July 4, 2007

Former Cal State athlete gets five years in real estate scam

The Associated Press

SANTA ANA -- A former Cal State Fullerton baseball player who hired onetime Dodgers star Steve Garvey to help promote his business was sentenced to five years in prison for duping more than 200 investors out of $32 million through a real estate scam.

Salvatore Favata also was ordered on Monday to compensate his victims at a rate of $10,000 a month when he is released from prison and attend drug abuse and gamblers' anonymous meetings.

Favata, of Yorba Linda, was president of Orange-based National Consumer Mortgage, which legitimately funded home loans, when he persuaded clients to refinance their homes and use the cash and other assets to invest in another arm of the company. He promised returns of as much as 60 percent a year.

But an investigation, triggered by the Securities and Exchange Commission, found that instead of investing the money, Favata was paying earlier investors with funds from new investors in what is known as a Ponzi scheme. Favata also was using the funds to pay gambling debts, living expenses and the expenses of his mortgage company, federal officials said.

The scheme took place between 2001 and 2006, according to officials.

Garvey, who had been hired as a pitchman for the legitimate loan business and was unaware of the scheme, was in court Monday to show support for Favata. Investors who lost money in the scheme also were there, some arguing for less prison time so Favata could get to work and start repaying the money faster.