Two Classes of First Pension Investors Face Different Odds : Investments: A Q&A; with court-appointed receiver of firm that handled client funds.


With a staff of just three employees, attorney Andrew C. Snyder has his work cut out for him.

As court-appointed receiver for Summit Trust Services of Colorado--the company created by the three principals of failed First Pension Corp. in Irvine to handle client money--Snyder is trying to untangle the twisted web of thousands of retirement accounts and track down more than $24 million in missing investor funds. Summit was seized by Colorado banking authorities April 22.

As much as $124 million of the money invested by 8,000 First Pension clients may have been lost to fraud and outright theft. Numerous clients may have invested in mortgages that did not exist, investigators said.

While the three First Pension principals--William E. Cooper, Valerie Jensen and Robert Lindley--are cooperating with federal investigators and have agreed to eventually plead guilty to some criminal charges in connection with what securities regulators have described as an elaborate pyramid scheme, the three have yet to cooperate with Snyder.

In an interview with staff writer Debora Vrana, Snyder describes the distinctions between investors who used First Pension only as an administrator for their retirement funds and those clients who invested in allegedly fraudulent mortgage pools marketed through First Diversified Financial Services Inc., the parent of First Pension. He gives investors an idea of what to expect in upcoming months.


Q. What are you trying to achieve as trustee for Summit?

A. My obligation under Colorado law is to sell the company, or, if possible, reorganize it. To do this, I have continued to retain Kenneth Lyon, the former president of Summit, and two other former Summit employees.

Our phones have been ringing off the hook. Since the bankruptcy, we've been getting about 20 to 30 calls each day from investors, and also some from brokers who were responsible for bringing people in, and even some from the accountants. We are supervising the daily transactions and affairs of Summit. In addition, we are still receiving (client's interest) checks and trying to track down the missing money.


Q. At a bankruptcy hearing last week for First Pension, you told investors that Summit has only 30%, or about $9 million, of the $34 million in funds it is supposed to have. How does this affect investors' chances of getting their funds back?

A. Right now, what we think is left is about 30 cents on the dollar of cash, that's not including the mortgage pools. These people took a risk and invested in the mortgage pools. And it not my present intention under a yet-to-be proposed distribution plan to assist people who invested in the pools in 1982, and have been receiving earnings ever since.


Q. Why aren't the concerns of people who invested in the possibly phony mortgage pools being addressed under the bankruptcy filing by First Pension and the shutdown of Summit? These investors seem to be in the worst straits.

A. Well, nobody filed a bankruptcy petition for First Diversified or for the limited real estate partnerships, so those investors still can't get partnership investor lists or determine what assets may still exist. (All assets of First Diversified were frozen by the Securities and Exchange Commission on May 23, when the assets of its principals, Cooper, Jensen and Lindley were frozen.) It's not that we are avoiding any custodial obligation.


Q. Well, who is going to do something about these real estate pools? They are just sitting there, and investors can't get any answers.

A. I understand the frustration about this, and I'm not trying to dodge your question. I don't know why we aren't getting off our duffs and doing something about the partnerships. Investors in these partnerships need to get organized. They need to get together, hire someone to represent them in an attempt to replace their assets. It may be they are chasing windmills.

The probability is that the majority of these mortgage-pool assets were just entries on a computer system. You had a lot of sheep here that listened to the First Pension wolf.


Q. What are the chances that anyone in the mortgage pools will get their money back?

A. You tell me what the stock market is going to be on Dec. 31 and I will tell you if they will get their money back. I think the answer is available when I get a chance to question Cooper, Lindley and Jensen about what happened. My knowledge will depend on what information the federal authorities will share with me.


Q. Is it frustrating that the three principals from First Pension are reportedly cooperating with the criminal investigation, yet not providing any information or answers yet to you, the receiver?

A. Hopefully, we will get some information soon. At this point the three have agreed to plead guilty, but the charges still have to be filed. After a formal guilty plea is entered to the charges when they are filed, then we should get some answers. It is my anticipation that we will get some answers before the end of the month.


Q. What is the most common question you get from investors?

A. They all want to know "How do I get my money?" And the answer is, "I have frozen the accounts, and we are trying to track it down." The other thing they all say is, "Gee, I thought my money was insured." Well, the remaining cash, the 30%, is insured by the Federal Deposit Insurance Corp. to the tune of $100,000 (per account) against the failure of First Interstate Bank of Denver, where the remaining money is sitting in accounts. FDIC does not insure the funds against fraud or failure of the custodian, Summit Trust, or the administrator, First Pension. It only insures against fraud and failure of the bank, First Interstate, which is open and fully functioning.


Q. Where do you think the missing investment funds went?

A. Probably back to the earlier investors, as in the typical pyramid scheme. Some was sent to Singapore, and I can't tell you how much went offshore, or into (other companies).

A. It's hard to say whether they are OK; we believe that investors who had their funds in trust deeds with other companies and there is an existing mortgage or tangible assets, then to my knowledge those are still performing. So business and transactions can occur with relation to those assets.


Q. Are you conducting transfers or other transactions on those accounts for investors?

A. We just do not have the staff to conduct transfers (to other investments) for everyone. First Pension was the pension administrator, and they had a staff of about 40 people doing this. We have three. So, it has to be an emergency situation. And most people think: "If I don't have any cash, that's an emergency situation," but I'm talking about emergencies like being sick or injured.


Q. When could another pension administrator, such as California Central Trust Bank in Irvine, assume control of the retirement plans of First Pension clients and provide such services?

A. Such a move would be subject to the approval of the bankruptcy court here, and the regulators in Colorado. It may take 30 days, or it may take 60 days. The most important issue is finding a pension administrator. We think the sooner we can get these accounts operating again is more important than the price we can get someone to pay you for these custodian assets. I am in favor of getting Cal-Trust.


Q. One investor told me $25,000 of his IRA funds were just sitting in a cash account with First Pension. Such funds cannot be transferred or withdrawn, correct? And what is the likelihood that they are still there?

A. Well, the answer is they could move the money when we make a determination to unfreeze the assets. If I believe the records show that you have $25,000 and you want to transfer $10,000, I may be able to do it. The problem is I don't have an administrator right now and we're just not equipped to deal with all the administrative duties.


Q. What should investors who want to protect their funds managed by First Pension be doing now?

A. Honestly, there's nothing you can do. The money is frozen and what's left is FDIC insured and earning interest. The only people I really want to hear from are those who have an emergency need for distribution, not those who feel they are losing out on some investment or because they think they have some stock tip. Investors should sit tight. We will be sending out letters to investors this week giving them an update.

Snyder said First Pension clients who want information about cash balances in their accounts held at Summit should write to:

Andrew C. Snyder, receiver

c/o Summit Trust Services

P.O. Box 6504

Englewood, Colo. 80155-6504

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