Laguna Beach real estate magnate Mohammad Honarkar faced a significant financial challenge during the pandemic. He sought assistance from a local investor, hoping for relief, but his expectations shattered as the joint venture with the investor fell apart. Consequently, Honarkar lost control of most of his properties, including the historic Hotel Laguna, which became the scene of a public confrontation in 2023. This incident involved a clash between his security staff and guards employed by his partner who took over the landmark.
Fast forward three years, Honarkar emerged victorious with a $1.34 billion arbitration award against the investor, Mahender Makhijani. Makhijani, aged 44, residing in Corona del Mar, faced charges of alleged bank fraud related to a $100 million loan default and was arrested by federal authorities on June 10. He remains in custody and is scheduled to enter a plea on July 6. His defense attorneys refrained from commenting last week.
The prominent business conflict in Laguna Beach has agitated the affluent coastal community. Honarkar possessed an extensive portfolio in the area that included hotels, shops, restaurants, and vacation rentals. These properties were taken over by Makhijani and his associates. Honarkar’s legal team described this takeover as one of Southern California’s most significant commercial real estate scandals.
“I don’t recall anything like that ever happening where people felt the need for armed guards in a dozen properties throughout Laguna Beach,” stated Heidi Miller, a local shopkeeper familiar with Honarkar, expressing her distress over the hostile takeover and its unfortunate impact on the community.
Makhijani, though not widely known outside Orange County’s real estate sector, built a lucrative business focusing on distressed assets over the past decade, attracting high-profile investors in Southern California. Prosecutors revealed that this business supported an extravagant lifestyle that featured multimillion-dollar homes in Corona del Mar, a luxurious apartment in Newport Beach, and high-end vehicles, including a Bentley, Porsche, and Mercedes G-Wagon. Authorities have yet to fully trace his assets, suspecting their concealment under different names, potentially some located in India.
Federal prosecutors alleged that Makhijani resorted to violence and threats against those who opposed him. Using shell companies and strawmen, he executed documents both real and fraudulent, and these individuals ostensibly managed his operations. An affidavit supporting the criminal complaint revealed Makhijani’s intent to shield himself from legal consequences, conscious of the industry’s predatory nature.
Accusations against Makhijani included arranging deceitful collateral for a $100 million loan by falsifying documents to give the lender, Western Alliance, false first lien rights, should the loan default.
First Assistant U.S. Attorney Bill Essayli emphasized the broader implications, “When criminals are allowed to deceive lenders, the spillover effects can harm consumers and businesses.” A former employee disclosed that Western Alliance acted favorably towards Makhijani, highlighting their close relationship. Nonetheless, the bank was not accused of misconduct.
Further revelations by an employee indicated that Makhijani hosted parties involving sex workers and substances, attended by current or former bank personnel, though the affidavit refrained from identifying the bank involved.
The affidavit details a dispute with a “businessman,” whose situation aligns with Honarkar’s. Honarkar expressed relief and satisfaction with the arbitration’s outcome, hopeful of reclaiming his properties, including the Hotel Laguna, presently in foreclosure.
Honarkar, an Iranian immigrant and UC Irvine graduate, amassed his wealth through a cellular phone retailer that he sold to Verizon Wireless in 2016. He then expanded his real estate ventures. Purchasing the Hotel Laguna in 2019, Honarkar embarked on renovating the Mediterranean-style establishment, favored by past Hollywood icons. Financial strains during the pandemic compounded by a contentious divorce led him to seek refinancing for his $195 million loan.
Facing financial limitations and personal challenges, Honarkar turned to Nano Bank for funding and found himself introduced to Makhijani, newly involved in the bank’s management. In 2021, Honarkar agreed to a joint venture, contributing a portion of his ownership in various properties, including the hotel, for $30 million. Makhijani promised refinancing for the imposing loan.
Despite losing his home, refinancing succeeded, yet Honarkar later discovered an earlier $20 million loan, secured unbeknownst to him by four of his properties. His assets inadvertently contributed to his partner’s venture capital, a revelation leading Honarkar to scrutinize the joint venture’s records in March 2023.
This led to an immediate backlash, including a mobile billboard painted with “CORRUPTION??” and a photo of Honarkar. Altercations at Hotel Laguna ensued, with prosecutors affirming Makhijani’s presence and control during one confrontation. A subsequent armed takeover occurred involving a restaurant managed by Honarkar following the Festival of Arts.
The arbitration yielded Honarkar $6.5 million, asserting ownership over properties unrelated to the joint venture. Damages totaling over $398,000 were also awarded for unauthorized access and removal of records by Makhijani’s associates.
Honarkar voiced disappointment at the partnership’s failure, “To me, if a partnership doesn’t work, they should be nice enough to shake hands and walk away.” Allegations resulted in the arbitration process, where Honarkar’s accusations of fraud and breach of contract were met by counterclaims against him.
Arbitrator David Thompson’s 2025 ruling favored Honarkar, identifying fraudulent inducement into the venture and awarded $9.2 million in legal fees. He subsequently attributed $316 million in property loss damages among $1.34 billion total damages. Thompson highlighted the venture’s creditors reclaiming properties as rent collection failed to cover liabilities.
Nano Bank was found accountable for obscured $20 million loans, settling separately with undisclosed terms this year. Attorneys for Makhijani in the arbitration did not issue comments.
The federal complaint ties Western Alliance to fraudulent entities named by the arbitrator, raising alarms about title fraud involving Makhijani-linked properties. The FBI’s September raids came after Western Alliance’s legal actions, closely followed by Zions Bank’s similar lawsuit.
Though the massive arbitration award requires validation from an Orange County Superior Court judge, Makhijani’s attorneys contest it, citing procedural errors. Aaron May, representing Honarkar, stated plans to reclaim properties and locate Makhijani’s assets both domestically and potentially abroad.
Meanwhile, Hope surrounds the Hotel Laguna’s management by a receiver, with Honarkar optimistic about repurchasing the property and completing the renovations. “We’re hoping that something will happen soon,” Honarkar shared, recalling moments he contemplated resigning the legal battle. His family’s encouragement upheld his resolve throughout the prolonged ordeal.