Torrance Weighing Lawsuit to Recover Missing Investments : Courts: City hopes to track $6 million entrusted to financial adviser who is facing federal charges. But legal costs might be higher than amount regained.

Two California cities that lost money that had been entrusted to Newport Beach investment adviser Steven D. Wymer have filed lawsuits in an effort to recover the funds, but Torrance has not yet decided whether to do the same to get back its missing $6 million.

Torrance has hired the Los Angeles law firm of Hedges & Caldwell to investigate what happened to the city’s money, which Wymer was supposed to have invested in U.S. Treasury notes. Only $93 was left in Torrance’s account at the time Wymer’s accounts were frozen as part of a federal investigation of his financial dealings.

“We’re in the process of tracking down a lot of information,” said the law firm’s George Hedges. “The patchwork of this is not clear yet.”

Hedges said the investigation is extremely complex because it involves many trades. But he believes there is still a chance the missing money can be located.

“If we’re lucky,” he said, “we may actually find that . . . some securities are sitting there” that clearly belong to Torrance.

In the opening shots of what is sure to be an expensive legal war, the cities of Loma Linda and La Quinta have sued Wymer to recover about $16.8 million in allegedly misappropriated funds, the cities’ attorney said Wednesday.

The Orange County city of Orange also has hired a legal adviser to find out what happened to the missing $7 million and to recover as much of it as possible. No decision has yet been made on whether to sue Wymer.

Ten California cities are believed to have lost a total of $45 million, money they had entrusted to Wymer for what they thought would be low-risk investments in U. S. government securities. Loma Linda and La Quinta are the first to sue, but they will soon have company.

Palm Desert said Wednesday that it intends to sue, and Big Bear Lake and Indio are also seriously considering litigation, attorneys and city officials said. Representatives from all 10 cities, as well as the Coachella Valley Joint Powers Authority, met Tuesday at a Riverside law firm to discuss the situation.

If recent developments in Iowa provide any guide, however, the California cities may find themselves fighting not only Wymer, but also the Iowans and one another over who gets how much of whatever money is left.

At least $113 million is missing from the accounts of 15 Wymer clients in California, Iowa and Colorado, prosecutors allege. Though federal authorities have seized up to $15 million in Wymer’s personal assets, his two Irvine companies--Institutional Treasury Management and Denman & Co.--have few assets and are likely to be placed into bankruptcy, the receiver said.

Wymer has pleaded not guilty to 30 counts of securities fraud, money laundering and other federal crimes. He is also the target of a suit by the Securities and Exchange Commission, which is seeking to recoup investors’ money.

Even if Wymer is convicted on all charges, it is unclear how much the cities could expect to recover.

Public agencies must consider whether Wymer would be “judgment-proof” before investing more tax money in legal fees, said attorney Edwin W. Duncan, who represents two trust pools for Colorado governments and agencies. Duncan’s clients did not lose their $260-million principal, but Wymer allegedly used their money for unauthorized securities trades, then misappropriated at least $4 million in profits. The trusts have not decided whether to sue.

“It becomes an economic decision,” Duncan said. “One of the questions is, would it cost you more to sue than you could hope to recover?”

In the lawsuits filed Friday in San Bernardino and Indio superior courts, La Quinta and Loma Linda charge Wymer with fraud, negligent misrepresentation and violation of state securities laws, said their attorney, Kurt Yeager of Newport Beach.

Attorney Mark S. Roberts, who is representing Wymer, did not return a telephone call seeking comment.

Also named in the suits is Refco Securities, a New York brokerage firm where all 11 of Wymer’s California clients had accounts. Yeager said the cities are “only seeking an accounting from Refco; we are not charging any wrongdoing.”

The La Quinta suit also names Iowa Trust, an investment pool for Iowa public agencies that says $75 million of its funds were misappropriated by Wymer. In what prosecutors allege was an attempt to hide shortfalls in the La Quinta bank account from SEC investigators, Wymer allegedly placed some of Iowa Trust’s money into the La Quinta bank account, and La Quinta then withdrew $10.7 million.

Now La Quinta has received a letter from Iowa Trust saying the money belongs to Iowa, Yeager said. The lawsuit asks the court to decide who should get the money.

“We are still investigating and learning the facts,” Yeager said. “Our real hope is to begin the legal discovery process so we can get to the bottom of what happened.”

The Wymer case already has snared Iowans in a mesh of interrelated legal squabbles.

Several cities that invested with Iowa Trust are unhappy with a court-appointed receiver’s plan for dividing the losses among them. Others are suing the trustees for alleged mismanagement, while the trustees have mounted a failed attempt to dump the receiver and divide the spoils in bankruptcy court instead.

“If you have a pie that has shrunk, then when you redistribute the pieces there’s going to be someone that’s not happy,” said Bill Roach, spokesman for the U.S. attorney’s office in Des Moines.

Times staff writer Deborah Schoch contributed to this report