Fund Adviser Is Arrested on Fraud Charges : Investing: Authorities say Steven Wymer is being held after money from client accounts, including municipal investments, turned up missing.

Investment adviser Steven D. Wymer was arrested at his Newport Beach home Tuesday on federal fraud charges in connection with what authorities now say is at least $95 million missing from client accounts, including funds from several municipalities.

Already facing a civil suit on fraud charges, Wymer was ordered held in custody after prosecutors in Los Angeles filed one criminal count of securities fraud and two counts of mail fraud. U.S. District Magistrate Judge Venetta S. Tassopulos scheduled a bail hearing for Thursday after Assistant U.S. Atty. Jean Kawahara described Wymer as “an economic danger to his community” as well as a flight risk and asked that he be held without bail.

As Wymer listened, dressed in a gray checked sweater and gray slacks, his attorney, Paul N. Murphy, said Wymer would be unable to post bail immediately because all his personal assets are frozen, but denied that Wymer would flee or cause financial harm to his clients.

Murphy said he is part of the defense team of Charles H. Keating Jr., who has been convicted on state charges and is facing federal criminal charges in connection with the collapse of Irvine-based Lincoln Savings & Loan.

The criminal charges against Wymer, the 43-year-old former operator of two Irvine-based investment firms, had been expected after the Securities and Exchange Commission last week accused him of fraud in its civil suit. That suit grew out of the SEC’s investigation into how Wymer and his firms handled the accounts of several government entities. The financial scandal has resulted in a freeze on $1.2 billion in money from investors in 13 states and Micronesia. Many of Wymer’s clients were small cities and counties in Iowa and California that believed that Wymer was investing surplus tax dollars in secure U.S. Treasury bonds and other government instruments.

Prosecutors said they still do not know whether more than $95 million is missing from accounts that Wymer controlled. The SEC last week had alleged in court documents that at least $75.4 million in investors’ money was unaccounted for. But the criminal complaint tallies at least $95 million in allegedly misappropriated funds.

The complaint alleges that Wymer had been diverting clients’ money from accounts he managed through his two companies, Institutional Treasury Management and Denman & Co. But neither federal prosecutors nor the SEC have disclosed what Wymer is alleged to have done with the missing money.

However, when the SEC began to inquire about discrepancies in Wymer’s books in October, the criminal complaint alleges that Wymer took $65 million from a trust fund that pooled funds of many Iowa cities and towns, and that after several complex securities trades and bank transfers, he attempted to use those funds to cover up the diversions in other accounts.

In addition, the complaint alleges that Wymer sold the securities of two clients for $10.4 million more than market value, keeping the profits, and that he told at least four cities that they had about $20 million more in their accounts than actually existed.

In one case, Wymer appears to have falsified documents to persuade the city of Orange that its money was sound, according to the complaint and the head of a New York brokerage where the money was kept.

In June, 1991, Orange had an audit and asked the brokerage, Refco Securities Inc., how much was in the discretionary account that Wymer managed. The city received a statement on Refco stationery, supposedly signed by a Refco employee, purporting to verify that the Refco account contained $7.1 million, the complaint alleges. In fact, it held $4,000.

The form that Orange apparently received is clearly “a phony,” Sandy Maggio, president of Refco Securities Inc., said Tuesday. “The funds are not here,” Maggio said. “Nor were they ever here.”

When city officials faxed a copy of the form to his office recently, said Maggio, the first thing he noticed is that it described a purchase of government Treasury bonds in an amount that ended in an odd number.

“Treasury bonds don’t trade in odd lots,” Maggio said. “A treasurer should know that, and somebody should have questioned it.”

Maggio said he is cooperating with the SEC and that no other discrepancies have turned up in accounts at the firm managed by Wymer. Wymer had several accounts at the firm that were run by him for clients at Wymer’s discretion, including the city of Orange account, Maggio said.

Orange officials were in a City Council meeting late Tuesday afternoon and couldn’t be reached for comment.

Other California cities that invested with Wymer are Beaumont, Big Bear Lake, Grand Terrace, Indio, La Quinta, Loma Linda, Palm Desert, Sanger, Torrance, and the Coachella Valley Joint Powers Utility. But it is was not clear that funds were missing from all of these accounts. SEC officials say they are attempting to trace, recover and return as much money as possible to the investors.

Times staff writer Michael Flagg contributed to this report.