Colorado Seizes Trust Affiliate of 1st Pension : Investing: Action is taken after $10 million is reported withdrawn. Firm’s principal, William E. Cooper, had business ties with ex-Sen. John Seymour.

In a hilly section of this affluent town, William E. Cooper bought a 3,400-square-foot house in a gated community by raising money the same way he did in business. He got it from investors.

Those who helped by lending him money were eventually paid back. But 8,000 investors are wondering if they will recoup $350 million they put into the labyrinth of companies under Cooper’s First Diversified Financial Services in Irvine.

Cooper’s First Pension Corp., the administrator for the investments, went bankrupt Friday. His Summit Trust Co. in Englewood, Colo., which acted as the trustee for investment proceeds, was seized Thursday by state authorities there after Summit’s president reported that First Pension, without authorization, withdrew $10 million.

Cooper, who was a financial backer of former U.S. Sen. John Seymour and bought 80% of Seymour’s real estate company in 1981, would not comment Saturday.

His lawyer, Milan Smith, said Cooper will be working “to help investors find out what happened to their money.” All records are intact, he said, and the FBI has the Irvine headquarters under surveillance to make sure no records are removed.

Smith said he did know whether the allegation that $10 million was diverted from Summit Trust is true. He likened the problems at Cooper’s companies to the kinds of loan problems that have faced banks and savings and loans. Some loans simply went bad, he said.

Cooper’s three-bedroom house in Villa Park is for sale. The assessed value of the brown Tudor-style house, built in 1979 in the upscale Somerset neighborhood, is $732,238, according to Orange County property records.

Cooper bought the house at least in part with personal loans, including $20,000 from Thomas and Barbara Vennum of Huntington Beach. The Vennums also invested in a number of second and third trust deeds through Cooper’s company, then called Continental Home Loan.

Second trust deeds are generally risky because they are mortgages that stand behind first trust deeds in the event of foreclosure. The Vennums were eventually repaid on the loan for Cooper’s house. So when a $26,000 investment on a Simi Valley property in the early 1980s went awry, Vennum said, Cooper promised that the funds would be returned.

“He was going to pay us back at a certain rate of interest, but he never got around to doing that,” Vennum said. The couple sued in 1990 when interest had raised the total amount owed to $60,000. Cooper eventually settled by paying $22,500, Vennum said.

Pointing out Cooper’s various corporate names, Vennum said, “Every time I got a paper from this guy, it was on different letterhead.”

Among other corporate names Cooper used were Continental Commercial Financial, Diversified Financial Services, First Diversified Asset Management, Equity Realty Advisors and Vestcorp. Equity Realty and Vestcorp recently moved from Orange to Irvine with the parent company, First Diversified Financial Services.

First Pension in Irvine, with about 40 employees, closed its doors Thursday, though a dozen workers will try to keep the company operating while a buyer is sought, said the company’s bankruptcy lawyer, William M. Burd of Santa Ana.

Investors in Cooper’s various companies say that promised payments of interest and principal were often slow in arriving and that a number of investment funds never closed, meaning that repayments of principal continued to be delayed.

“I’ve never been in a fund that closed,” said Ralph Breen, a Los Angeles resident who began investing with Cooper in 1982 and was supposed to be repaid on his first investment two years ago. Breen said he is still waiting to get all of his money.

Cooper also was slow in paying the $720,000 purchase price for the majority stake in Seymour’s Anaheim real estate firm in 1981, court records show. Seymour, then Anaheim’s mayor, wanted to concentrate more on his political career.

Cooper paid $50,000 down and agreed to pay another $670,000 plus interest over time, according to court records. But the company faltered, and Cooper made only a few payments. Seymour, who had become a state senator by then, sued and agreed to settle with Cooper in 1988 for $100,000. It was unclear whether any money was turned over.

During that time, one of Seymour’s aides twice intervened with state regulators in matters involving Cooper, once to help get Cooper’s real estate license reinstated after it had been revoked by the state and later to urge the state real estate department to investigate Cooper’s company.

Since his defeat in the 1992 Senate election, Seymour has become executive director of the California Housing Finance Agency.

Before their apparent falling out, Cooper’s conservative credentials and close ties to Seymour helped him win appointment by former Gov. George Deukmejian in 1984 to the board of the California Economic Development Corp., a nonprofit agency studying the state’s economy.

In promotional material he sent to investors in 1990, Cooper also said he was chairman of the board of trustees for the Medical Center of Garden Grove and was a fund-raiser for the Orangewood Children’s Home and the Orange County Performing Arts Center.

Meantime, investigations into Cooper’s operations here and in Colorado have begun, and investors will likely have to wait awhile before they receive their funds.

“To the extent that I have the ability to freeze accounts, I have stopped the bleeding at Summit,” Andrew Snyder, a Denver lawyer appointed to liquidate Summit Trust, said Saturday. “Our biggest problem now is tapping into records that are tied up in computer.”

Some limited partnerships, he said, haven’t paid a cent in years. Payments will resume once he can determine how much money is available, he said, and how much is owed to each of about 8,000 Southern California investors, most of whom bought into Cooper’s pools of mortgage securities.

He said Summit is 95% owned by Cooper, Valerie Jensen and Robert E. Lindley. Jensen and Lindley are both longtime aides of Cooper’s and top executives in his various companies. He said Summit’s president, Kenneth Lyon, told Colorado banking regulators that unauthorized transfers totaling $10 million from Summit accounts were made by First Pension.

Snyder said he has asked federal authorities to investigate Summit’s collapse. Irvine Police Sgt. Dwight Henninger said his department is looking into the activities of Cooper and First Pension and that he has called the FBI for help.

In addition, both the Securities and Exchange Commission and the U.S. attorney’s office in Los Angeles acknowledged that they are monitoring developments.

Times staff writer James M. Gomez contributed to this report.