Drew Hundreds of Prominent Investors : Agent Urges Doerring Liquidation
Doerring & Associates, accused by regulators of fraud and securities violations for misappropriating real estate partnership trust funds, can no longer generate enough income to meet expenses and should be liquidated, according to documents filed in federal court Thursday.
The liquidation process of Doerring’s 32 properties, owned by more than 80 limited partnerships, will take about 18 months, according to documents filed by Thomas F. Lennon, the court-appointed “disbursing agent” who took charge of the company in December.
Hundreds of prominent San Diegans--and several pension funds of local companies--invested $65 million into partnerships that owned assets estimated to be worth more than $170 million. The property is mostly in California, Arizona and Texas.
Some of the company’s trust fund money--at least $4.1 million, according to several sources close to the case--was taken from the partnerships and used for non-partnership purposes.
According to an investor list obtained by The Times, Doerring investors included: Gordon Luce, chairman of Great American First Savings Bank; Robert Adellizi, president of Home Federal Savings & Loan Assn.; Tom Page, chairman and president of San Diego Gas & Electric; insurance executive Bruce Moore; Intermark chairman Charles (Red) Scott; architect Frank Hope; jeweler George Jessop; public relations agency owner Tom Gable; John Burnham & Co. vice president John Hucko; former Pacific Telephone regional manager Lincoln Ward; San Diego Chargers place kicker Rolf Benirschke and television sportscaster Jim Laslavic.
Movie actor Mark Hamill, who played Luke Skywalker in the “Star Wars” series, also was an investor, as were more than two dozen lawyers at the Gray Cary Ames & Frye law firm.
Pension funds of several companies were invested in Doerring, including those of Bay City Television, owners of television Channel 6, and University Industries.
In his court filing, Lennon asks U.S. District Judge Edward J. Schwartz to continue a stay on all partnership operations for six months, change Lennon’s title to Securities and Exchange Commission receiver, and first freeze and then liquidate all Doerring corporate and partnership assets.
A hearing on the request is scheduled for Feb. 20.
The liquidation will “preserve the equity of the limited partners and . . . satisfy creditor claims, the magnitude of which is not totally known at this time,” Lennon wrote.
Lennon said that he wants to avoid a “fire sale” of Doerring’s assets and that he will seek to identify a “quality general partner to run Doerring’s affairs.”
The SEC filed suit against Doerring & Associates in November, after former employee Richard J. Annen resigned when he discovered that the seven shareholders of the company had used funds from the partnerships for non-partnership purposes.
The SEC’s action prompted Schwartz to appoint a temporary “disbursing agent,” similar to a receiver but with less authority, to take over the company.
The San Diego County district attorney’s office is also investigating the company, a spokesman confirmed Thursday.
A study by the accounting firm of Touche Ross & Co., filed with Lennon’s papers Thursday, claimed that Doerring’s investor funds were commingled and that the funds were used to support Doerring’s operating expenses.
In addition, Touche Ross was unable to effectively audit the company because of insufficient financial records, according to the court document.
Several limited partners have previously said they want to select their own general partners while, at the same time, remaining under the protection of court officials.
“That way, they commence the restructuring of their own partnership,” said one source familiar with the partnerships. “The compensation and indemnification required to locate just one general partner to take over is unrealistic and the partnerships can’t afford it.”
Doerring shareholders are Harvey Doerring, Kirk Doerring, Fred Schmidt, Art Noehren, Pal Donndelinger, John Sarber and Jim Hoover.
Five of them have been sued by the SEC--Kirk Doerring, Schmidt, Noehren, Donndelinger and Sarber.
Attorney Robert D. Rose, representing four of the defendants, said that his clients are “fully cooperating with the disbursing agent and assisting wherever permitted at no expense to the company.”
Each of them, added Rose, is “actively seeking buyers for the Doerring properties.”
Doerring’s real estate syndication was effective for about 10 years, according to former officials and limited partners. However, in early 1985, the company purchased, on its own, several large undeveloped parcels in Texas and planned to eventually develop the land.
However, the company could not meet the enormous debt service to cover the interest payments on the land, the sources said. Some of the investor funds were used to pay the interest expense, the sources alleged.
