Court ruling buoys victims of defunct Santa Rosa financial firm

A number of investors defrauded by a defunct Santa Rosa financial services firm have won a major court victory in their four-year effort to recoup approximately $30 million in losses.

A Marin County judge on Friday ruled that Successful Money Management Systems Inc., which organized financial planning seminars for employees of Fireman's Fund, had a duty to protect workers from "bad apples" like Santa Rosa's AGA Financial.

Owned by Gary Armitage and Jeff Guidi until it collapsed in 2008, AGA Financial was an integral part of a massive real-estate Ponzi scheme that bilked more than 2,000 people out of at least $250 million, many of them North Coast retirees.

Armitage, a Healdsburg native, is serving a 10-year prison sentence. Guidi struck a plea deal with prosecutors calling for him to cooperate with the investigation, make restitution of nearly $300,000 to victims, and give up his broker's license for three years. Their co-conspirator, a Redding ex-con named James Koenig, is serving 43 years in prison.

Dozens of AGA's clients were employees or former employees of Fireman's Fund, the large Novato-based insurance company that is fifth largest private employer in Marin County.

Soon after AGA's collapse, a group of former Fireman's Fund employees sued the company and the firm that put on its retirement planning seminars for employees, SMMS. They argued that they would never have invested their life savings with AGA were it not for Fireman's Fund's implied stamp of approval of the seminars.

Judge Roy Chernus found that SMMS "had a duty to take reasonable steps to ensure the quality of its program instructors" but instead "failed... to weed out unscrupulous financial professionals" such as AGA. The failure was "akin to sloth," Chernus said according to a transcript of the hearing.

Plaintiff's attorney Val Hornstein of San Francisco called the judge's ruling "enormously significant."

"It's really a landmark ruling in many ways," Hornstein said.

The judge found that Fireman's Fund was not at fault for hiring SMMS, but rather that SMMS had deceived the insurance firm. Lawyers for SMMS, which is now owned by ING North America Insurance Corp., denied those claims.

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