Irvine Adviser Accused in $75.4-Million Fraud Case : Trust funds: Iowa’s governor assesses potential damage to as many as 86 public entities, whose surplus revenue was managed by Steven D. Wymer’s two companies.
Allegations that an Irvine financial adviser defrauded clients of $75.4 million sent a fiscal shock wave Thursday through Iowa, where scores of government agencies had invested in trust funds now under federal investigation.
As the Securities and Exchange Commission pursued accusations of fraud against Steven D. Wymer and his two companies, Iowa’s governor called a special meeting to assess the potential damage to as many as 86 public entities, whose surplus funds were managed by Wymer’s firms.
Those agencies have been unable to withdraw money from their investment accounts since Wednesday, when a federal judge in Los Angeles froze Wymer’s corporate and personal assets and issued a temporary restraining order against him. The action was prompted by a recent SEC discovery that at least $75.4 million was missing from three trusts, including the Iowa Trust, which had the most missing funds.
Wymer’s companies, Institutional Treasury Management and Denman & Co., are responsible for an estimated $1.2 billion invested in U.S. Treasury notes and other securities for 64 clients. SEC officials say their investigation has concentrated only on the missing $75.4 million, but the probe into Wymer’s activities is continuing.
“We don’t know the extent of the problem right now,” said Elaine Cacheris, acting regional administrator for the SEC’s Los Angeles office. “Seventy-five million dollars is a lot of money, especially for the clients involved. It is possible some of the money will be accounted for.”
Cacheris said the SEC is trying to determine quickly the number of troubled accounts so all investors can retake control of their money.
Wymer, 43, who lives in Newport Beach, could not be reached for comment Thursday. An employee at Institutional Treasury Management, who refused to give her name, said company officials have been instructed by their attorney not to comment on the SEC action.
Wymer’s attorney, Michael Perlis, said his client did not steal investor money for personal use and has agreed to a temporary injunction without admitting the SEC’s allegations.
“This is the standard resolution for many SEC cases,” Perlis said. “The SEC alleges the $75 million remains unaccounted for, but the SEC is not contending that he spent it on a lavish lifestyle, nor will it show misappropriation of any sum.”
Perlis declined to comment on where the money might be.
Last week, attorneys in the SEC’s Los Angeles office filed a civil lawsuit in U.S. District Court against Wymer, Institutional Treasury Management and Denman. On Wednesday, Judge Richard A. Gadbois Jr. placed Denman and Institutional Treasury Management into temporary receivership, froze Wymer’s corporate and personal assets and issued a temporary restraining to assure that Wymer complied with federal securities laws.
The temporary receiver, lawyer Robert Carlson, is scheduled to present an assessment of the situation at a court hearing scheduled Dec. 20. The commission is also seeking an undetermined amount in civil penalties against Wymer.
SEC attorneys alleged that all $10 million from the trust fund for Marshalltown, Iowa, was missing, and that Wymer conducted many securities transactions in the Marshalltown account without the client’s knowledge.
Commission attorneys further contend that when Wymer found that the SEC was scrutinizing the municipality’s fund, he transferred cash from other accounts into that account to compensate for the discrepancy.
Then Wymer allegedly tried to cover the new shortages by buying Treasury notes in his own account at Institutional Treasury Management and reselling them to at least two other clients at inflated prices. The lawsuit charges that he netted more than $10 million in five fraudulent transactions.
The SEC alleges that the other funds turned up missing in November, when Wymer withdrew $65 million in Treasury notes from the Iowa Trust and sold them without the client’s permission. Some of the money was then funneled to other client accounts, according to commission attorneys.
“A lot of this we won’t have the answer to until the investigation is complete,” said Dick Vohs, press secretary for Iowa Gov. Terry E. Branstad.
Vohs said the investors, mostly cities and counties, have been scrambling in a bid to assess the impact on their ability to make payrolls, pay their bills and pay for new construction.
To assess the situation, Branstad held a meeting Thursday with the state banking superintendent, the commissioner of public safety, the state attorney general, the state treasurer and the U.S. attorney.
At the meeting, Vohs said, questions were raised about how Wymer was hired and whether there were adequate reviews and audits to protect against the possibility of fraud or mismanagement.
“We’ve got (86) entities with a (86) different problems,” said David B. VanSickel, an attorney for investors in the Iowa Trust. “All have troubles of varying degrees. We will do everything we can to get the funds back.”
According to Orange County Superior Court records, Wymer has been sued twice, once for a $14,000 debt and once by an irate investor. The records, however, did not indicate the dispositions of those lawsuits.
In March, 1985, Wymer and Ronald Olsen, president of the now defunct Ace American Inc., were sued by an investor who alleged that she had given them $20,000 to invest in the commodities futures market.
The investor, Diana M. Nichols, alleged that the brokers ignored her repeated requests to sell the futures when their value reached $21,000, and returned to her $3,074 eight months later.
Ace American was suspended by the state Franchise Tax Board in May, 1985, state records show. Nichols did not pursue the lawsuit, according to court records.
Wymer was also sued by Valleylabs Inc. in 1981 to collect a $14,121 court judgment against him in Colorado. Records show that he moved from Eldorado Springs, in Boulder County, to Newport Beach about 1980. In March, 1981, he was arrested at his Newport Beach home after failing to appear in court to respond to the lawsuit.
Court records do not specify the nature of the debt, or whether Wymer settled the case, which was dismissed in 1987. The attorney who represented Wymer, Richard E. Ramos of Newport Beach, has since been disbarred, according to the State Bar Assn.
Ramos could not be reached for comment Thursday.
Times staff writer Sonni Efron contributed to this report.
