Hundreds of Southland Clergymen Had Invested : Securities Company Run by Minister Is Placed in Receivership by Court

Hundreds of active and retired Los Angeles-area clergymen are among the nearly 1,000 people who invested more than $12 million through a Downey securities firm run by a minister and taken over this week by a court-appointed receiver amid allegations of fraud.

Without admitting or denying accusations made by state authorities in a civil lawsuit, Vesper Corp. and its owner, the Rev. John M. Simon, who is an ordained Lutheran pastor, consented to the entry of a court judgment that they “disgorge any property or funds acquired in violation of law. . . .” The lawsuit accuses Simon and Vesper of illegally commingling funds and misstating risks about investments to clients.

Thomas Fehn, attorney for Simon and the firm, which did business as Clergy Tax & Financial Services, said Tuesday that his clients agreed to the receivership and the permanent injunction without admitting wrongdoing because “the investors need to be protected.” No estimate has been made of how much money can be recovered and returned to investors.

Simon, who was ordained by the Lutheran Church-Missouri Synod, did not return calls to his Downey office Tuesday. Fehn said that Simon is in his late 40s. A church source described Simon as a “worker-priest,” who earns his money outside the church and is affiliated part time with a church in Long Beach.

A former Vesper employee who declined to be identified said Simon had been a full-time pastor before turning his part-time tax preparation service into a full-time business about 1973.

“He built enormous trust,” the former employee said. “Probably 4,000 clergy used his tax preparation services.”

Most were in Southern California, but Simon had clients across the country, the same source said.

Although the suit did not name investors, state Corporations Commission attorney George Crawford, who filed the complaint, said “some of the most prominent clergy I know of in Southern California had investments” with Simon, identified in the state’s complaint as Vesper’s chief executive and sole shareholder.

The lawsuit alleges that since January, 1980, Vesper and Simon have offered and sold unregistered securities in the form of about 66 limited partnerships and in promissory notes.

Some of the limited partnerships involved real estate here and in states as far away as Alaska, according to investors.

Large Losses Reported

One, who said he formerly was a regional officer of a “mainline denomination” but declined to be identified, told The Times that he has invested in five of the deals and estimates his present loss at $250,000.

“It’s a sad, sad story,” the investor said. “I know several ministers--one sold his home and put $130,000 profit from that into it, and . . . it didn’t come through. I know one widow of a minister who cashed in his life insurance ($150,000), and that’s all she had to live on.”

The investor added that he thinks that Simon did “an excellent job” with the tax service he created, adding: “I’d been with him for about 10 years but only started investing with him about five years ago.”

He said he and his wife “cashed in all our annuities” last May and invested the money with Simon.

“We found out two months later there had already been a notice of foreclosure at the time that I purchased the partnership in that property.” The investor told of a number of “totally distraught” investors who claim that Simon “misled them.”

Just last Wednesday, Simon sent out a letter that began, “Dear Valued Clients” and went on to say that Vesper had agreed to put all the California limited partnerships and other investments under a “voluntary receivership agreement.”

In part, it said: “You may also hear rumors, incorrect conjectures and possibly media publicity. Please be assured that our voluntary release of the projects and investments to the receiver has been in your very best interest after much prayerful consideration and months of hard work on your behalf.”

The former Vesper employee characterized Simon as optimistic and a person who didn’t listen to warnings from others.

Typical of Simon’s optimistic tone was his letter to clients last week, which noted that Clergy Tax & Financial has been incorporated separately and “will continue to do your tax preparation here at 9625 Lakewood Blvd.”

The state’s lawsuit alleges that the defendants violated anti-fraud provisions of state law through misstatements and omissions of material facts.

Unsecured Loans

For example, it said that defendants did not inform prospective investors that loans made by the partnerships would be “essentially unsecured” interests in real property owned by the partnerships and that they would be unable to foreclose if defaults occurred.

Simon and Vesper also allegedly led investors to believe that the real estate and lending partnerships would be essentially independent, whereas funds were commingled between the various partnerships.

Judge Jerry K. Fields of the Los Angeles County Superior Court provided in the permanent judgment that Vesper is to pay civil penalties of $25,000 to the California Corporations Commissioner, but subordinated that to the payment of receivership expenses and disgorgement to investors.