TMI Not to Blame for ’94 Collapse, Court Says

Educators who lost their retirement savings in the 1994 collapse of Teachers Management & Investment Corp. can’t blame the company or its advisors for most of the losses, a receiver said Thursday.

Dennis B. Schmucker of San Diego said 20,000 teachers and administrators statewide lost more than $200 million in real estate partnerships put together by TMI.

Unfortunately for them, Schmucker said, “the biggest chunk of the loss was caused by the decline in the real estate market.”

The teachers’ lawsuit, in fact, alleges that wrongdoing caused only $50 million in lost principal and a like amount in interest. Schmucker was one of the experts ready to testify about that loss.

Some teachers were disappointed with the $14-million settlement reached Tuesday with TMI’s auditor, KPMG Peat Marwick accounting firm, and banker, Comerica Bank-California. The settlement ended cases brought both by the teachers and the receiver.

On Thursday, Orange County Superior Court Judge John C. Woolley tentatively approved the settlement and set a hearing on final approval for March 20.

Schmucker said teachers and administrators had invested a total of $280 million in 39 limited partnerships that TMI oversaw and probably will receive only about $65 million back from settlements and property sales.

He said the sales of properties will raise more than $82 million, but only about $50 million will be available to partners after liens and costs are paid. Teachers will share only in the proceeds of the partnerships in which they invested, he said.

Woolley will determine how to allocate a total of $20 million in settlements among investors. Last year, TMI and its owners agreed to pay $4 million, and the law firm of Bruck & Perry in Newport Beach agreed to pay $2 million to settle.

None of the defendants admitted any wrongdoing or liability in settling.