First Capital’s Creditors Claim Conspiracy in Suit : Insurance: They say some company officials schemed with Shearson Lehman Bros. to enrich themselves.

Creditors of bankrupt First Capital Holdings charged Wednesday in a federal lawsuit that Shearson Lehman Bros. and some First Capital officials conspired to enrich themselves at the expense of the company’s shareholders and lenders.

The suit, filed in U.S. District Court in Los Angeles, seeks $300 million in damages from Shearson, the New York brokerage giant, and First Capital, the parent of First Capital Life Insurance Co. and Fidelity Banker’s Life Insurance Co.

The suit comes just two days after the creditors challenged in bankruptcy court a proposed reorganization for First Capital, including the sale of First Capital Life to Shearson for $50 million.

“Shearson and its hand-picked directors not only helped send the debtors to their financial graves, they are now also scavenging the carcasses,” the suit charged.

A Shearson spokesman denied the allegations and said the suit would be vigorously defended. An attorney representing First Capital’s officials declined comment.

Shearson is First Capital’s largest shareholder, holding 28% of the company’s stock, and several of Shearson’s executive officers were members of First Capital’s board. In addition, Shearson’s brokers sold the bulk of First Capital’s life insurance policies and annuities. The suit charges that Shearson first became worried about First Capital in January of 1988, when it gained control of E. F. Hutton & Co. Hutton had previously sold its life insurance operations to First Capital for $300 million, and Hutton’s agents continued to sell billions of dollars of First Capital insurance policies and annuities to the brokerage firm’s clients.

Shearson, convinced that First Capital was financially ailing, decided it had to gain control of the firm to protect itself from liability for all the First Capital policies its newly acquired agents had sold, the suit claims.

Shearson proceeded to “coerce” First Capital’s managers to sell control by threatening to stop selling First Capital policies, the suit alleges. As an extra incentive, Shearson offered to buy the stock holdings of First Capital’s two top mangers--Robert I. Weingarten, former chairman and chief executive, and Gerry R. Ginsberg, former president and chief operating officer--at above-market prices. The brokerage assured other top officers of lucrative employment and severance agreements, the suit charged.

“Confronted with this formidable carrot-and-stick approach--be rich or be driven out of business--FCH’s insiders elected to act in their own self-interest and sell out,” according to the suit.

Shearson’s controlling interest apparently did not improve First Capital’s financial condition. Indeed, by continuing to sell First Capital policies at a rapid clip, the brokerage firm helped to further strain the insurer’s rapidly dwindling reserves, while Shearson earned about $100 million in commissions, the suit said.

In 1990, Shearson “began taking steps to prepare for the eventual collapse of First Capital and to protect itself from any additional liability or losses,” the suit said. For instance, that April, IDS Financial Corp., another Shearson subsidiary, began to urge First Capital customers to switch to IDS products.

First Capital’s financial condition continued to deteriorate. Shearson began to tell rating services and First Capital’s creditors that it would not stand behind the company by contributing additional capital. Months later, Shearson refused to pump more money into First Capital, and the news triggered a run and led to the regulatory takeovers of both First Capital Life and Fidelity Bankers Life in May, 1991.