Torrance Introduces New Safeguards on Investments

Responding to the recent disappearance of a $6-million city investment, the Torrance City Council this week restricted the powers of City Treasurer Thomas C. Rupert and gave other officials more authority to oversee the city’s $74-million investment portfolio.

“I feel that we did what needed to be done to tighten up procedures and provide oversight,” said Mayor Katy Geissert.

Rupert did not attend Tuesday’s council meeting and could not be reached for comment Wednesday. City officials said they have been told that he is ill, and they are uncertain when he will be able to return to work.

The council’s vote came about six weeks after the city learned $6 million entrusted to Irvine-based financial adviser Steven D. Wymer was missing. Wymer has pleaded not guilty to 30 counts of securities fraud and other charges. Rupert has not been accused of any wrongdoing in connection with the missing money.

Until now, Rupert has had sole authority to invest Torrance’s portfolio. The council and other city officials previously received regular reports about how the money was being invested, but they did not participate in investment decisions.

In the wake of the Wymer scandal, in which a number of California and Iowa cities appear to have lost millions of dollars, both the city manager’s office and outside auditors have recommended instituting new internal controls and guidelines.

At its Tuesday meeting, the council stopped short of revoking Rupert’s investment powers.

Instead, it created a new city investment team--made up of City Manager LeRoy Jackson, Finance Director Mary Giordano and City Atty. Kenneth Nelson or their designees--that will meet monthly to review investments made by the treasurer.

And Giordano was given day-to-day authority for verifying transactions and checking the accuracy of treasury reports, making the Finance Department the agency that processes paperwork from the city treasurer’s investment transactions.

“It’s just to have a different entity involved,” Giordano said. If the new procedure had been in place earlier, she said, her office would have been required to verify transactions with Wymer.

The council also adopted a new investment policy with guidelines on what percentage of city funds can be held in particular types of investments.

For instance, about 74% of the city’s portfolio was in non-negotiable certificates of deposit as of Nov. 30, according to information presented to the council. The new limit is 10%, as recommended by the city’s auditors, Deloitte & Touche.

The city will be rearranging its investments to conform with the new guidelines, Giordano said.

“The key is diversification,” she said. “That was the whole thrust of the (new) investment policy.”

The council postponed one major decision--creating the new post of investment officer, as recommended by Deloitte & Touche in a report last week. The report called for an officer with “an educational background and experience in fixed-income and money-market investments.”

Rupert, in an interview last week, said he expected that officer would work in his office.

But Councilman Bill Applegate said Tuesday that he believes the new investment officer should work in the Finance Department--separate from the treasurer’s office--to maintain “the independence factor.”

“I strongly feel at this juncture that we need to have an independent knowledgeable person . . . capable of assisting or reviewing or even collaborating with the city treasurer” on investments, Applegate said.

Other council members chose to wait for more information from the city manager’s office before creating the new job. And Councilman Dan Walker is questioning if the city even needs an investment officer, reiterating his belief that the city treasurer should be appointed. The position is now an elected one, and Rupert has held the job since 1964.

“I think we should have an appointed city treasurer that has the necessary educational background and the practical experience to do the job,” Walker said.

Walker said last week he believes Rupert should resign in light of the $6 million, as well as other investments that have been questioned by city officials in recent weeks.

In a matter unrelated to the missing $6 million, city officials said Wednesday they have recovered $1 million in municipal funds that had been held at Independence Bank, an Encino bank closed by regulators last week. Federal regulators say Independence Bank was secretly controlled by the Bank of Credit and Commerce International, which has been linked to fraud, money laundering and drug trafficking.

After Independence Bank’s closing, Torrance’s money was transferred to First Interstate Bank and the city was able to withdraw it Tuesday, said Deputy City Treasurer Linda Barnett.