Fourteen former investors of CFS Financial Inc. have filed a federal lawsuit alleging securities fraud against company president Gary Sheets and other officers and subsidiaries of the defunct investment firm.

Sheets, whose wife, Kathleen, was one of two pipe-bombing victims of convicted documents forger Mark Hofmann, was one of several defendants named in the $3.25 million lawsuit filed in U.S. District Court Friday.The plaintiffs were allegedly approached by Sheets and Karl Blomquist, general partner of CFS-Northwest Minerals Limited, and asked to purchase partnership shares in Northwest at $4,000 each.

Northwest, an Oregon-based gold-mining operation formed in 1983, has filed for Chapter 11 bankruptcy. The company entered a limited partnership agreement with CFS Financial in 1983, according to the suit.

The suit alleges the plaintiff investors were told by Sheets and Blomquist and their staff that shares of Northwest would be sold only to individuals with knowledge and experience in financial matters and that the Oregon mine had been tested and contained samples of commercially recoverable gold. Blomquist was to get only $10,000, or 1 percent of all profits.

The plaintiffs, however, contend that shares in Northwest were sold to anyone, regardless of whether they understood or could afford the risk of the highly speculative venture.

They also allege there was insufficient water during dry spells of the year and too much water during wetter months to operate the mine. The suit also claims the mine's gold content was not ascertained and that no industry-approved tests had ever been run on the mine.

The suit names both Blomquist, CFS-Northwest Minerals Limited, CFS Financial, Montague Metals, a firm owned by Blomquist, and Sheets, with each equally liable for the fraud.

The plaintiffs are seeking damages equal to their investments, punitive damages of $250,000 and interest on the judgment at the highest lawful rate until paid, along with any further relief deemed justified by the court.