Feds: Plaza Mariachi, Auto Masters owner led multi-million-dollar bank fraud scheme
The owner of used car dealership group Auto Masters and popular South Nashville event center Plaza Mariachi was indicted by a federal court this week in a case including nearly two dozen charges of bank fraud in what the U.S. Attorney's office said was a multi-million-dollar scheme.
Mahan (Mark) Janbakhsh, 47, of Brentwood, and Steven L. Piper, 51, of Joelton, were arrested Thursday morning by the FBI. They are expected to appear before a federal judge later Thursday. Janbakhsh previously owned Auto Masters, but the company was purchased by the unrelated Freeland Auto Group after he filed for bankruptcy in late 2017.
The current owners of the company distanced themselves from the allegations on Thursday.
"We're business as usual," Auto Masters Chief Operating Officer Nick Rice told The Tennessean on Thursday afternoon. "Anything he has done in his past has no bearing on how our operations are proceeding at this time."
Janbakhsh on Thursday said he denied the allegations and planned to "vigorously defend himself against" them, through an emailed statement sent by a representative from his attorney's office
He pleaded not guilty in his first appearance before U.S. District Magistrate Judge Barbara D. Holmes on Thursday. It was not immediately clear how Piper pleaded as of Friday morning.
Fake vehicles, outdated customer information
Janbakhsh and Piper are accused of conspiring to defraud two banks, Capital One and First Tennessee Bank (now known as First Horizon).
Investigators found the pair used a used car dealership chain in the Nashville area, Auto Masters, to overstate their collateral by more than $37 million and defraud the banks out of huge lines of credit — $24 million in total — based on the falsified collateral.
Janbakhsh was the majority owner of nine used car dealerships and six related finance companies in Middle Tennessee that did business as Auto Masters. Piper, a certified public accountant, was the chief financial officer of all the Auto Masters entities and prepared the tax returns for Auto Masters and for Janbakhsh personally, according to details released by the U.S. Attorney's office.
Auto Masters' current owners, Freeland Auto Group, purchased the company's name and logo in 2018, as well as its automotive inventory. The business’ previous loan portfolio was not a part of the purchase, a representative from the company confirmed by email on Thursday evening.
"The previous owners’ actions are deeply disappointing and are no reflection on our organization or its leadership today," a statement from the company reads.
Charges mirror settled bankruptcy claims
They've been charged each with five counts of defrauding these financial institutions; five counts of making false statements and over-valuing property and securities for the purpose of influencing these financial institutions; and three counts of making false representations during official proceedings.
Separately, Janbakhsh faces a charge of witness tampering and Piper three counts of filing false tax returns.
Janbakhsh and Piper are accused of misusing Auto Masters' sideline of providing car loans financed through lines of credit from the banks. Investigators say they falsely inflated numbers in monthly reports on the total value of eligible loans that made up the collateral for that credit.
Investigators found the reports included delinquent loans that appeared current, duplicated vehicle identification numbers, vehicles that had been repossessed, vehicles that had been paid off and information from customers who applied for loans but were rejected.
In October 2017, Piper submitted another report to Capital One disclosing that Auto Masters had overstated its collateral by over $33 million, records show. In that filing, the company admitted it it had drawn more than $26.4 million more than it was permitted to.
A week later, the company filed for bankruptcy. During those hearings, investigators believe the pair falsely testified they had no knowledge of the false information.
But, Janbakhsh's attorney's office said Thursday, there's more to the story.
Auto Masters, at the time owned by Janbakhsh, entered a loan agreement with Capital One in 2011, Janbakhsh's legal team wrote in a statement provided to The Tennessean. The agreement's backing included stock collateral as well as a personal guaranty by Janbakhsh.
Six years later, Capitol One began to remove itself from parts of the auto market and called in its line of credit from Auto Masters. While attempting to refinance, Janbakhsh "discovered that a collateral shortfall had developed," according to his statement
The discrepancy was reported to Capital One, all parties agree. Shortly afterward, the bank sued to foreclose on the dealership's collateral, prompting the 2017 bankruptcy filing, Janbakhsh's statement indicated.
Bankruptcy proceedings were settled with a $10.2 million payment in August 2019, according to Janbakhsh.
"Since then, Mark has been active in the philanthropic world, attempting to serve Nashville and better the lives of its residents," his statement indicates.
Janbakhsh maintains he did not operate a scheme to defraud nor improperly withdraw money from the dealerships for his own use.
A release from the U.S. Attorney's office stated that during the bankruptcy proceedings, Janbakhsh tried to pay the former Auto Masters portfolio manager $10,000 and promised him an additional sum of approximately $300,000 to leave the area and not give further information to federal agents.
Janbakhsh did not address that allegation in his emailed statement.
Piper is also accused of underreporting his income in personal taxes in 2016, 2017 and 2019, the indictment shows.
The government has asked the court to seize and forfeit all proceeds from any crimes.
The charges against the pair carry penalties of up to 30 years in prison and a $1 million fine, if convicted.
This article originally appeared on Nashville Tennessean: Feds: Plaza Mariachi owner charged in bank fraud scheme