Wymer Lost Clients’ Money, Attorneys Say

Steven D. Wymer’s attorneys said Thursday that the Newport Beach money manager lost tens of millions of dollars of his clients’ money in bad investments and was “trying to make them whole” when the Securities and Exchange Commission shut him down and charged him with securities fraud.

Despite Wymer’s promises to cooperate with investigators trying to untangle his vast financial web, U.S. District Judge Venetta S. Tassopulus refused to grant bail and ordered Wymer to remain in the Metropolitan Detention Center in Los Angeles at least until his next scheduled court appearance on Jan. 6.

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 foreign bank accounts that Wymer could tap if he were released.

Outside the courtroom, Wymer’s attorneys said they did not know the exact amount of his trading losses, but gave a “ballpark estimate” of $95 million. They declined to specify how Wymer had lost such a sum, but said that Wymer was managing $1.5 billion--$300 million more than the SEC had estimated--at his two Irvine companies, Institutional Treasury Management and Denman & Co.

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, or 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 or has been transferred to other accounts or traded without the clients’ permission.

“Whether it’s trading losses or he diverted the money or whatever, the bottom line is that $100 million is gone,” explained Assistant U.S. Atty. James R. Asperger.

Wymer, 43, has been charged with both 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 Tuesday. As courtroom spectators tried to muffle their giggles, Assistant U.S. Atty. Jean A. Kawahara read the book’s table of contents, which included chapters on how to get and use false identification and how to avoid getting caught.

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

Wymer has both the means and motive to flee, Kawahara said. He earned $4 million in personal income this year, and had transferred some $40 million through his personal checking account at First Interstate Bank in Denver in the last 12 months. Kawahara said the account appeared to be “a clearinghouse” for trades Wymer made for himself, his clients or both. 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 selling a Cessna jet worth an estimated $500,000, she said. Wymer’s defense attorneys described him as “chastened, not defiant, contrite, (and) ready to assist the government in untangling this web.”

Murphy, who is defending Wymer in the criminal case, surrendered Wymer’s passport to the court and said Wymer had offered even before his arrest to give authorities his personal bank statements. Murphy said Wymer knew his arrest was imminent and made no attempt to flee, and that he had liquidated assets in anticipation of legal bills and SEC fines.

“If he had $100 million stashed in Switzerland, why is he here?” said attorney Michael Perlis, who is defending Wymer in the civil case. The missing money is “not in an offshore bank account waiting for Steve Wymer,” Perlis added.

Wymer’s lawyers said he would wear an electronic surveillance bracelet to ensure he did not flee, and would show authorities where the supposedly missing money went, but that he could not do so from jail. The judge rejected the offer. “See you later, sweetheart,” Wymer said to his wife as he was led out of the courtroom and then handcuffed. He declined to speak to reporters.

Asked why Wymer had attempted to hide the losses from his clients and the SEC, Perlis replied, “I think a lot of people don’t like to come forward to clients and give them bad news.”

SEC officials and prosecutors could not say Thursday whether the 13 clients whose money has been identified as “missing” can expect to recover their $100 million. They are still trying to establish whose money is whose.

For example, $65 million that Wymer allegedly removed from an Iowa Trust account was traced to New York, but prosecutors said Wymer is believed to have used that money to try to cover at least $65 million in losses from other clients who have not been identified.

“If he lost it in trading, or diverted it, or squandered it, investors have no hope of getting it back,” Asperger said.

Today, the judge handling the civil suit against Wymer will likely be asked to unfreeze up to $960 million in clients’ assets that were frozen as a result of the investigation of Wymer’s two companies.