A Marin County judge awarded $36.8 million in damages Thursday to 34 families defrauded by a defunct Santa Rosa financial services firm whose founder is serving a 10-year prison sentence.
The ruling represents a remarkable victory for investors in AGA Financial, who for years had been told there was little hope they would recoup any of their millions of dollars in losses.
AGA, which collapsed in 2008, was not the target of Thursday’s decision. Instead, Judge Roy Chernus ordered the company that gave AGA owners Gary Armitage and Jeffrey Guidi access to employees at Fireman’s Fund Insurance to pay the damages.
“I feel comforted today, somewhat, knowing we don’t have to worry about scraping pennies together,” said Lynda Howerton, who lost her Petaluma home and horses because of investment losses she and her husband suffered.
Larry Howerton worked for Fireman’s Fund for years and sunk the couple’s life savings into investments that Armitage assured them were safe, she said. The couple lost their entire $1.2 million when the recession exposed the risky real estate investments Armitage had put their money into as part of a massive Ponzi scheme.
Chernus awarded the Howertons $928,204. When combined with a previous settlement, the couple, like other plaintiffs, will recoup their entire original investment plus the returns they would have enjoyed if the money had been invested properly.
‘A long, hard battle’
Plaintiff’s attorney Val Hornstein of San Francisco said he’s been working for six years to help investors who suffered “heart-wrenching” losses.
“It was a long, hard battle, but it’s extremely gratifying to see that clients are going to be getting the award the court made today,” Hornstein said.
The judge had previously found that the company that organized retirement planning workshops for Fireman’s Fund employees, Successful Money Management Systems Inc., failed to protect employees from investing with “bad apples” like AGA Financial.
SMMS Inc. is now owned by massive financial services firm ING North America Insurance Corp., which the judge found liable for the damages.
The judge ruled Fireman’s Fund itself “has not done anything wrong” and can recoup from ING the $7.5 million the Novato-based company paid as a settlement to the plaintiffs in 2012, plus interest.
Thursday’s ruling brought nearly to a close a yearlong trial that attorneys said was one of the longest in Marin County history. The hearing focused on damages to the 47 individual plaintiffs in the case, most of whom lived in Marin and Sonoma counties and many of whom attended the hearing.
The judge had previously held a two-week hearing aimed at determining what would be fair compensation for people who lost their investments years ago because of poor advice.
While compensation was difficult to compute, the judge said he had an obligation to try to arrive at levels that were “fair and reasonable.”
“I don’t know what the plaintiffs would have had the investment advisers placed their investments as they should have been placed,” Chernus said. “Not only don’t I know, I think it’s fair to say absolutely no one could know.”
But he said he found that plaintiff’s financial experts has used reasonable models to calculate what investors would have received if their money had been placed in diversified investments that tracked historical investment returns over the relevant time frames.