Gas Co. OKs Settlement With 89 Investors in Alleged Fraud

The Southern California Gas Co. has agreed to a tentative settlement with 89 mostly elderly people who were allegedly defrauded of $1.9 million by an investment firm that helped finance the utility’s energy-saving programs in the early 1980s, attorneys said Monday.

A last-minute technicality prohibited consummation of the agreement on Monday, attorneys for both sides said. However, a Superior Court jury deliberating the complicated case was recessed Monday afternoon in the expectation that the agreement would be made final this morning. Terms of the agreement are expected to be confidential, lawyers said.

“Let’s just say we’ll be walking away with smiles on our faces and they’ll be walking off with frowns on theirs,” said J. Michael Hennigan, an attorney representing some of the elderly plaintiffs.

“We expect to have something by tomorrow,” said Jordana Singer, an attorney for Southern California Gas, when asked about the settlement. “However, to the general public it would be confidential . . . in the interest of protecting the clients.”

The utility, which denied any wrongdoing, was accused of negligence and conspiracy in allowing Missman-Kaplan & Associates (MKA), a Northridge-based investment firm, to use the gas company’s name in attracting investors. David Missman of Lancaster, an owner of the now-defunct investment firm, is facing criminal charges stemming from allegations that he operated a Ponzi scam in which early investors are paid off using later investors’ money.

In closing arguments, Hennigan asserted that $10 million would “not be out of line” to award five elderly clients for having lost their life’s savings. One plaintiff, a retired Los Angeles jeweler named Emil Snyder, died shortly before the trial began. Another, Cecilia Glickman, 90, had a stroke and testified in a wheelchair. A third, Aaron Rosensweig, had a heart attack purportedly linked to distress over his investment losses.

At the time the firm closed in 1987, the 89 plaintiffs were owed $2 million, according to Hennigan and attorney Brian Strange. In all, there were about 900 investors. According to evidence presented at trial, MKA ledgers showed debts of $18 million when it closed. An estimated $6 million is unaccounted for, Hennigan said.

MKA was one of five major “factors,” agencies that helped finance a state-mandated energy conservation campaign aimed at offering homeowners discounts or rebates for weatherproofing their homes. Investors claimed that Southern California Gas Co., “acting under a confused mandate from senior management to assist certain factoring companies in improving their cash flow . . . actively assisted MKA in its solicitation of investors, who then lost their entire investment.”

Though the utility warned MKA about using its name in its advertisements soliciting investors in 1981, it later appointed a “factoring coordinator” who made dozens of visits to the firm and, in effect, endorsed its operations, the plaintiffs charged.

Missman, acting as his own lawyer, has failed to put on a defense or show up in court, attorneys said. Hennigan said he has no significant assets.

Terms of the agreement with Southern California Gas could become public if the utility wishes to pass some of its costs on to ratepayers, as utilities sometimes do in civil judgments.