John Seymour didn't think to question where the money would come from. Seymour, a real estate broker who would later become the mayor of Anaheim, Calif., and briefly a U.S. senator, needed to sell his business to turn to politics.

Enter William E. Cooper, a loan broker who had struck it rich riding Orange County's real estate boom in the late '70s and was making the rounds at Republican fundraisers. "He was up front, a fine guy to deal with," Seymour recalls. In 1981, Cooper agreed to buy the business for $720,000. But soon, the checks stopped coming in, and Seymour sued. The two settled for $100,000.

For Cooper, the incident appears to have been a dress rehearsal of sorts. Over the next 13 years, the Securities & Exchange Commission charges, he and two associates operated what may have been the largest real estate pyramid ever in a region rife with investor scams. The regulators allege that the trio's First Pension Corp. and its subsidiaries bilked investors out of as much as $124 million by selling shares in limited partnerships promising returns approaching 28%--from property investments that were never made.

SINGAPORE STASH. Cooper, 49, and his partners, Robert E. Lindley and Valerie Jensen, won't comment directly on the case but say through their attorneys that they intend to cooperate with federal authorities, who filed a complaint on May 13 in Los Angeles federal court. "Mr. Cooper profoundly regrets any losses that may have occurred to investors," says his attorney, former federal Judge Robert C. Bonner. Just how much was lost may never be known: Officials say the Federal Bureau of Investigation is examining the flow of some of the money to Singapore and other countries. The Justice Dept. may soon file criminal charges.

At the center of the probe is a jovial, bearded man who started in the mortgage business as an 18-year-old loan-officer trainee and by the late '70s operated his own loan-brokerage agency. As the real estate market boomed, Cooper became well known among Orange County's monied set. A former board chairman for a local hospital, he and his wife, Terri, were fund-raisers for a local children's home. He was appointed by then-California Governor George Deukmejian in '84 to the board of the California Economic Development Corp., a nonprofit agency studying the state's economy.

By then, the SEC alleges, Cooper, Lindley, and Jensen had already planted the seeds of their scam. Selling units in 218 separate limited partnerships that promised to buy mortgages at steep discounts, brokers at First Pension's VestCorp Securities Corp. subsidiary raised an estimated $99 million. "It all looked so perfect, so neat and clean," fumes retired insurance-company inspector John Keeler, who invested nearly $8,000. Colorful brochures arrived frequently, says Keeler. For a while, so did dividend checks.

The problem, the SEC now says, was that the dividends Keeler received were coming not from investments but from other units that VestCorp sold. In fact, says SEC Assistant Regional Director Lisa A. Gok: "we're not even sure there were any investments." Instead, the SEC charges, First Pension maintained a secret account called the "99 minifund" that it used to funnel $2.1 million in "dividends" from one investor to another. At the same time, the SEC maintains, $25 million was diverted to a Scottsdale (Ariz.) brokerage house, Ernest-Edwards & Associates. Gok says it was little more than a mail drop for the funds.

SLEIGHT OF HAND. The scheme began to unravel earlier this year, according to investigators. In early 1993, the trio founded Denver-based Summit Trust Co. to act as custodian for the funds raised by First Pension and VestCorp. But a year later--last April--Summit President Kenneth Lyon notified Colorado banking regulators that at least $10 million had been siphoned out of the bank without his knowledge.

SEC regulators now believe that Cooper, forging Lyon's signature, wrote 114 checks totaling $1.3 million and deposited them into Wells Fargo Bank accounts in the name of two other Cooper-controlled companies. At least 50 checks from investors were never even deposited with Summit, the SEC charges, but were instead funneled into accounts controlled by Cooper and Lindley. Lyon did not return phone calls.

Summit has been seized by Colorado regulators, and First Pension has filed for Chapter 7 bankruptcy. SEC officials, who have petitioned the court to appoint auditors to pore over First Pension's books, say at least $225 million in other First Pension investments, unrelated to the partnerships, are considered secure. That's little comfort to the thousands of other investors who sought Orange County riches and instead may have bought themselves a scam.

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