Doctors Sue Valencia Bancorp, Claiming Pension Fund Losses

Embattled Valencia Bancorp of Santa Ana was accused in a civil lawsuit Monday of mismanaging the employee pension fund accounts of 12 doctors who claimed combined losses of more than $1.5 million.

The suit, which seeks the lost funds plus $4 million in punitive damages, alleges that the bank holding company, parent of Valencia Bank, and members of its board of directors failed to “select, supervise and control” its trust department employees from 1981 to last July.

The doctors claimed that a trust department vice president and a bank consultant “routinely” pooled pension money for unauthorized investments in which the two men had financial interests.

The suit, filed in Orange County Superior Court, also accuses the accounting firm of Peat, Marwick, Mitchell & Co. of failing during an audit to evaluate Valencia’s internal controls, assets and insurance to find a “widespread pattern and practice of fraud and deception.”

Last Friday, the doctors filed a federal lawsuit in Los Angeles making similar accusations and alleging violations of federal pension and racketeering laws, according to member of the plaintiffs’ law firm, Nelson, Seligman & Wright of Los Angeles.

Bank president Harvey Ferguson said the claimed losses are part of $5.7 million in losses last year.