Sit back and think for a moment about which of your friends you might give $100,000. Which friend would it be and why?

Someone needs to ask Chris Cox why he gave Gary Mendoza $125,000 (including a $100,000 personal check!) for the latter’s 2002 campaign for California insurance commissioner. Mendoza never paid a dime back. What ’s going on here? Only Chris Cox can answer that question.

Chris Cox’s interview with Dan Tsang on KUCI is interesting for several reasons. Particularly, the last 15 minutes are pertinent to the Cox/Mendoza/1st Pension/Securities Litigation Reform Act nexus of issues. (To listen click on http://falco.kuci.uci.edu/~dtsang/subversity/thisweek.htm, scroll down to October 29, 2002, then click on the loud-speaker icon, then you can fast forward to the 45th minute.)

1. You will notice by listening to the entire interview that Mr. Cox has an excellent command of detail when he wants to – about China, tobacco issues, etc.

2. As to the $125,000 he’s given his good friend, Gary Mendoza – it’s just that, a gift to a good friend. In fact, he is Mendoza’s single biggest contributor. Mendoza spent the money in losing the 2002 campaign and closed his campaign accounts without paying Mr. Cox back. But, according to Mr. Cox, there is apparently no influence attached to his extraordinary six-figure donation?

3. Indeed, he has lots of good stuff to say about Mendoza including my favorite: “Truth is that it is a case that never even got so far as a hearing or trial. It wasn’t settled. It was just thrown out with respect to Gary Mendoza and yours truly as well.”

4. Articles in the LA Times tell another story – please see (1) Richard Keil (2/24/95); John O’Dell and James Granelli (6/16/95, 6/15/96) and Greg Hernandez (7/29/00). Either Cox is lying or the Times has the story wrong? That is, Cox was dismissed from the suit after long consideration and the law firm and Mendoza settled for an undisclosed amount.

5. Cox’s strategic memory lapses are consistent with comments in the Keil article and it’s influence on Cox’s composition of the Securities Litigation Reform Act.

6. Finally, you will hear Mr. Cox dismissing (disparaging if you consider his tone of voice) Lisa Girion’s July 21, 2002 article.

Chris Cox and Gary Mendoza Avoid Questions About First Pension Scandal

Congressman’s Contribution to Republican Candidate Raises More Concerns

IRVINE – Why does Congressman Christopher Cox owe Gary Mendoza $125,000? That’s how much Mr. Cox has contributed to the campaign coffers of Republican Insurance Commissioner Candidate Gary Mendoza. The last time the pair worked together they ended up being sued for fraud. As lawyers, Cox and Mendoza represented William E. Cooper, the architect of a Ponzi scheme perpetrated by First Pension Corporation, an Irvine retirement firm that managed the savings of over 8,000 mostly elderly Southern Californians. Through aggressive radio advertisements promising high yields, First Pension recruited clients to invest in home loan mortgages. The mortgages, however, never existed and Cooper and his cronies accrued some $136 million in ill-gotten gains before being discovered.

“$125,000 is an unusually large contribution for a federal candidate to be making to a state campaign, particularly when the federal races are so tight this year. I think the public should know exactly what Chris Cox and Gary Mendoza are up to,” said Professor John Graham, who is running against Cox in the 48th Congressional District election. “Voters in Orange County deserve representation that is not tainted by shady backroom deals and associations with perpetrators of a major frauds.”

Mendoza and Cox were named in a class action suit for aiding and abetting the First Pension fraud. Mendoza ponied up to settle the major litigation accusing him of helping the crook to rearrange a corporate structure to change how the operation looked on paper and to trick the SEC, and other regulators into allowing the Ponzi scheme to continue. Mendoza refuses to this day to disclose the amount of the settlement. Although Cox was dropped from the suit, he was later forced by the bilked investors to return to them the thousands of dollars in campaign contributions given him by Cooper.

While Cox was fighting the lawsuit regarding First Pension in the state courts he was also fighting very hard to limit shareholders rights on Capitol Hill. Indeed, he authored the bill that has allowed his cronies and donors to pillage pension and savings accounts nationwide. His Private Securities Litigation Reform Act was passed in December of 1995 over President Clinton’s veto. The law made it much more difficult for shareholders to sue executives for fraud, thus opening the flood gates for the corporate misbehavior only now being revealed today. The Los Angeles Times recently headlined a story on the bill: “Crisis in Corporate America, 1995 Tort Reform Act Said to Provide Safe Harbor for Fraud,” (July 21, 2002).

That bill was aggressively lobbied for by accounting firm Arthur Andersen. Indeed, Andersen, Merrill Lynch (remember the Orange County bankruptcy), and WorldCom executives have all donated thousands of dollars to Mr. Cox’s campaign, and have also recently taken the 5th Amendment on Capitol Hill. Of course, William E. Cooper another of Cox’s donors was convicted of fraud and is now serving a ten-year term in state prison.

At the time Cox was asked about his work for Cooper – he initially reported working on just one real estate mutual fund offering. However, documents obtained by the Associated Press also showed that Cox had represented Cooper during an attempt to purchase a bank in Northern California. In a subsequent interview, Cox couldn’t remember working on the bank deal. The LA Times (2-24-95) reported that the day after he “forgot” this information, “…the congressman amended his legislation [that is, the Litigation Reform Act] to prevent lawyers and others from being sued if they ‘genuinely forgot to disclose’ important information.” One has to wonder how many times the “Cox excuse” will be used by Enron and WorldCom con men during their trials in the coming months.

The consequences of Christopher Cox’s past actions have been devastating to Americans’ retirement accounts. He and Gary Mendoza were law firm partners working together for one of the most notorious perpetrators of fraud in California history. Given Mr. Cox’s six-figure donation to Mr. Mendoza’s current campaign, one has to wonder what’s being cooked up now?

Chronology of Cox and 1st Pension1983 “fraud began at 1st Pension,” according to William E. Cooper

1984-85: Cox works on two separate cases for 1st Pension

1986: Cox goes to White House

1988, 1990: Cox accepts donations from Cooper [Cooper also donates some $44,000 to Bush Sr., Wilson, Deukmajian]

1990: Deukmajian appoints Francisco Firmat to Superior Court

1994: April 1st Pension scandal breaks, declares bankruptcy
September Cooper is convicted, Cox implicated in scandal

1995: February Associated Press links Cox to Cooper*
March Cox introduces Securities Litigation Reform Act in House
September Cox returns Cooper’s donations AFTER they are publicly demanded by bilked investors, so does Wilson who also has political ambitions December Clinton’s veto of Securities Litigation Reform Act overridden

1996: February Firmat** first hears case against Cox and considers for 4 months, including two denials of motions to dismiss (note that Firmat is long term donor to Republican Party)
June Cox’s case finally dismissed by Firmat 2000 July Coopers & Lybrand (1st Pension’s auditor) found liable by a jury
Mendoza and Latham & Watkins had earlier settled with plaintiffs

2002: July 21 LA Times article blames Securities Litigation Reform Act for “providing safe harbor for fraud”

2002: May and September Cox gives Mendoza campaign $125,000 (in the form of donations and loans), this being an extraordinary kind of support provided by Cox for a state candidate

*Cox and Cooper are connected by two different cases on which the former worked for the latter, three separate campaign donations over two years, and a fundraiser for Cox held at Cooper’s Villa Park home. Cooper was also a prominent member of the OC Lincoln Club through which he and Cox would have had numerous opportunities for other interactions.

**One wonders why Judge Firmat did not recuse himself from the Cox case? He had two reasons to do so: (1) William Cooper had donated thousands of dollars to Governor Deukmajian and the Governor had initially appointed him to the bench; (2) Cox was claiming that the plaintiff’s purpose in including him in the suit was Cox’s prominence in the Republican Party – Firmat had been a long-term donor to that party.

Contact: John Graham at 949-856-1969 or john@johngraham.us