Bad Deals, Not Fraud, Caused Loss, Wymer Says

Attorneys for Steven D. Wymer, the Newport Beach money manager accused of federal securities fraud, said in court Thursday that he lost millions of dollars of clients’ money in bad investments and was “trying to make them whole” when forced to close down his business.

The statements came during a hearing before U.S. District Judge Venetta S. Tassopulus, who refused to grant bail and ordered Wymer to remain in the Metropolitan Detention Center, at least until his next scheduled court appearance on Jan. 6.

Outside the courtroom, his attorneys said Wymer managed about $1.5 billion--$300 million more than the Securities and Exchange Commission has said--for cities, counties and financial institutions throughout the nation. They estimated that he lost up to $95 million in bad transactions.

His attorneys said in court that Wymer, who operated Institutional Treasury Management and Denman & Co., both of Irvine, was willing to cooperate with investigators trying to untangle his vast financial web.

But federal prosecutors accused Wymer of playing a “very sophisticated sort of shell game” to try to cover up his losses. Because so many of Wymer’s records are missing, prosecutors said they do not know if Wymer lost the money in trading, diverted it for his personal use, or both.

They alleged that more than $100 million in investments from at least 13 Wymer clients--including Orange, Torrance and other California cities--is either missing, has been transferred to other accounts or traded without the clients’ permission.

Tassopulus said she would reconsider granting bail if Wymer could produce documents verifying that the missing money had indeed been lost in trading and not “siphoned off” or placed in overseas bank accounts that Wymer could tap if he were released.

Wymer, 43, has been charged with criminal and civil fraud and could face a minimum 10-year jail sentence if convicted, prosecutors said. In asking that he be denied bail, they described Wymer as “an extreme flight risk and an economic danger to his community.”

Prosecutors produced a manual titled “How to Launder Money,” which they said was seized from Wymer’s dresser drawer when his Newport Beach home was searched by law-enforcement agents Tuesday.

Wymer’s criminal attorney, Paul N. Murphy, said the book was on Wymer’s wife’s bedside table, and that Wymer himself had not read it.

Assistant U.S. Atty. Jean A. Kawahara said Wymer earned $4 million in personal income this year and had transferred about $40 million through his personal checking account at First Interstate Bank in Denver in the past 12 months.

After the SEC began asking him about irregularities in his clients’ accounts in October, the volume of money going into that account increased sharply, and Wymer began liquidating assets, including the sale of a Cessna aircraft worth about $500,000, she said.