Company Records Seized in Factoring Investigation

Armed with a search warrant, the state Department of Corporations seized business records of Missman Kaplan Associates Ltd. and several affiliated firms in an investigation into complaints by public school teachers who invested millions of dollars in promissory notes.

Dorene B. Wolf, senior trial counsel for the department, said authorities were aided in the case by the secretary-treasurer of the company, Hank Springer, who during the 1970s was president of the United Teachers of Los Angeles, a union.

A declaration by Springer, filed in Los Angeles County Superior Court, said MKA’s head, David Missman, and his family were using MKA investor funds for expensive automobiles, trips and houses. Missman could not be reached for comment.

With the help of the Los Angeles County district attorney’s office, the records were seized from the Chatsworth residence of Missman and from an office in Reseda, Wolf said.

The department had ordered MKA last May to stop taking in new investor money. The company was put into involuntary bankruptcy proceedings Feb. 5 by three creditors, Wolf said.

Program of ‘Factoring’

According to details filed in court with the application for the search warrant, an audit by the Corporations Department disclosed that MKA was using new investor money to pay high interest rates to earlier investors.

From July 1, 1985, through March 1, 1987, the audit showed, MKA took in $12,528,130 from investors in its program of factoring, or buying accounts receivable at a discount. Of that total, only $1,914,031 was spent on buying the accounts receivable.

Out of a total of $10,654,237 that MKA paid out to investors in principal and interest, $9,399,492 was paid from new investor funds, according to the court papers. Wolf said the state has not yet been able to establish where the rest of the investors’ funds went.

According to allegations in court papers, the management of MKA previously operated a company called SCS, which was ordered by the state Real Estate Department in 1984 to stop issuing mortgage securities. Some of the same investors’ funds were later switched into MKA, the court was told.

After the MKA bankruptcy filing, according to Springer’s declaration, Missman transferred company records to his home, his stables and a vacant Reseda office.