First Pension Land Fund Role Denied by O.C. Builder
Millions of dollars invested in land deals controlled by Orange County developer Buck Johns and the owner of scandal-plagued First Pension Corp. were improperly diverted through the pension management firm, a court-appointed receiver has found.
Receiver Donald W. Henry said he will present his findings in federal court in the next few months after he completes his investigation of investments run by First Pension founder William E. Cooper, who for more than 10 years operated an elaborate pyramid scheme with his clients’ retirement funds.
Johns, one of Orange County’s most influential citizens and a Republican power broker, vehemently rejects Henry’s allegations, and neither the receiver nor any government authority has accused Johns of wrongdoing.
“It is our opinion that no funds were commingled,” Johns said. “Those funds, if they were commingled, were then replaced back into the partnership accounts.”
Johns, 52, described his business relationship with Cooper as “straightforward.”
“Cooper had the checkbook,” Johns said in an interview Thursday. “We had no access to any of those funds.”
Clients of Orange-based First Pension lost $121.5 million by investing in mortgages that never existed. Cooper agreed in August to plead guilty to two counts of federal mail fraud.
Henry, a Woodland Hills attorney appointed by government securities regulators in July to examine investments controlled by Cooper, estimated that more than $2 million was diverted from partnerships jointly controlled by Johns and Cooper, though some of the money was subsequently returned. The receiver would not say where the money was transferred or who moved it.
“The Buck Johns partnerships may have liabilities to other investors in the First Pension case,” said Henry, who has 20 years’ experience as a specialist in real estate-related bankruptcies. “Some of the investor monies put into his partnerships were misdirected and taken by other Cooper entities.”
More than 400 investors, Henry said, put about $7 million into land deals controlled by the two men and sold from 1987 to 1990. The properties involved cover nearly 100 acres, mostly in Moreno Valley.
While most of the cash raised from investors for the partnerships was used to buy land, other money originally set aside to pay bills and conduct other operations was diverted, Henry said.
“We’ve found commingling rampant everywhere. This money traveled more than you and I ever will in our lives,” Henry said. “We are going to ask the court how to proceed when you have pervasive fraud.”
An independent accountant hired by Henry is auditing the land partnerships, which were created with the help of an in-house accountant at Cooper’s company, Henry said.
Cooper and Johns, who met in the late 1970s, were both members of the exclusive Lincoln Club, an influential group of Republican campaign contributors. Johns--still an active member of the group--is one of the leading advocates of a November ballot measure to convert El Toro Marine Corps Air Station into a commercial airport.
As part of a tight Orange County political circle, Johns has hosted two campaign fund-raisers for former Vice President Dan Quayle, hobnobbed with former President George Bush and had private meetings with Gov. Pete Wilson.
Cooper, though not as politically active as Johns, made nearly $20,000 in contributions to Republican candidates from 1989 to 1992.
Johns said he was taken by surprise when he heard last spring about the 10-year fraud run by Cooper at First Pension.
“I was just as shocked as anyone when I saw the thing start to unravel,” he said. “Our business was very straightforward. I had no reason to suspect that anything else was going on.”
On Aug. 2, the day after Cooper entered his guilty pleas, Johns sent a letter to investors in the land partnerships asking them to oust Cooper as managing general partner and appoint him to the position. He said this week that more than 80% of investors have voted to do that, but such a shift cannot occur until Henry’s investigation is completed.
Johns, an Arkansas native, began investing in real estate in the late 1970s while heading the California operations of an air-conditioning company. He is owner of Inland Group Inc., an 8-year-old Newport Beach company that mainly develops land in the Inland Empire.
For its real estate projects, all of which are in Riverside and San Bernardino counties, Inland Group typically teams with investors such as Cooper to finance the development. The Inland Group then handles the paperwork involved in launching the construction of the project. Johns is known for his skill at cutting through red tape at city halls and county courthouses to keep projects moving.
A broker familiar with those transactions said that Cooper, as managing general partner, kept track of the finances while Johns, as co-general partner, was responsible for permits and government approvals.
“Buck used to come in . . . and do updates for us on the old partnerships and present details on the new ones,” said John Hiers, who was a broker at Vestcorp Securities, another Cooper-owned company, from 1989 to 1993.
Cooper’s and Johns’ friendship soured in the early 1990s, Hiers said, when Cooper stopped paying bills, including taxes and consultants’ fees, for some of the partnerships.
“Buck has a lot of relationships in the Inland Empire, and he demanded that Bill write the checks,” Hiers said. “Bill just did his usual song and dance. After that, they didn’t do any more deals.”
Through First Pension, many investors put money into the Cooper-Johns land deals. One of those is Mark O’Connell, a Newport Beach lawyer who says he lost $68,000 in First Pension. It is hard to comprehend that a businessman as savvy as Johns could have been a partner of Cooper and not have suspected that something was amiss at First Pension, O’Connell said this week.
After the SEC alleged massive fraud at First Pension, a federal judge in May froze the assets of Cooper and two of his long-term associates, Valerie Jensen and Robert E. Lindley. Jensen and Lindley, along with Cooper, agreed in August to plead guilty of federal mail fraud. Each faces a prison term of up to 10 years and a $500,000 fine. The three are to be sentenced by a federal judge on Nov. 10.
Though Cooper’s continued cooperation with investigators was part of the August plea bargain, Henry said, Cooper is not cooperating.
“We feel he has not been candid or cooperative,” Henry said. “In 20 years, I have never seen such a convoluted conduit of funds.”
Robert C. Bonner, a former federal judge who is now Cooper’s lawyer, said his client is “actively cooperating” with Henry and all the investigators.
John F. Libby, the assistant U.S. attorney in Los Angeles who led the Cooper investigation, said, “We are aware of his cooperation or lack thereof, and we will be taking that into account in forming our sentencing recommendation to the court.”
Johns-Cooper Land Deals
Orange County developer William Buck Johns and William E. Cooper, owner of now-defunct First Pension Corp., were partners in 10 partnerships that raised money to invest in undeveloped land, according to a lawyer appointed by the U.S. District Court in Los Angeles to investigate First Pension. The properties:
Amount raised Date Partnership Acres from investors sold Moreno Valley Land Bank I 10 $700,000 1987 Moreno Valley Land Fund II 20 800,000 1988 Moreno Valley Land Fund IV 20 850,000 1988 Moreno Valley Land Fund V 10 850,000 1988 Moreno Valley Land Fund VI 5 350,000 1988 Moreno Valley Land Fund C/Q 10 630,000 1989 Moreno Valley Land Fund XII 8.9 810,000 1989 Beaumont Land Fund IX 4 275,000 1989 Beaumont Land Fund X 5 570,000 1990 Beaumont Land Fund XV 4.87 1,250,000 1990
Source: Court-appointed receiver Donald W. Henry; Researched by JANICE L. JONES / Los Angeles Times
