What we know after Plaza Mariachi, ex-Auto Masters owner's fraud indictment

Nashville businessman Mahan "Mark" Janbakhsh, owner of Plaza Mariachi and former owner of Auto Masters, was charged Thursday in what federal investigators called a multi-million-dollar bank fraud scheme.

Also charged was former Auto Masters chief financial officer Steven L. Piper.

Janbakhsh, 47, of Brentwood, and Piper, 51, of Joelton, were arrested Thursday morning by the FBI.

Janbakhsh denied the allegations in a statement sent to The Tennessean on Thursday.

Is Auto Masters in trouble in this case?

No. The current owners of the Auto Masters chain were not included in these charges.

Freeland Auto Group bought the company in 2018 after Janbakhsh filed for bankruptcy. Although they bought the company's name, logo and stock, a representative confirmed to The Tennessean on Thursday they did not buy the former loan portfolio and have no connection with how things were previously run.

"The previous owners’ actions are deeply disappointing and are no reflection on our organization or its leadership today," a statement from the company read.

FEDS:Plaza Mariachi, Auto Masters owner led multi-million-dollar bank fraud scheme

Does this affect Plaza Mariachi?

No business operations tied to Plaza Mariachi or Janbakhsh's other businesses are mentioned in the federal indictment.

A spokesperson for Plaza Mariachi said Friday that operations will continue as normal. The same is true for the Hispanic Family Foundation and Activa Nashville, a Spanish-format radio station, that Janbakhsh helped launch. Both are headquartered at Plaza Mariachi.

Since a 2019 bankruptcy settlement, "Mark has been active in the philanthropic world, attempting to serve Nashville and better the lives of its residents," a representative of his defense told The Tennessean.

What's the story?

Janbakhsh and Piper are accused of conspiring to defraud two banks, Capital One and First Tennessee Bank (now known as First Horizon).

Investigators claim 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 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.

What are they charged with?

Janbakhsh and Piper are each charged 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 faces 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.

Janbakhsh's defense said he denies all allegations. A listed attorney for Piper declined comment when reached by phone.

What was the agreement with Capital One?

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, Capital 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.

In October 2017, Piper submitted another report to Capital One disclosing that Auto Masters had overstated its collateral by over $33 million, court records show. In that report, the company admitted it it had drawn $26.4 million more than it was permitted.

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 insists everything was above board and the bankruptcy proceedings were settled with a $10.2 million payment in August 2019, according to his statement.

What else are they accused of?

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.

How did they plead?

Janbakhsh and Piper pleaded not guilty in their initial appearances before a federal magistrate judge on Thursday in Nashville.

The next hearing in the case had not been set as of Friday afternoon.

Reporter Rachel Wegner contributed to this story.

This article originally appeared on Nashville Tennessean: Plaza Mariachi, ex-Auto Masters owner fraud indictment: What we know