American Principals Holdings Investor Suit Made Class Action

A federal court judge on Thursday granted a request by former investors in American Principals Holdings Inc. to certify their lawsuit against more than three dozen former company executives and outside professionals as a class action.

The ruling, issued by U.S. District Judge Gordon Thompson Jr., means that plaintiffs in the lawsuit will now total nearly 2,000, according to Michael J. Aguirre, the lead attorney in the action.

Aguirre last July filed a 500-page amended complaint that detailed alleged improprieties in dozens of American Principals Holdings’ limited partnerships. The suit charged that partnership funds were “inextricably commingled” and that “so-called trust accounts were used . . . for whatever current activities required funds.”

American Principals Holdings raised about $90 million from investors, but collapsed in March, 1984, after a supposed internal investigation uncovered “irregularities” by former management.

The Securities and Exchange Commission subsequently sued the firm and a federal court appointed a receiver, Ashley Orr, who has been selling off the firm’s remaining, overleveraged partnerships.

In his filing, Aguirre asked that Orr be appointed a “class agent to assist the court,” Aguirre said Thursday.

Defendants Listed

Defendants in the suit include former company executives Carl Zimmerman, Hugh F. Sackett and Thomas Schueneman. Also named were Private Ledger Financial Services, a former American Principals Holdings subsidiary; the law firm of Rogers & Wells, which represented American Principals in various capacities from July, 1982, until it resigned in February, 1983, and Coopers & Lybrand, the firm’s accountants.

Earlier this month, Coopers & Lybrand was sued by Crown Life Insurance Co., a Canadian firm that invested $9 million in American Principals and which now owns Private Ledger. The suit claims fraud and breach of fiduciary duty.

Don Salem, an attorney for Coopers & Lybrand who argued against certifying it as a class action, said that Thursday’s designation is not “a major development one way or the other. It’s another step in the litigation.”

Aguirre, however, took a different view. “This means that more than 1,800 investors (who weren’t part of the original suit) will now have a chance of getting their money back.”