AGA lawsuit: Fireman's Fund exposed workers to scam

Dozens of Fireman’s Fund Insurance Co. workers and retirees filed a lawsuit against their employer claiming they lost $30 million by following investment advice from two Santa Rosa financial advisers accused of fraud.

Fireman’s Fund, which was reducing its workforce at the time, retained now-defunct AGA Financial to steer employees into early retirement, the suit claims. Some employees who followed its advice lost their homes and others went bankrupt when the risky investments went sour, according to the suit.

Fireman’s Fund issued a statement asserting the company did not directly hire AGA Financial and was not responsible for the losses.

The suit, filed Tuesday in Marin County Superior Court, comes just five days after state officials arrested AGA Financial owner Gary Armitage and former partner Jeff Guidi on fraud charges. State officials said their yearlong investigation turned up more than 2,000 investors, many of them elderly, claiming losses of more than $200 million.

Those victims include the 46 current or former Fireman’s Fund employees named in the suit, as well as spouses, trusts and other plaintiffs.

AGA Financial and broker dealer E-Planning Securities provided investment advice and services to Fireman’s Fund employees from 1996 to 2007 as the company’s agents, the suit claims.

“They were negligent in what they did but the people doing the seminars were acting on behalf of Fireman’s Fund, so it’s as if Fireman’s Fund was directly responsible,” said Val Hornstein, the San Francisco lawyer for the workers and retirees.

Fireman’s Fund was negligent, the suit claims, in recommending the financial advisers to employees over other firms. Fireman’s Fund also actively sponsored presentations the advisers made at the insurance giant’s Novato offices and other sites, the suit claims. The company trained staff to assist the advisers, promoted seminar sign-ups in e-mails and at computer kiosks, and targeted workers nearing retirement, the suit claims.

At the heart of the suit is the claim that Fireman’s Fund is liable for the losses because AGA Financial acted as an agent for the company. The advisers, the suit claims, encouraged risky investments and placed employees’ money in unsecured assets and companies in which they had undisclosed interests.

In a statement, the company said the losses are unfortunate but not the responsibility of Fireman’s Fund.

“We contracted with a national vendor to offer voluntary retirement planning training. That vendor was responsible for bringing local instructors to Novato to conduct the training. Individuals associated with AGA were among these local instructors. Our contract required the use of standard generic training material that did not endorse particular products,” the statement read.

“It is unfortunate that Fireman’s Fund employees and others suffered losses as a result of their investments with AGA, but we continue to believe that we are not responsible for these losses.”

Hornstein countered that Fireman’s Fund actively worked with and kept AGA Financial on board to help the company cut payroll by encouraging workers to attend the seminars, leading some to retire early.

“It appears there was a conscious decision to downsize and get rid of the most expensive employees. They were directed into this. Fireman’s Fund was telling them to go there,” he said. “AGA and Armitage were in the company for 11 years. They had the run of the company, so the foxes are in the hen house.”