City Treasurer Questioned for Putting Funds Into Mortgages : Torrance: Thomas C. Rupert invested $1 million in 10-year HUD loans. At least one council member says that may violate the city’s policy of making short-term investments, raising new concerns about the treasurer’s authority.

Torrance Treasurer Thomas C. Rupert, already on the hot seat because of $6 million in city funds missing in an investment scandal, is now being questioned about his decision to invest an additional $1 million in mortgages that the city does not plan to cash in until 1998.

Rupert said that in 1989 he invested $1 million in what he described as a package of U.S. Department of Housing and Urban Development mortgages that are guaranteed by the federal government. The current rate of return on the investment is 5%, according to city files.

City Councilman Dan Walker said the mortgage package does not appear to be in keeping with the city’s policy of making short-term investments. Under that policy, approved by the council, “longer term investments (over one year) are limited to maturities of five years or less.”

State law requires that all California cities limit their investments to conservative, low-risk, short-term purchases.

“I’m absolutely shocked that we were involved in that type of investment,” Walker said, adding that he learned of the holding only last week. “You just don’t tie up the public’s money that way. The question I have is, ‘Why?’ ”

Rupert defended the long-term nature of the mortgages, saying, “They were a stable, long-term interest rate, and that’s what we were looking for.”

He also said the $1 million represents only a small part of the city’s $77-million investment portfolio.

The questions come amid widespread debate over the city’s investment policy and the authority of the city treasurer, an elected official who decides how to invest the city’s money and does so without the oversight of other Torrance officials. The debate began last month, when Torrance officials discovered that $6 million in city funds, which had been entrusted to a Newport Beach investment counselor, were missing. The adviser, Steven D. Wymer, has pleaded not guilty to 30 counts of securities fraud, mail fraud and other criminal charges.

Rupert has said he has no knowledge of where the $6 million went.

The City Council receives regular reports from Rupert detailing where the city’s money is invested. But now, some City Council members are suggesting that Rupert may have too much control over city investments.

Councilmen Bill Applegate and Timothy Mock said Friday that they are unfamiliar with the $1-million investment.

“I’m obviously going to go ahead and ask some questions,” said Applegate, who wants a financial consultant “to sit down and give us an independent assessment of what we have . . . (and) what risks are associated with them.”

The 10-year mortgage package is separate from the $6 million that the city invested with Wymer. Rupert said he bought the package through Integrated Resources, a New York firm, and that it is now handled by another firm, American Insured Mortgages.

Rupert referred further questions about the package to Timothy McDuffie, whom he described as the agent in the deal. McDuffie on Friday declined to discuss specifics, saying he wanted to talk to Rupert first.

City Manager LeRoy J. Jackson said Friday that he is not familiar with the specifics of the package, calling investments “a role and function of the treasurer.”

The $1 million in mortgages was reviewed last month by the city’s auditors, Deloitte & Touche. Randall O. Vida, audit manager with the firm, said he could not comment because the annual Torrance audit is not due out until late this month.

A mid-1991 letter from American Insured Mortgages to the auditors reported the value of the mortgage package to be less than $1 million, said Ken Flewellyn, assistant finance director. He was not able to provide an exact figure.

But if the city holds the mortgages to the 1998 maturity date, it will get back its $1 million, Flewellyn said. He added that as far as he knows, the city has no intention of cashing in the investment before 1998.