First Pension Investors Sue Cox, Others : Courts: The $15.9-million class action alleges lawyers concealed fraud. Newport Beach congressman calls the lawsuit ‘meritless.’
Investors in scandal-ridden First Pension Corp. filed a lawsuit Friday against Rep. Christopher Cox (R-Newport Beach) and others, accusing them of concealing fraud in the defunct company’s investment scheme in the mid-1980s.
The class action, which seeks $15.9 million in damages, names Cox as one of the lawyers involved in preparing misleading documents and concealing shady dealings that allowed the fraud to continue for nearly another decade.
Cox, who represented the company in a securities matter as a lawyer more than two years before his 1988 election to the House of Representatives, said in a prepared statement from Washington that the lawsuit is “a stale and meritless claim” that will be thrown out of court.
He also slammed the lawyer who filed the lawsuit, Michael J. Aguirre of San Diego, as a “failed Democratic congressional candidate . . . who has a history of filing abusive litigation.”
Investors lost $136 million after the long-running First Pension scheme collapsed last year. Its president, William E. Cooper, was sentenced to 10 years in prison and fined $73.1 million.
First Pension and a companion company, VestCorp, urged working people in radio and newspaper advertisements to invest their retirement money in trust deeds. But the investments simply built a pyramid as Cooper and his top aides mainly used new money to repay prior investors.
Cooper; former company executives Robert E. Lindley and Valerie Jensen, both of whom also pleaded guilty to fraud charges, and company founder Glen Belka also were named as defendants in the civil lawsuit.
Cox was named in the suit along with lawyers Gary Mendoza and John Stahr, former colleagues at Latham & Watkins in Costa Mesa. Mendoza now is commissioner of the state Department of Corporations. Stahr is a partner at the law firm, which also is named as a defendant. In addition, the Los Angeles law firm of Smith & Hilbig, the Coopers & Lybrand accounting firm and the BMF Mortgage Income Fund limited partnership are named.
Other defendants could not be reached for comment.
The class action, filed in Orange County Superior Court, comes a week after another prominent Orange County figure, developer Buck Johns, was sued by the court-appointed receiver for companies affiliated with First Pension. The lawsuit against Johns alleges that he committed fraud in connection with the commingling of funds among his land deals and companies run by the pension management firm’s founder. Johns has denied any wrongdoing.
Friday’s 201-page class action alleges that First Pension encountered a series of early problems that were never disclosed to investors later.
In particular, it contends that Cox and the others hid the fact that Cooper’s real estate license was revoked in 1984. They also “recklessly made false statements to state and federal officials which concealed the ‘red flags’ pointing to First Pension defendants’ ongoing dissipation of . . . investor funds,” according to the suit.
Cox, fellow attorneys and accountants then allegedly filed false documents with the Securities and Exchange Commission and state Department of Corporations “with the intent of misleading, obstruction and manipulating legitimate inquiry” into the troubled funds, according to the suit.
In 1984, the suit states, the attorneys “organized or implemented a paper restructuring of the corporate and contractual organization used by the First Pension defendants to perpetrate the scheme.” In doing so, the lawyers “acted with the intent of actively concealing and misrepresenting the common control, conflicts of interests, breaches of fiduciary duty and fraud of the First Pension defendants.”
In his statement, Cox, who left Latham & Watkins in 1986, called lawyer Aguirre “an unethical political hack” who is trying to use the case to undermine the congressman’s legal reform legislation.
“Aguirre has had to make deliberately false statements in his complaint in order to involve me, because he knows full well that I’d left the firm a full year and a half” before Latham & Watkins completed its work for First Pension, Cox said.
While he has acknowledged working on the First Pension matter, Cox said his work did not involve any of the allegations set forth in the lawsuit.
