First Pension Investors Sue, Alleging Fraud

Two couples who say they lost more than $200,000 in retirement funds in the failure of First Pension Corp. sued the owners of the Irvine-based pension management company Thursday, accusing them of deception and fraud.

Their suit, filed in U.S. District Court in Santa Ana, alleges that William E. Cooper, who was First Pension’s president, and other individuals and companies violated securities laws and engaged in fraud, deceit, negligence and unfair business practices. It asks for actual and punitive damages.

The Securities and Exchange Commission has charged that First Pension operated an elaborate pyramid scheme and that it misled clients into investing in nonexistent mortgages. As much as $124 million of investors’ money may have been lost due to fraud and and outright theft, the SEC has said.

The company, which had an estimated 8,000 clients and accounts valued at $350 million, filed April 22 for liquidation under federal bankruptcy laws.

“There was a lot of money lost with First Pension, and it’s been nearly two months since this first came out,” said James C. Krause, one of the lawyers for the four investors bringing the suit.

“You’ve got the SEC doing their thing, the FBI doing a criminal investigation and the bankruptcy trustees,” Krause said, “but none of those entities have as a primary charge getting money back for investors. . . . That’s what we’re doing.”

San Diego lawyer Rochelle J. Felitti, who filed the lawsuit on behalf of Richard and Patricia Ting of Irvine and Karmele and Joseph T. Murray of San Jacinto, said she expects to see other First Pension investors join the action.

She also said other lawyers are studying the case and that further defendants--related banks or accounting firms--may be named. “As things become known, we will amend the complaint,” Felitti said.

The mortgage pools were operated through First Diversified Financial Services, the parent of First Pension. First Diversified has not filed for bankruptcy. The SEC has the authority to appoint a trustee to evaluate its assets but has not yet done so.

“There’s no one doing anything about the mortgage pools,” Richard Ting said.

In early May, the SEC alleged that First Pension’s three principals--Cooper and two associates, Robert E. Lindley and Valerie Jensen--operated a scheme that used money from new investors to cover dividends paid to earlier ones. The three recently agreed to plead guilty to criminal charges.