Defendant in Real Estate Fraud Case Is Missing; Arrest Ordered

Kevin S. Merritt, a defendant in a high-profile Los Angeles real estate fraud case, has dropped from sight, and authorities have issued a warrant for his arrest on $1-million bail after he failed to show up at a pretrial hearing.

Separately, a task force of U.S. and local arson investigators is seeking to question Merritt about a string of arson fires in rundown buildings owned by a business firm that Merritt worked for, law enforcement officials have told The Times.

One official called it “the most extensive [arson] case I’ve ever run across.”

Merritt has pleaded not guilty to 18 felony counts of swindling low-income clients of his real estate and lending business, but he did not show up for an Oct. 30 hearing on the case, prompting Los Angeles Superior Court Judge John Ouderkirk to issue the $1-million bench warrant.

Since then, one unconfirmed report circulating in law enforcement circles is that the 36-year-old real estate whiz is in hiding in Ecuador.

“I’m sure there are a lot of rumors about where he might be,” said Los Angeles Deputy Dist. Atty. Don Tamura, who is prosecuting Merritt. “Believe me, we’ve got lots of people out there looking for him.”

Meanwhile, arson investigators from the federal Bureau of Alcohol, Tobacco and Firearms and the Los Angeles Fire Department want to question Merritt about a series of arson fires in vacant buildings in Los Angeles and neighboring communities. Several of the torched buildings were owned by Wolfriver Holding Corp., a Nevada corporation.

“We would be very interested in finding him [Merritt],” said a law enforcement official close to the investigation. “There have been a number of fires at Wolfriver properties--more fires than there should be,” he said.

Vicki M. Roberts, a lawyer who represents Wolfriver and is also one of Merritt’s attorneys in his pending criminal case, confirmed that she had been contacted by arson investigators looking for Merritt.

She said she was “aware that they’re [arson investigators] carrying on some kind of preliminary investigation,” but added she had “no knowledge whatsoever that would suggest” Wolfriver’s involvement in an arson scheme.

According to Roberts, Merritt is a consultant to Wolfriver but is neither an officer nor stockholder of the firm. She declined to discuss his whereabouts.

The burned Wolfriver buildings include 450 S. Burlington Ave. in Los Angeles, a 28-unit apartment building that was torched four times in late 1994 and early 1995, public records show.

A transient who was present during one of the fires told officials that three men arrived at the building and began kicking open doors and ordering transients to leave before pouring gasoline on the floor and igniting it, according to a fire department incident report.

But for some reason, the transient said, the men lit the blaze before reaching his door, and he was forced to jump from the window to escape.

Executives at Scottsdale Insurance Co. in Arizona confirmed they had insured the Burlington Avenue building and paid a six-figure settlement to Wolfriver.

Another Wolfriver building, 431 South Bristol St. in Santa Ana, was burned on Jan. 14, 1995, and again two days later. The building was insured by CalFarm Insurance, which paid an undisclosed settlement, a company executive said.

In the real estate case, Merritt was originally charged in 1991 with cheating clients of his real estate and lending business--many of whom had sought his help in saving their homes from foreclosure.

At the time, Merritt was portrayed by clients, prosecutors and legal aid lawyers as the most notorious of an unscrupulous breed of loan brokers and foreclosure consultants who had preyed on inner-city homeowners.

His recent disappearance is but the latest snag in the torturous saga of the long-delayed case--which exploded in scandal when Merritt’s ex-girlfriend secretly videotaped a district attorney investigator making sexual advances and allegedly encouraging her to lie.

The ex-girlfriend, Katrina Smith, had described herself to authorities as a spurned lover who was eager to testify against Merritt. At some point, however, she had secretly gone back to the other side.

In January 1992, Smith invited district attorney investigator Joseph Kay to dinner at her home, where she and Merritt’s brother, James Merritt, had secretly planted a miniature camera in a stereo speaker. The device caught Kay trying to kiss Smith and telling her no one would know if she lied to boost her credibility as a prosecution witness.

Merritt’s lawyers charged prosecutorial misconduct and brought the tape into court in an effort to get the case dismissed. The judge refused to dismiss the charges but agreed to disqualify the district attorney’s office, forcing it to turn over the case to the state attorney general. Eventually, the D.A.’s office was reinstated by an appeals court decision that removed Kay from the case.

A superseding indictment issued in 1994 charged Merritt with 18 felony counts of grand theft and offering forged documents for recording--each linked to specific transactions.

Two counts concerned Merritt’s dealings with Edermiro Torres, who the indictment said bought a house from Merritt for $107,000 in 1988.

According to the indictment, Torres gave Merritt a $10,000 down payment, made monthly payments of $970 and spent $30,000 to remodel the house. But when Torres, after a year and a half, tried selling the house, he discovered the real owner was someone else and he owned nothing. According to the indictment, Merritt told Torres nothing could be done about returning his money.

Separately, the district attorney’s office has been conducting a criminal probe of Merritt’s long-time business partner, Joel Burakoff, in the wake of last year’s multimillion-dollar collapse of Univest Home Loan, based in the South Bay.

Merritt and Burakoff had been partners in Univest, which solicited well-heeled investors to finance the high-interest loans that Univest provided to its inner-city clients. Merritt left Univest in 1991 after the publicity attending his arrest.

But Burakoff carried on until last year, when Univest was placed under a court-appointed receiver. Investors--many of whom were Burakoff’s personal friends and fellow members of the Friars Club in Beverly Hills--discovered that loan repayments due them had been diverted to other accounts, and that loans they thought they had funded simply didn’t exist, according to public records and investor interviews.

Paperwork uncovered in an audit by the state Department of Real Estate showed Merritt continuing to own a 45% share of Univest. But prosecutors and private attorneys have blamed poor record-keeping, saying they believe Merritt had cut his ties and Burakoff was in charge.