The Southern California Gas Co. should be held responsible for a con artists' scheme that bilked dozens of investors of millions of dollars, a Los Angeles Superior Court jury was told Monday.
The gas company knew there was "a high probability that these people would be injured but they made a decision to let (them) suffer," said J. Michael Hennigan, attorney for two of the five plaintiffs in a lawsuit against the company and nine other defendants.
He charged that the utility let itself be used as a lure to convince investors--many of whom were retired teachers--that their money was safe.
The gas company--which denies any wrongdoing--teamed up with the defunct Missman-Kaplan & Associates Ltd. in 1981 in an effort to implement a state-mandated conservation requirement. MKA then used its gas company connection to advance what authorities have described as a classic Ponzi scheme, in which early investors' money is used to pay off later investors, Hennigan said.
The jury is scheduled to begin deliberating today on whether the gas company, through one of its employees, conspired with MKA to sell unregistered securities. The jury could also find that the utility behaved negligently in not taking action to end a scheme it realized was fraudulent.
MKA's owners, David and Karen Missman of Lancaster, are facing a preliminary hearing Sept. 17 on criminal charges in connection with the real estate investment company they ran from 1979 until it was shut down in 1988. The couple has pleaded not guilty in the criminal case; David Missman is one of the defendants in the civil trial, but has mounted no defense.
Calling the plaintiffs' case a "twisting of the facts," defense attorney Melvin King said that, far from being at fault, "the gas company was a victim of this conspiracy." The gas company may have been "foolish," he conceded, but it "did nothing vile and despicable."
Southern California Gas Co.'s involvement with MKA began 10 years ago, after the utility had been ordered by the state Public Utilities Commission to implement a conservation program giving consumers rebates for insulating their homes and retrofitting appliances.
In order to expedite the program, the gas company arranged to have MKA make direct payments to contractors who did the work.
The plaintiffs' conspiracy theory hinges on the role of Sheila Kelley, the gas company liaison with MKA, whom they accused of encouraging investments in MKA alleged schemes. Hennigan reminded the jury of testimony that showed she had a close relationship with the Missmans, visiting their office as many as 50 times, making four trips with them to Palm Springs and one to Las Vegas and dining with them on frequent occasions.
But gas company attorney King denied that Kelley, a 20-year employee of the company, played such a role. "Ms. Kelley's position was not created so she could solicit investors, " he said.
MKA's association with Southern California Gas helped persuade plaintiff Tanya Snyder, 81, of Beverly Hills, and her husband Emil, who died in May at the age of 83, that the real estate company was offering worthwhile investments, she said.
The couple lost $59,000.
King told the jury that the gas company unsuccessfully tried to get MKA promoters to stop using its name. The defense lawyer said the Snyders were duped by their own son, Ted, a teacher who received a commission for getting them to invest in MKA. Tanya Snyder said her son had himself been taken in.
The action by Snyder and the four other investors is the first in a series of related lawsuits to come to trial. Hennigan and his co-counsel, Brian R. Strange, said an additional 86 plaintiffs are seeking damages from the utility for losses amounting to more than $18 million.