Growing furor over AGA losses

<p>The state Attorney General's Office is intensifying its investigation of a Santa Rosa financial adviser accused of defrauding dozens of investors out of their life savings.</p><p>State investigators met Tuesday in Sacramento with a group of Bay Area investors who want Gary Armitage and his firm, AGA Financial, held accountable for their losses.</p><p>"We're saying put these bastards in jail and dig up as much of the assets as possible," said Dan Peterson, a vice president at a Lafayette bank who fears he and his wife have lost about $600,000. "These guys have got to pay, one way or another."</p><p>Following a series of stories this week about AGA Financial in The Press Democrat, more than a dozen people contacted the newspaper to say they had been defrauded by the firm or had elderly relatives whose investments have vanished.</p><p>Many have banded together into an online community to commiserate, share information and strategize over the best way to recover some of their investments.</p><p>Armitage has declined requests for comment through his son, citing litigation over the investments. In a letter to clients earlier this month, Armitage said he was shutting down his firm because of the soft economy.</p><p>Armitage and others face a flurry of lawsuits accusing them of systematically defrauding people out of their investments in senior care centers and other real estate investments around the nation.</p><p>One of the lawsuits against Armitage and partner Jeff Guidi charges they were co-owners of a Redding real estate investment firm that closed in June and filed for bankruptcy. The firm, Asset Real Estate & Investment Co., is now under investigation by the state Attorney General's Office.</p><p>Guidi, who left AGA Financial in August and has opened his own investment office in downtown Santa Rosa, declined to comment Wednesday.</p><p>"This is the worst case of elder abuse and abuse of trust I have seen in my 37 years as a broker," said Fred Ptucha, a financial adviser with Financial West Group in Santa Rosa. "I think Mr. Armitage and everyone else involved here should not only have all their assets taken away from them, including their houses, but they should be sent to jail for a long time."</p><p>Ptucha said he is familiar with AGA because several of his clients have lost millions invested with Armitage's firm.</p><p>State investigators have said they are still trying to determine the magnitude of investors' losses. Some AREI literature claimed to have raised $200 million from investors between 2002 and 2006, said Ptucha.</p><p>"This is huge," he said.</p><p>The Department of Justice's investigation of AREI and its founder, James Koenig, now includes AGA Financial and Armitage, said Robert Smith, a DOJ investigator on the case.</p><p>"This is a very high priority," Smith said Wednesday. "The DOJ is taking this case very seriously . . . We're trying to press forward as quickly as we can."</p><p>AGA Financial attracted many new clients by hosting investment seminars for employees of Bay Area companies concerned about their retirements.</p><p>In Marin County, numerous retirees of Fireman's Fund made sizeable investments with AGA Financial after attending financial seminars it hosted at the insurance company's Novato headquarters.</p><p>A 1997 brochure shows Fireman's Fund sponsored two AGA seminars entitled "Successful Money Management" and "Strategies for Successful Retirement."</p><p>Kay Kerriden, 67, a former Fireman's Fund employee who now lives in Petaluma, said the company's selection of AGA Financial to host retirement education seminars gave her the impression it was a reputable firm, she said.</p><p>Now with $330,000 in questionable AREI investments recommended by AGA Financial, Kerriden thinks her former employer shares some of the blame for the debacle.</p><p>Fireman's Fund did not return a telephone call seeking comment Wednesday.</p><p>Another Fireman's Fund retiree, Bill Potter, said he has been in touch with about 30 fellow retirees over the past year who have seen their investments evaporate and promises of repayment broken.</p><p>The 75-year-old Santa Rosa resident and his wife combined have about $375,000 invested in AREI companies.</p><p>Potter first started getting worried in June 2007 when interest payments on his investment in Mountain House Golf Course west of Tracy stopped coming in. In conference calls with investors over several months, Armitage and Koenig reassured investors that all was fine.</p><p>Then earlier this year, after promises of payment were broken time and time again, the group learned that Koenig had been convicted of bilking investors in the 1980s in connection with a gold-selling scam.</p><p>"Someone said 'Mountain House is bankrupt' said I said 'Oh, man,' " Potter recalled. "I have $155,000 in Mountain House, which is probably gone."</p><p>Peterson, a senior vice president at California Bank of Commerce, said the seminars encouraged participants to fill out detailed questionnaires about their finances. The stated purpose was to plug the numbers into a retirement investment software program that would help participants determine how to allocate their retirement dollars.</p><p>But in retrospect, Peterson said he believes the seminars were part of the scam. The brokers quickly zeroed in on the participants who had big nest eggs, he said.</p><p>"What it did was it essentially displayed every penny of the assets you had, and they proceeded to target you and say, 'Ah ha, here's a live one,' " Peterson said.</p><p>He started asking questions in 2005. But like other investors he hoped the assurances by Koenig and Armitage would come true.</p><p>Over and over they promised investors they were working on a new deal that in just a few short weeks would get everyone paid in full with interest, Peterson recalled.</p><p>"Gary would sit there and say, 'I guarantee you will not lose a dime,' " said Peterson, 61. "In hindsight it was bunch of BS, but at the time he was very convincing."</p><p>Peterson was particularly hopeful Armitage would come through because his wife has been diagnosed with cancer, he said. He wishes he could sue to recover his investments, but attorneys told him it would be expensive and they questioned whether any assets remained, due to the way the deals were financed.</p><p>"I certain can't afford to spend $250,000 on a crapshoot," Peterson said. "That's throwing good money after bad."</p><p>You can reach Staff Writer Kevin McCallum at 521-5207 or kevin.mccallum@press</p><p>democrat.com.</p>