edifice that was erstwhile a favourite of specified Hollywood celebrities arsenic Bette Davis and Errol Flynn. But earlier he could decorativeness nan job, nan pandemic squeezed his rate flow.

He was incapable to make payments connected a $195-million loan. He besides was going done a contentious divorcement and owed his woman $17.5 cardinal to clasp nan family location wherever he had raised 2 children.

“I worked really difficult to build my portfolio successful existent estate, and was genuinely unfortunate that during nan COVID [pandemic] I was besides dealing pinch divorce, which led to nan request for financing — and nan full point started there,” he said.

Honarkar sought financing from a mini Irvine commercialized lender called Nano Bank, but was referred to Makhijani, who was progressive successful its management, according to nan arbitrator.

Honarkar entered into nan associated task successful 2021. It required him to lend a information of his ownership interests successful much than 2 twelve properties, including nan hotel, successful speech for $30 cardinal successful capital. Makhijani besides would pat his connections to refinance nan $195-million loan.

He mislaid his location but nan ample indebtedness was refinanced. Two years later, Honarkar said he discovered thing amiss: a $20-million indebtedness had been taken retired by nan associated task a time earlier it had been established successful 2021 — and was secured by 4 of his properties, nan arbitrator found.

Unbeknownst to him, Honarkar’s properties had unwittingly helped finance his partners’ superior publication to nan associated venture, according to nan arbitrator.

Growing suspicious, Honarkar successful March 2023 demanded entree to nan venture’s books and records, and later recovered different transactions involving his properties of which he was unaware.

His records request brought astir what Honarkar described arsenic an contiguous run of retaliation.

He said that a mobile advertisement was driven astir Laguna Beach pinch a photograph of Honarkar and nan connection “CORRUPTION??” — an incident cited successful nan national affidavit.

There were 2 altercations astatine nan Hotel Laguna, including nan May 2 scuffle betwixt nan 2 information teams. Citing footage, prosecutors said Makhijani was astatine nan edifice that time and appeared to beryllium successful command. One of Makhijani’s associates was arrested during nan confrontation.

In precocious June, a group of equipped individuals took complete a edifice Honarkar had operated for years astatine nan Laguna Beach Festival of Arts. The arbitrator recovered nan spot had not moreover been contributed to nan associated task and granted Honarkar $6.5 cardinal arsenic portion of nan $1.34-billion award.

Then, nan adjacent month, Makhijani’s associates — dressed successful achromatic — collapsed into Honarkar’s business and removed bankers boxes and records, according to nan arbitrator, who awarded Honarkar much than $398,000 successful damages for that incident.

Honarkar said he felt Makhijani and his associates were retired to destruct him.

“To maine if a business doesn’t work, they should beryllium bully capable to shingle hands and locomotion away,” he said.

The conflict was sent to arbitration successful 2023. Honarkar accused his partners of fraud, breach of statement and different misdeeds, while they made claims against him, including interference pinch contractual relations and trespassing, nan arbitrator stated.

In May 2025 arbitrator David Thompson sided pinch Honarkar connected virtually each nan disputed issues.

He recovered nan existent property investor had had been “fraudulently induced” to participate into nan associated task and awarded him $9.2 cardinal successful ineligible fees and nan correct to unwind nan task and activity damages.

In a 2nd proceeding held to find damages, Thompson awarded Honarkar nan $1.34 billion, including $316 cardinal for nan nonaccomplishment of his properties.

Thompson noted that virtually each of nan properties Honarkar had contributed to nan task were mislaid to creditors aft Makhijani and his associates collected rent from them, but grounded to salary loans, leases and taxes.

“In fact, Makhijani told Honarkar, ‘I will destruct each 1 of [the properties] earlier you tin put your manus connected them,’” Thompson’s determination states. “The undisputed grounds ... demonstrated location were fundamentally nary (joint venture) properties aliases spot liking lefts for Honarkar to recover.”

The arbitrator besides recovered that Nano Bank was liable for fraud, concealing nan $20-million indebtedness from Honarkar.

Nano Bank reached a abstracted undisclosed colony pinch Honarkar this year. It did not respond to a petition for comment.

Attorneys who represented Makhijani successful nan arbitration did not respond to messages for comment.

While nan national title does not sanction nan slope that issued nan $100-million loan, it cites a circumstantial fraud suit revenge by nan bank, which identifies it arsenic Western Alliance.

The slope was 1 of 2 institutions that revenge lawsuits past twelvemonth alleging title fraud related to defaulted loans issued to entities nan arbitrator tied to Makhijani.

The FBI raided Makhijani’s offices successful September, 1 period aft Western Alliance revenge suit.

The different slope was Utah-based Zions Bankcorporation, which besides sued complete properties pinch bogus collateral connected to Makhijani, immoderate of which Honarkar had contributed to nan associated venture.

The $1.34-billion arbitration grant must still beryllium confirmed by an Orange County Superior Court judge. Makhijani’s attorneys are seeking to get it thrown out, citing alleged errors made by nan arbitrator, tribunal documents show.

Aaron May, an lawyer for Honarkar, said that if nan grant is confirmed, he will activity to retrieve his client’s properties and to way down Makhijani’s assets.

“We started a process of identifying assets of his and person located immoderate assets successful nan United States. We are exploring locating assets successful India to spot if we tin retrieve connected those assets arsenic well,” he said.

Meanwhile, nan Hotel Laguna spot is now being managed by a receiver, but Honarkar said he is hopeful he tin repurchase it and finishing nan renewal of nan edifice first built successful nan 1880s.

“We’re hoping that thing will hap soon,” said Honarkar, who astatine times wanted to springiness up nan ineligible conflict against Makhijani but was encouraged by his family to spell on. “For 5 years of my life I’ve dealt pinch this nonsense.”