State Agency Investigating Teachers’ Fund in Wake of Suit : Probe: Real Estate Department looking into allegations that the Newport Beach firm is insolvent. All documents ordered preserved.

The state Department of Real Estate confirmed Thursday that it is investigating Teachers Management & Investment Inc. in the wake of allegations that the fund has lost at least $100 million of teachers’ retirement money.

“Our concern is that everything be on the up-and-up at TMI,” said Randy Brendia, regional manager in Los Angeles for the department that regulates the state’s real estate industry. “A lawsuit can allege anything, but if there is some truth to it, we want to be the first ones there.”

Also Thursday, a judge granted a temporary restraining order to prohibit TMI from altering or destroying documents. The investigation and restraining order follow a lawsuit filed Tuesday alleging that TMI, which raised as much as $1 billion from 60,000 investors, is insolvent. It seeks immediate appointment of a receiver to take over the company and determine if there are any remaining assets. Besides approving the restraining order, Orange County Superior Court Judge Richard W. Luesebrink said he will decide by Sept. 7 whether to appoint a receiver.

TMI’s owners, James R. Martin and Maurice Shuman, have said they “absolutely deny” the allegations in the lawsuit. On Thursday, the company issued a statement saying that investors’ concern that it would destroy documents was “misplaced” and asserting that TMI “has always maintained appropriate business records.”

However, a lawyer for McDermott, Will & Emery, the Newport Beach firm representing TMI in court Thursday, said that the investment fund did not contest the restraining order.

“Since TMI had no intention of losing or destroying any documents, we had no problem with that,” lawyer David A. Sprowl said.

TMI, whose symbol is a shiny red apple, offers to educators--most of them teachers--an opportunity to invest in real estate partnerships that have purchased undeveloped land and commercial properties across California.

The lawsuit alleges that company officials lost millions of dollars of investors’ money in a scheme designed to hide financial problems with its partnerships, which were hurt by the real estate slump of the early 1990s. That activity, the suit states, included “payments made out of trust amounting in the end to a Ponzi scheme undermining the security of possibly as much as $1 billion in retirement funds.”