Law Firm Settles Suit With TMI Investors

SANTA ANA — A law firm that long advised Teachers Management & Investment Corp. has agreed to pay $2.2 million to settle a lawsuit brought by investors who allege they were defrauded by the Newport Beach company.

The agreement with Bruck & Perry, which also is based in Newport Beach, was revealed in an Orange County Superior Court hearing Thursday. The agreement includes law firm partner David J. Perry, who also was named as a defendant.

The lawsuit, filed on behalf of about 20,000 teachers who had invested in TMI limited partnerships, accused Bruck & Perry of conflicts of interest and of helping TMI set up “sham” entities that TMI used to siphon cash from the partnerships.

The law firm and Perry have denied any wrongdoing.

The settlement was in the class-action lawsuit was announced in court by Ronald Rus of Irvine, lawyer for the investors, who wanted to set a date for a court hearing on the agreement. Because the lawsuit is a class action, The agreement must be approved is subject to approval by the court.

Rus said later that, under the settlement, Bruck & Perry would pay $1.55 million in cash and erase $650,000 in legal fees billed to the partnerships.

“It was clear that money was being siphoned out of the TMI partnerships for years,” Rus said. “The lawyers represented both the limited partnerships and general partner--TMI--for the whole time. That’s a clear conflict.”

George M. Lindahl(CQ) of Los Angeles, attorney for the law firm, said that a tentative agreement had been reached but that some details remain to be worked out. Perry wasn’t available for comment.

About 20,000 teachers statewide initially sued TMI and its operators, Maurice B. Shuman and James R. Martin, in August 1994, alleging that the company was insolvent, that it had lost more than $100 million and that its operators had diverted funds for their own use.

TMI, Shuman and Martin asserted said that the long recession of the early 1990s had eroded property values and caused the losses. They settled the claims against them last September for $4 million but admitted no wrongdoing.

The suit is still pending against other defendants, including the national accounting firm KPMG Peat Marwick LLP.

Formed in 1968 by a group of educators and real estate specialists, TMI promoted itself as a way for teachers to save for their retirement by investing in real estate. Some teachers saw 30% returns before the real estate market began to decline.