The co-owner of a real estate firm based in Irvine and Long Beach, California, set up a Ponzi scheme to pay off old investors while continuing to recruit new ones for a plan to flip distressed apartment buildings during the Great Recession’s housing collapse, a federal prosecutor told jurors.

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However, Michael J. Stewart’s attorney told jurors his client was innocent and he thought his plan was a financially prudent one because homeowners who lost their property in foreclosure would have to turn to renting apartments Tuesday. Defense attorney Kenneth Miller also placed the blame for the company’s failure on co-defendant John Packard.

Packard, who pleaded guilty in November and “is hoping for a lesser sentence,” will testify against his former co-owner of Pacific Property Assets, according to Assistant U.S. Attorney Brett Sagel. Packard is awaiting sentencing.

Ultimately, Stewart and Packard declared bankruptcy in June 2009. The company’s 647 investors lost $91.6 million and the executives owed about $96 million in outstanding principal to banks, according to prosecutors.

In early 2009, during the downturn of the economy, “everybody’s extremely concerned… But defendant Michael Stewart is telling everybody, every potential investor … he has an opportunity for you to make money because his business is thriving,” Sagel said.

Stewart failed to tell his investors his company was failing, Sagel said.

The plan he sold to new investors was to snatch up apartment buildings at “rock bottom prices” and refurbish them to fill the void in housing when evicted homeowners look for a place to live, Sagel said.