DALLAS -- A $100 million drama that is said to have ruined convenience store operators across Texas and left major financial scars on the North Texas Pakistani community played out another act in a Dallas courtroom this past month.
Dallas lawyer James W. Demik, 67, owner of Commercial Escrow & Title Co., drew five years in federal prison on 10 counts of bank fraud, conspiracy and money laundering. His March trial was laced with charges of massive fraud involving Texas bankers and the U.S. Small Business Administration, according to a report [image-nocss] in Fort Worth Weekly. Demik is appealing his conviction, which was handed down in October.
His prosecution was the result of an ongoing, five-year investigation by the FBI into a series of property flips engineered by a former prominent Bedford real-estate broker, Sajid Sargent Hussain. The deals essentially involved Hussain and his associates buying convenience store/gas stations, artificially inflating the prices, and then reselling them to buyers at far more than their actual value, according to the Weekly.
Hussain's group helped buyers obtain SBA loans for the purchases. He would act as broker on the loan, obtain the loan money and then, using Demik's title company, immediately insert the money into the buyers' bank accounts or convert it to cashier's checks to provide the required down payments. Some of the stations allegedly had major environmental problems, and others had construction flaws.
Assistant Federal Public Defender Douglas A. Morris, whose office is handling the appeal, declined comment on Demik's behalf but said the appeal will challenge rulings on evidence and may challenge the adequacy of Demik's trial defense.
Hussain, 47, pleaded guilty to bank fraud and became a key government witness in Demik's trial and others. He is set to be sentenced Wednesday, Nov. 30, and could get up to 30 years in prison, $1 million in fines, or both. According to a 2003 affidavit filed by an agent in the FBI's Fort Worth-based white-collar crime unit, Hussain, a Pakistan native, and his company, Certified Commercial Real Estate Group Inc. of Bedford, Texas, brokered 114 small-business loans worth more than $94 million between 1998 and 2000.
Most of Hussain's customers were of Pakistani or Indian descent. Demik and Sargent Hussain exploited buyers, John H. Carney, the Dallas attorney leading the charge in civil courts in Dallas and Tarrant counties, told the Weekly. Hussain by and large exploited his own countrymen, who relied on them for their expertise and integrity and who've lost everything they had.
Carney represents 52 convenience store/gas station buyers suing Hussain, Colleyville real estate broker Mohammed Mo Siddique and a close-knit group of associates over the deals. The market was driven by these fraudulent transactions, Carney said. The values of these gas stations and convenience stores have been slaughtered. They're worth 40% of what they were.
Atlantic Oil & Gas, Dallas, is a party to one of the major lawsuits involving Hussain still pending in Dallas County, where trials have been delayed by Hussain's September bankruptcy filing. The company settled a 1999 lawsuit alleging it conspired with Hussain to inflate financial projections on a Fina station in Garland and then flipped it. Court records show Hussain earned a $300,000 commission when Atlantic bought the station for $350,000 and sold it the same day for $1.12 million.
In another case, a jury awarded a plaintiff a $300,000 judgment involving inflated values and allegations that Atlantic falsely promised a Church's Chicken franchise in exchange for a franchise fee and an oil-distribution contract. The company appealed but reached a settlement with the plaintiffs. Atlantic attorney R. Kirk Newsom has said in past interviews that the company's dealing with Hussain were rare, according to the Weekly report.
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