Armitage files for bankruptcy

Gary Armitage, the disgraced Santa Rosa financial adviser accused of defrauding investors out of tens of millions of dollars, filed bankruptcy this week.

The one-time owner of AGA Financial and his wife, Nell, sought protection from creditors Sunday by filing Chapter 7 in U.S. Bankruptcy Court in Santa Rosa.

Armitage owes creditors between $50 million and $100 million, according to court documents. He reported assets of between $1 million and $10 million.

The 57-year-old Healdsburg resident is being sued by dozens of investors and is under investigation by the state Attorney General's Office.

Department of Justice investigators have fielded more than 2,000 complaints against Armitage, former partner and Santa Rosa resident Jeff Guidi, and Redding real estate investor James Koenig. No criminal charges have been filed in the case.

Investors have accused the men of operating a "classic Ponzi scheme," a form of financial fraud designed to lure in new investors by promising unrealistically high returns. Money from new investors is used to pay returns to earlier investors, maintaining an illusion of profits.

Armitage could not be reached for comment Wednesday. His bankruptcy attorney, Russell Marne, did not return a call for comment.

Armitage closed AGA Financial in September and put his $2.5 million Healdsburg home and his castle in the mountains outside Redding up for sale.

The filing may have been a move to protect any remaining assets from legal judgments against him. Former Marin residents Bonnie and Monty Morrissey won an uncontested $312,704 judgment against Armitage in Sonoma County Superior Court in January.

"That may be part of the reason he filed for bankruptcy, he wanted to protect himself," said Jeff Terry, a Santa Rosa attorney who represents another investor in a case against Armitage.

The bankruptcy case will halt all efforts to collect debts and court judgments against Armitage, Terry said. Court judgments involving fraud allegations would not necessarily be discharged by a bankruptcy, he said.

Armitage listed the Morrisseys as creditors in his bankruptcy filing. He estimates fewer than 50 creditors.

The emergency filing did not estimate how much each creditor is owed. The court gives filers 15 days to provide more detail about the amounts owed to creditors.

Guidi and Koenig are listed as creditors. Bud and Noona Merrill, an elderly Santa Rosa couple suing Armitage for more than $2 million, are also listed.

Other creditors include officials at ePlanning, the Roseville-based stock brokerage that licensed Armitage to sell securities, Bank of America, Chase and several smaller banks.

The filings also indicate that Armitage took a credit counseling class on Dec. 17.

Kathleen Adams, a Healdsburg resident who estimates she lost nearly $300,000 of her investments with Armitage, said she wasn't surprised to hear of the filing.

Once good friends with the Armitages, Adams said she hasn't heard from them since news of the allegations broke last summer. It shocked the small Wine Country town where Armitage grew up and was well known.

"It's amazing how many people I know who have come forward," Adams said.

Investors, many of them elderly, say Armitage assured them of steady retirement income from low-risk real estate investments, such as senior care centers. They now accuse him and the other men of running a complex web of interlocking companies that maximized their fees and bled investors dry.

Adams said she never filed a lawsuit against Armitage because she "didn't want to throw good money after bad." She said she knows plenty of other investors who have lost more money than her, and she doubts there will be anything left for most to recover.

Thinking about the betrayal and her lost savings began affecting her health, and so she has decided to put it out of her mind.

"I have learned to accept it because otherwise you go crazy," she said.

Armitage's son, Jeremy, and his wife, Mani, filed Chapter 7 bankruptcy Jan. 30.

Jeremy Armitage, also an investment adviser, was supposed to help manage the accounts of hundreds of AGA Financial clients after his father lost his broker's license over the summer.

But the younger Armitage, who set up a company called Ethos Capital Management, found it difficult to persuade his father's clients to do business with him, he said in an interview in the fall. Many of the clients lost their life savings in his father's alleged schemes.

Jeremy Armitage's attorney, Michael Fallon, said a meeting of creditors is scheduled for March 4.

Deputy Attorney General Robert Morgester declined to discuss the case.

"We are still investigating," he said.

You can reach Staff Writer Kevin McCallum at 521-5207 or kevin.mccallum@pressdemocrat

.com.