A bit of relief may be available for some clients of failed First Pension Corp. in Irvine. Receivers have discovered two small insurance policies held by an affiliate that may cover some investor claims against the parent company.
The court-appointed receiver for Summit Trust Services, a Denver-based firm established by First Pension principal William E. Cooper to handle his clients' money, said Summit held a financial institution bond to cover as much as $1 million in forgery and theft claims, and a $1-million policy to cover liability claims against the company's directors and officers.
While the small policies uncovered by receiver Snyder are unlikely to provide relief to all of the investors who put an estimated $99 million into First Pension's mortgage partnerships, it may help those who used First Pension solely as a pension fund administrator, allowing them to make choices about where to invest their retirement funds.
"The receiver believes claims are available against both of the policies for the retirement investors," receiver Andrew C. Snyder said Friday.
Snyder would not reveal the name of the insurance company, saying he feared that it would be deluged with calls from First Pension investors. He did say that both policies are with an insurance company rated A-plus by A.M. Best Co., a national insurance rating service.
The U.S. Securities and Exchange Commission has alleged in federal court that First Pension operated an elaborate scheme that led clients to invest in mortgages that did not exist. As much as $124 million of the $350 million invested through the firm may have been lost to fraud and theft, investigators say.
Just as scores of the company's nearly 8,000 investors discovered that substantial sums were missing from their accounts, First Pension filed April 22 for liquidation under Chapter 7 of the federal Bankruptcy Code. The day before the filing, Colorado banking regulators had seized Summit Trust after its president told them that millions of dollars in client funds were missing.
Many of those investors sent to First Pension checks that were cashed somewhere else or simply disappeared, the SEC said. The federal agency alleges that some of those checks were eventually deposited in bank accounts opened by Cooper and another First Pension principal, Robert E. Lindley.
According to court filings by the SEC, in April Cooper forged 114 checks totaling $1.3 million on a custodial account held at Summit Trust.
"These policies may be sufficient to cover the deficiencies of the 114 checks," said Snyder, who added that he has already filed a preliminary claim with the insurance company and will file a more complete statement within a month.
And First Pension has a small amount of insurance coverage. The company held a $500,000 fiduciary fidelity bond through Utica National Insurance Group, a New York insurance company, said James Joseph, trustee for First Pension. That type of policy covers fraud by employees and is the only policy known to have been held by First Pension, Joseph said.