TMI Corp., Investors in Tentative Agreement

After years of legal wrangling and failed attempts to reach a settlement, financially troubled Teachers Management & Investment Corp. on Wednesday agreed to pay investors $4.3 million to settle accusations that the company mishandled their retirement funds and caused losses of more than $200 million.

The settlement stems from a 1994 class-action lawsuit filed against the Newport Beach real estate investment firm on behalf of 20,000 California teachers, some of whom lost their life savings. The educators accused the firm and its operators, Maurice B. Shuman and James Martin, of illegally diverting money and shuffling funds to conceal deep losses in the company’s real estate holdings.

In settling the case, Shuman and Martin admitted no liability. The executives have long maintained that California’s depressed real estate values--not fraud or mismanagement--sunk the value of TMI’s real estate portfolio.

Louise Carmichael of Orange, a retired schoolteacher and plaintiff in the case, expressed relief that a settlement had finally been reached, though the amount doesn’t begin to cover what investors lost in TMI.

“This doesn’t right the wrongs done to [investors], but it’s a step in the right direction,” she said.

The tentative agreement, reached late Wednesday, guarantees that TMI will pay a minimum of $4.3 million to investors, according to Irvine attorney Ron Rus, who is representing the teachers. Rus said investors could reap a few million more from the sale of TMI real estate, most of which is now under the control of court-appointed receiver Dennis B. Schmucker.

The agreement must still be approved by Orange County Superior Court Judge John C. Woolley.

Schmucker said it is unclear how much of the proceeds of the settlement will eventually be distributed to investors or how the split will be calculated. He said legal fees must first be deducted from the final payout.