When Laguna Beach real estate mogul Mohammad Honarkar got into financial trouble during the pandemic, he turned to a local investor for help — but it didn’t turn out as he planned.
The joint venture he formed with the investor soon collapsed. Amid the fallout, Honarkar lost possession of most of his properties, including the historic Hotel Laguna, where a public scuffle had broken out in 2023 between his security team and guards working for the partner who wrested control of the landmark.
Three years later, Honarkar is claiming vindication after winning a $1.34-billion arbitration award against the investor, Mahender Makhijani, 44, of Corona del Mar, who was arrested June 10 by federal authorities for alleged bank fraud involving a $100-million loan default.
Makhijani was in custody last week and is due to enter a plea July 6. His criminal defense attorneys declined to comment last week.
The high-profile Laguna Beach business dispute has roiled the affluent seaside community, where Honarkar owned an area portfolio that included hotels, shops, restaurants and vacation rentals that were taken over by Makhijani and his associates in what Honarkar’s attorneys have described as one of the largest commercial real estate scandals in Southern California history.
“I don’t recall anything like that ever happening where people felt the need for armed guards in a dozen properties throughout Laguna Beach,” said Heidi Miller, 71, a shopkeeper who rented from Honarkar and has lived in the community for decades. “It was like a hostile takeover. It’s just been really tragic and sad for Laguna Beach.”
While Makhijani is not well known outside Orange County real estate circles, the Indian immigrant built up a thriving distressed-assets business over the last decade that attracted prominent Southern California real estate investors.
Makhijani’s business fueled a lifestyle, prosecutors said, that included two multimillion-dollar homes in Corona del Mar, a luxury apartment in Newport Beach and exotic vehicles that included a Bentley, Porsche and Mercedes G-Wagon. Prosecutors have not fully traced his assets, which they believed are not held in his name and some of which may be in India.
However, federal authorities say, Makhijani’s business was built on something more sinister: threats of violence against anyone who crossed him.
The businessman employed an array of shell companies and strawmen to sign documents on his behalf real and fake, and to stand in for him as operators of his companies, according to an affidavit filed by a federal agent in support of the criminal complaint.
Makhijani told an associate he wanted to insulate himself from litigation, because “they were sharks in the distressed world who took advantage of people,” the affidavit stated.
Prosecutors allege that Makhijani arranged for one of his employees to provide bogus collateral for a $100-million commercial loan by falsifying documents professing to show the bank — Arizona-based Western Alliance — had first lien rights if the loan went bad, the affidavit said.
“When criminals are allowed to deceive lenders, the spillover effects can harm consumers and businesses,” First Assistant U.S. Atty. Bill Essayli said in a statement announcing the June 10 arrest.
A former Makhijani employee — who claimed he was threatened with death if he crossed the businessman — said that the defrauded bank would “bend the rules” for Makhijani due to its relationship with him, according to the affidavit. The bank was not accused of any wrongdoing.
A company spokesperson said, “Western Alliance was the victim of fraud.”
The employee also told prosecutors that Makhijani hosted parties with sex workers and drugs that were attended by current or former bank workers, the affidavit states. It does not identify the institution.
The affidavit cites a dispute Makhijani had with a “businessman” as evidence of how he “used force and threats in prior business dealings.”
Though the businessman is not identified, the details of the dispute match Honarkar’s case.
“Obviously I feel justice finally came true. I went through a really difficult time to prove my case,” said Honarkar, 68, who is hoping he can get some of his properties back, including the Hotel Laguna, now in foreclosure.
Honarkar, an Iranian immigrant who graduated from UC Irvine in 1983, made his initial fortune with a cellular phone retailer he founded and sold to Verizon Wireless in 2016. He then amassed his real estate portfolio.
After buying the Hotel Laguna in 2019, Honarkar had set about renovating the the Mediterranean-style hotel that was once a favorite of such Hollywood celebrities as Bette Davis and Errol Flynn. But before he could finish the job, the pandemic squeezed his cash flow.
He was unable to make payments on a $195-million loan. He also was going through a contentious divorce and owed his wife $17.5 million to retain the family home where he had raised two children.
“I worked really hard to build my portfolio in real estate, and was truly unfortunate that during the COVID [pandemic] I was also dealing with divorce, which led to the need for financing — and the whole thing started there,” he said.
Honarkar sought financing from a small Irvine commercial lender called Nano Bank, but was referred to Makhijani, who was involved in its management, according to the arbitrator.
Honarkar entered into the joint venture in 2021. It required him to contribute a portion of his ownership interests in more than two dozen properties, including the hotel, in exchange for $30 million in capital. Makhijani also would tap his connections to refinance the $195-million loan.
He lost his home but the large loan was refinanced. Two years later, Honarkar said he discovered something amiss: a $20-million loan had been taken out by the joint venture a day before it had been established in 2021 — and was secured by four of his properties, the arbitrator found.
Unbeknownst to him, Honarkar’s properties had unwittingly helped finance his partners’ capital contribution to the joint venture, according to the arbitrator.
Growing suspicious, Honarkar in March 2023 demanded access to the venture’s books and records, and later found other transactions involving his properties of which he was unaware.
His records demand brought about what Honarkar described as an immediate campaign of retaliation.
He said that a mobile billboard was driven around Laguna Beach with a photo of Honarkar and the word “CORRUPTION??” — an incident cited in the federal affidavit.
There were two altercations at the Hotel Laguna, including the May 2 scuffle between the two security teams. Citing footage, prosecutors said Makhijani was at the hotel that day and appeared to be in command. One of Makhijani’s associates was arrested during the confrontation.
In late June, a group of armed individuals took over a restaurant Honarkar had operated for years at the Laguna Beach Festival of Arts. The arbitrator found the property had not even been contributed to the joint venture and granted Honarkar $6.5 million as part of the $1.34-billion award.
Then, the next month, Makhijani’s associates — dressed in black — broke into Honarkar’s business and removed bankers boxes and records, according to the arbitrator, who awarded Honarkar more than $398,000 in damages for that incident.
Honarkar said he felt Makhijani and his associates were out to destroy him.
“To me if a partnership doesn’t work, they should be nice enough to shake hands and walk away,” he said.
The dispute was sent to arbitration in 2023. Honarkar accused his partners of fraud, breach of contract and other misdeeds, while they made claims against him, including interference with contractual relations and trespassing, the arbitrator stated.
In May 2025 arbitrator David Thompson sided with Honarkar on virtually all the disputed issues.
He found the real estate investor had had been “fraudulently induced” to enter into the joint venture and awarded him $9.2 million in legal fees and the right to unwind the venture and seek damages.
In a second proceeding held to determine damages, Thompson awarded Honarkar the $1.34 billion, including $316 million for the loss of his properties.
Thompson noted that virtually all of the properties Honarkar had contributed to the venture were lost to creditors after Makhijani and his associates collected rent from them, but failed to pay loans, leases and taxes.
“In fact, Makhijani told Honarkar, ‘I will destroy every one of [the properties] before you can put your hand on them,’” Thompson’s decision states. “The undisputed evidence … demonstrated there were essentially no (joint venture) properties or property interest lefts for Honarkar to recover.”
The arbitrator also found that Nano Bank was liable for fraud, concealing the $20-million loan from Honarkar.
Nano Bank reached a separate undisclosed settlement with Honarkar this year. It did not respond to a request for comment.
Attorneys who represented Makhijani in the arbitration did not respond to messages for comment.
While the federal complaint does not name the bank that issued the $100-million loan, it cites a specific fraud lawsuit filed by the bank, which identifies it as Western Alliance.
The bank was one of two institutions that filed lawsuits last year alleging title fraud related to defaulted loans issued to entities the arbitrator tied to Makhijani.
The FBI raided Makhijani’s offices in September, one month after Western Alliance filed suit.
The other bank was Utah-based Zions Bankcorporation, which also sued over properties with bogus collateral connected to Makhijani, some of which Honarkar had contributed to the joint venture.
The $1.34-billion arbitration award must still be confirmed by an Orange County Superior Court judge. Makhijani’s attorneys are seeking to get it thrown out, citing alleged errors made by the arbitrator, court documents show.
Aaron May, an attorney for Honarkar, said that if the award is confirmed, he will seek to recover his client’s properties and to track down Makhijani’s assets.
“We started a process of identifying assets of his and have located some assets in the United States. We are exploring locating assets in India to see if we can recover on those assets as well,” he said.
Meanwhile, the Hotel Laguna property is now being managed by a receiver, but Honarkar said he is hopeful he can repurchase it and finishing the renovation of the hotel first built in the 1880s.
“We’re hoping that something will happen soon,” said Honarkar, who at times wanted to give up the legal battle against Makhijani but was encouraged by his family to go on. “For five years of my life I’ve dealt with this nonsense.”
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