Lancaster Pair Charged in Massive Grand Theft Scheme

A Lancaster couple has been charged with grand theft, forgery and securities violations for allegedly bilking investors out of millions of dollars through two San Fernando Valley-based companies.

A 117-count complaint filed Monday by the Los Angeles County district attorney’s office accuses David and Karen Missman of engineering elaborate schemes involving promissory notes and real estate loans to defraud 35 investors, many of them schoolteachers who live in the San Fernando Valley.

An audit by the state Department of Corporations indicates that close to $10 million of investor money is unaccounted for in the records of the Missmans’ now bankrupt companies, S.C.S. Co. and Missman Kaplan Associates Ltd., according to court papers.

But officials said as much as $30 million, collected from up to 5,000 victims since 1979, may have been misappropriated. The complaint focuses on the cases in which they had the best evidence, said Deputy Dist. Atty. Robert M. Youngdahl.

“We have people who have lost hundreds of thousands of dollars,” Youngdahl said. “Some of them have been devastated.”

The Missmans have agreed to surrender Monday in Los Angeles Municipal Court, Youngdahl said. They face 10 years in prison if convicted. The Missmans and their attorney, Michael Nasatir of Santa Monica, could not be reached for comment.

The Missmans allegedly targeted active and retired teachers because some of their company officers and salespeople were former teachers, investigators said. Among them was Henry Springer, a former president of the United Teachers-Los Angeles, who alleged in a sworn declaration that Missman and his family used investor funds for luxury cars, travel and houses.

Some victims invested money in promissory notes secured by deeds of trust offered by the Missman companies, which purportedly brought together investors who acted as borrowers with homeowners seeking home improvement loans. The Missmans then allegedly bilked borrowers by forging their names in order to resell the deeds repeatedly.

The Missmans allegedly also ran a scheme in which new investors in a “factoring” program, involving the purchase of low-interest utility loans, were paid interest with the money of earlier investors.

After the Department of Corporations ordered them to end such illegal practices in 1987, the Missmans continued to defraud investors through illicit partnerships set up through a Chicago firm, officials said.

One alleged victim, a Woodland Hills resident who asked not to be identified, said the Missmans and their sales representatives had appeared to be “very pleasant” and “were not hard-sell type of people.”

The victim said his monthly payment checks on a deed of trust began bouncing in 1987, about two years after his initial investment, and then abruptly stopped coming. Other victims lost more money, Youngdahl said, because they allowed the companies to purportedly make new investments with their earnings instead of receiving monthly payments.

“On paper it looked as if they were making a lot of money,” Youngdahl said.

The victim said he has attended meetings along with scores of other investors seeking a way to get their money back, but has been advised by lawyers that recovering anything will be extremely difficult.

“The only type of satisfaction I can hope for now is if they’re put in prison,” he said. Youngdahl said a maximum of $300,000 of the couple’s assets seized by authorities could be returned to investors.

MKA and S.C.S. were forced into involuntary bankruptcy proceedings in February by three creditors. In March, investigators for the Department of Corporations and district attorney’s office seized business records at those companies and at a $1.3-million Chatsworth home owned by Missman.