Bankruptcy Trustee Sues Hill Williams Firm : Investing: Suit seeks return of $89 million plus punitive damages on behalf of thousands of investors. State called it ‘a classic Ponzi scheme.’

Donald Hill Williams’ now-bankrupt investment company conspired with its attorneys, accountants and brokers to fraudulently raise $89 million in investor funds that subsequently were misappropriated, according to a lawsuit filed this week in U.S. Bankruptcy Court.

The suit, filed Wednesday by the bankruptcy trustee representing four limited partnerships with several thousand investors, seeks return of the $89 million plus unspecified punitive damages in connection with the February, 1993, failure of Anaheim-based Hill Williams Development Co.

State regulators last year said Williams operated “a classic Ponzi scheme” by using new investors’ funds to pay off previously incurred obligations. Hill Williams’ various real estate development deals attracted thousands of investors, many of whom pumped money into several different funds.

The lawsuit alleges that only $5 million of investors’ funds made its way into real estate projects. The rest, according to the suit, went to pay “opulent” salaries at Hill Williams, hefty commissions and fees for the company’s agents, affiliated brokers, attorneys and accountants, and to pay obligations to other investors.

Williams was unavailable for comment on Thursday. Attorney William C. Starrett II said that Williams is still living in Southern California, but that “unfortunately, because of all the broad allegations, he’s been unable to find suitable work.”

Starrett also maintained that his client did not engage in fraudulent activity at Hill Williams.

Williams was not named as a party in the suit filed Wednesday because he previously filed for personal bankruptcy. Disputed claims generated by Williams’ personal bankruptcy filing could be settled in a trial scheduled to begin later this year, Starrett said.

The week’s suit filed by attorney Ronald Rus in Irvine on behalf of trustee Charles W. Daff lists six pages of defendants, including Hill Williams executives Charles R. Roundtree, Jeff Rowerdink, Lawrence V. Dorn II, Richard F. Dickerson and Marvin L. Christensen.

The suit alleges that fraudulent actions at the failed company occurred in concert with David A. Colton’s Irvine-based investment firms; Goodrich & Goodyear & Hinds, the company’s accounting firm in Long Beach, and Higham, McConnell & Dunning, Hill Williams’ Laguna Niguel-based law firm.

Spokesmen for the law firm and the accounting firm did not return telephone calls on Thursday. Colton also could not be reached Thursday.

The suit maintains that the accounting firm fraudulently approved transfers of $75 million in investor loans from the limited partnerships to Hill Williams Development Corp., and failed to alert investors that Williams was running a Ponzi scheme. The suit also alleges that “a reasonable attorney” should have known that Williams was operating a Ponzi scheme.

The suit alleges that Colton played a key role in “perpetrating the illegal and fraudulent schemes.” Colton, the suit alleges, occasionally served as a “tour guide” on bus trips that were designed to show investors that the company’s ill-fated real estate developments in Southern California were on track.

The suit also alleges that dozens of investment firms in Southern California fraudulently used their “relationship of friendship and/or trust and confidence” to steer investors into the dubious investments.