First Pension’s Stunned Clients Plan Next Move : Inquiry: Investors talking on Prodigy and in an O.C. meeting plan suits and wonder why government agencies did not detect problems.

Gordon Reiter, Irvin Starr and H. Farrar thought they knew a good investment opportunity when they saw one. So, for more than a decade, the three retirees gladly trusted their retirement dollars to real estate limited partnerships led by First Pension Corp.

Reiter, a 59-year-old aerospace industry retiree, eventually invested more than $200,000 in retirement funds through the “old war horse of a company.” When Irvine-based First Pension unveiled its newest limited partnership in February, Starr, 64, enthusiastically dashed off yet another check.

So did Farrar, a Ventura County retiree who’d stuck with First Pension largely on the strength of a 1991 report from the state Department of Corporations, which knew of “no disciplinary records” for the Orange County company, its chairman, William E. Cooper, and co-owners Valerie Jensen and Robert Lindley.

So it was all the more stunning on April 21 when Colorado regulators seized Summit Trust Services, a Denver-based First Pension affiliate. On April 22, Cooper pushed First Pension into bankruptcy court for protection from creditors. On May 13, the FBI and the Securities and Exchange Commission alleged that First Pension used a massive pyramid scheme to defraud investors out of as much as $124 million.

Farrar learned of the bankruptcy filing on the day it happened during a tense conversation with a First Pension switchboard operator who told him that the company was bankrupt and that the employees had been let go.

Later that day, as the retiree flew to a business meeting in South America, he kept thinking about the numbing conversation. “This is incredible, simply incredible,” Farrar thought. “I’ve been . . . involved with them for 12 years and all they’ll say is, ‘We’re bankrupt.’ ”

Investors are still reeling from the magnitude of the alleged fraud. “I still wonder what’s really going on,” Starr said. “I’ve still not fully accepted the fact that it was an elaborate Ponzi scheme.”

But as the shock wears off, investors are beginning to plot strategies. A dozen investors met Thursday in Orange County to consider which attorneys are best equipped to handle the inevitable civil lawsuits. Starr, who lives in Northern California, is harnessing the Prodigy computer system to communicate with other First Pension investors. (To read First Pension messages on Prodigy, select the “MONEY TALK” board and “BROKERAGES” topic.) And investors are clamoring for answers from state and federal regulators.

“I believed the state had done a complete review and found nothing,” said Farrar, whose August, 1991, letter requested information on various First Pension entities as well as Cooper and other company officials. “What more could I have done?” Farrar asked. “How could I have matched the muscle or knowledge to do what they’d already done?”

Mark A. O’Connell, an attorney in Newport Beach and a First Pension investor, voiced frustration with lax enforcement of the securities industry. “This type of crime is running rampant in our society and even after Lincoln Savings, Prudential Securities, etc. . . . there seems to be no action taken by our government.”

Federal regulators quickly moved to seize First Pension’s various businesses. On April 13, a federal judge in Los Angeles froze First Pension’s assets and the bank accounts held by Cooper, Jensen and Lindley. Investors now hope that criminal indictments will be returned against the three during upcoming court hearings in a Los Angeles federal courtroom.

In retrospect, investors said there were signs that First Pension’s unsullied record might have had blemishes.

Manhattan Beach retiree Richard Bradshaw describes himself as someone who does his homework before investing. He’d grown comfortable with First Pension over the years but “began to get nervous” during a late March meeting when First Pension employees couldn’t explain a $6,000 discrepancy in his account. “I told them you can’t stand (an IRS) audit,” said Bradshaw, who still did not suspect major fraud. “They blamed it all on a computer error and said they’d have it fixed.”

But, up until the day before First Pension entered bankruptcy, clerical workers continued to mail account statements and brokers kept promoting the newest limited partnership.

Cooper did his part to ensure investor calm. In a Feb. 7 letter to account holders, he boasted about the company’s “excellent track record . . . conservative appraisal practices, sound loan underwriting and servicing policies.” Sticking to those “strict” guidelines, Cooper wrote, allowed First Pension to handle 14,500 loans valued at $390 million since 1976--and generated average investor returns that topped 13%.

But even as Cooper was composing his “dear shareholder” letter, investigators in the SEC’s Los Angeles office were revving up their own letter-writing campaign as they searched for investors who could support the allegation of massive fraud.

Copies of letters provided by investors show that the SEC initially sought “voluntary cooperation” from account holders with its investigation into First Pension. Investigators then interviewed investors and lower-level First Pension employees. But court documents show that Cooper and Jensen refused to answer SEC questions and instead exercised their constitutional right to remain silent.

Given subsequent allegations of massive fraud, numerous investors say they are angry at themselves for not taking Cooper to task for his frustrating policy of refusing to give them copies of trust deeds that were supposedly at the heart of the various limited partnerships.

Farrar had planned to confront Cooper’s penchant for privacy during a 10:30 a.m. meeting May 12 at First Pension’s Irvine headquarters. But the meeting was effectively canceled by the April 22 Chapter 11 bankruptcy filing.

Investors who managed to meet with Cooper generally came away empty-handed. Investor Donna Bedale, in papers filed in District Court in Los Angeles, told investigators that Cooper “had a policy not to divulge that information to investors because one investor (previously) had confronted a homeowner.”

“We’ve always been nervous about that one thing,” Bradshaw said. “He’d never actually shown us the mortgages. As we pressed him for information (about trust deeds), he’d always make excuses.”