Wymer Rose to Riches Despite Checkered Past : Profile: Records show failed businesses, a property foreclosure and several lawsuits by creditors.

By SONNI EFRON

Feb. 18, 1992 12 AM PT

TIMES STAFF WRITER

NEWPORT BEACH —

The phone call jolted Janet Bainbridge from her sleep. Had she heard that her former business partner, investment adviser Steven David Wymer, was accused of making $113 million of taxpayer money disappear without a trace?

“My first thought was: I bet he was playing the futures market uncovered, and lost it there,” said Bainbridge.

But Bainbridge’s shock was tempered by a sickening sense of deja vu. In 1985, she says, she discovered that Wymer had lost $200,000 in company funds in speculative futures trading. He had used an additional $250,000 to buy a BMW and two Manhattan condominiums, hire a housekeeper and pay for other personal luxuries, she said. Their fledgling investment firm, J.A. Denman & Co., was penniless.

Client funds were not affected, and Bainbridge never took legal action against Wymer. None of the investors who over the next four years entrusted Wymer with $1.2 billion--much of it in public funds--ever contacted her.

In fact, Wymer was so very likable, came so well recommended and was earning such high yields that cities, banks, thrifts, pension funds and investment trusts handed him millions without ever checking his background.

If they had, they might have learned that the 43-year-old investment adviser who in 1991 was named one of “The 100 Best Money Managers You Can Hire” had extravagant tastes, an embellished resume and a pockmarked career.

Wymer’s storied past included two failed businesses, a property foreclosure and several lawsuits filed by creditors, according to court records and former associates. In 1979 he was fired then sued by his employer, a medical instrument company that sent Wymer to Europe as a salesman, then discovered he had billed company credit cards for $14,000 in personal expenses, including hotel bills from London and St. Tropez, France.

Now Wymer has pleaded not guilty to 30 counts of securities fraud, money laundering, obstruction of justice and lying to the Securities and Exchange Commission.

Wymer cited the Fifth Amendment when questioned by the SEC. He has declined to be interviewed. His lawyers, citing the indictment, say he cannot respond to the specific allegations against him but that he denies any wrongdoing.

Prosecutors say he either lost or stole $113 million belonging to dozens of cities and public agencies, then played a giant shell game to try to mask the losses.

SEC enforcement officials in Los Angeles say the Wymer case is one of the largest investor swindles they have ever seen.

Ten California cities are out about $45 million, and prospects for recovering the money are dim.

The case hasn’t enraged Golden State taxpayers, who have perhaps become jaded by daily reports of fraud, embezzlement and savings and loan scams.

But in Iowa, where losses top $65 million, the Des Moines Register dubbed the Wymer case the biggest financial disaster in the state’s history. The scandal has spread to the state Senate president, who was forced to resign last month after admitting he had been on Wymer’s payroll.

In Colorado, the Wymer case triggered a bank run when depositors in Jefferson Bank & Trust of Lakewood, Colo., learned that a quarter of the bank’s assets had been frozen. On Jan. 22, a federal judge froze $43 million amid a dispute over whether the money belonged to the bank or had been stolen by Wymer from one of his clients, the Iowa Trust investment pool, and stashed in Jefferson for safekeeping. Panicky depositors have since withdrawn more than $13 million.

“I wish I’d never met the guy,” said Jefferson Bank Chairman Mo Grotjohn, who also invested his bank’s own money with Wymer.

Red-faced former clients everywhere are reviewing their investment policies and procedures.

“The citizens are rightfully very upset that we’ve been bilked,” said Ronald Thompson, city manager of Orange. The city received statements, now believed to be forged, showing its $7 million was safely invested in U.S. Treasury notes. But when the SEC shut down Wymer’s two Irvine companies, Institutional Treasury Management Inc. and Denman & Co., in December, Orange found it had $4,032.

“I’d love to strangle Steven Wymer,” Thompson said. “I’d like to be on his jury.”

Banker Grotjohn also wishes he had looked into Wymer more carefully. The bank does routine background checks on employees in sensitive areas--even the janitors who clean the bank vaults.

“The janitor got checked, this guy didn’t,” Grotjohn said. “We will never again buy an investment where the security is not held at the Federal Reserve Bank.”

Prosecutors and the SEC are pursuing Wymer with a vengeance, seizing his assets as alleged ill-gotten gains, and blanketing the country with subpoenas to ferret out any hidden bank accounts.

“If any white-collar case justifies attention, this is the case,” said Assistant U.S. Atty. James R. Asperger.

Wymer is free on $650,000 bail, but U.S. District Judge Richard A. Gadbois Jr. has required the money manager to wear an electronic ankle monitor, like the one sported by arms dealer Adnan Khashoggi while he awaits trial. Gadbois also ordered probation officers to “be all over him like a cheap suit” to ensure Wymer does not flee.

However, Wymer has been allowed to go to Colorado to visit his 20-year-old daughter, Megan, who was critically injured in a bicycle accident last month. She remains in critical condition. Wymer’s lawyers say he had ample time to flee before his Dec. 17 arrest, but stayed and plans to fight the charges.

Wymer’s lawyers will say only that “so-called missing” money was lost in bad investments, not stolen. But federal officials and sources at the brokerage firms where Wymer traded say they have no evidence of massive losses.

Still, four months after the SEC probe began, authorities have yet to trace exactly where the missing $113 million went. Prosecutors say that is because Wymer hid or destroyed all the telltale documents.

Athletic and Charming

If Steve Wymer was a confidence artist, he was perfect for the part: 6-foot-2 and athletic with blond good looks, low-key charm and a striking talent for making everybody like him.

Wymer was born and raised in a middle-class neighborhood in Fullerton, but his parents divorced, and money seemed tight. A school chum, David Severson, recalls Wymer’s mother driving him to Fullerton High in an old Rambler. The passenger door was broken, so Wymer sat in the back seat.

“Most guys would have died,” Severson said. “Steven, it didn’t bother him. He didn’t have that kind of vanity.”

Perhaps. Yet when federal postal inspectors began seizing Wymer’s personal assets last month as alleged ill-gotten gains, they discovered that Wymer and his 29-year-old second wife, Ann Marie, owned 13 cars, including three BMWs, two Mercedes-Benzes, a Porsche and a 1991 Ferrari.

At Fullerton High, Wymer worked on the school newspaper, swam and ran cross-country.

“He wasn’t pretentious, he was very intellectual, and he was genuine,” Severson said. “He was one of the only people I really admired.” Wymer reminds Severson most of movie star Christopher Reeve, who played Superman. “He’s got the same kind of smile.”

Wymer earned a bachelor’s degree in math from UC Irvine in 1969, and worked briefly for Rockwell International in Anaheim. He would later claim to have been a senior engineer at Rockwell, and he told two former employees that he had developed the computer skills that gave him an edge in the bond market by working on missile guidance systems. Company records show that Wymer worked part time as a data entry clerk and briefly as an entry-level engineer.

Wymer left Rockwell, saying he intended to return to school. He moved to Boulder, Colo., where he launched a construction company and was part owner of a dance studio. Both ventures were sued by creditors. In 1978, he lost a $25,000 property in a foreclosure, and in 1979 a lumber company sued him for a $15,000 debt, court records show.

“He was a real slick dude, real good looking, real ladies’ man,” recalled Joseph Riddle, the lumber company’s attorney. “Tall, handsome guy, big money, big spender.”

In 1977, Wymer went to work for Valleylab Inc. in Boulder, which fired him in 1979 over his expense account, and eventually won its case, court records show.

“He feels they were legitimate business expenses,” said Wymer’s attorney, Mark S. Roberts.

In 1980, Wymer moved to Newport Beach, where he was arrested on drug possession charges. The case was later dismissed.

Roberts questioned the relevance of press inquiries into Wymer’s background, and declined to comment specifically on either the drug arrest or the allegations of past financial misconduct. “There’s an attempt to smear the guy,” he said.

In early 1980, Wymer landed the first in a series of jobs trading commodities and futures. “He was one of the top producers for me, a very, very good commission broker,” recalled Ronald H. Olsen, a former boss.

Wymer met Bainbridge at the Del Mar racetrack. She was a British astrophysicist who had retired to raise three children. Recently widowed, she was selling real estate.

“He was a delightful person to talk to,” she said. “We talked endlessly.” He was also magnetic. “When he walked into a room, there was a huge presence there.”

In 1983, Wymer and Bainbridge formed their own investment firm, giving it her maiden name of Denman. When it began to prosper, he surprised her with two new Porsches, a cream one for her, a silver one for himself.

“He liked to spend money,” Bainbridge said. “He liked huge gestures.”

Business went well, Bainbridge said, until Wymer began to have unexplained absences.

She told Wymer she wanted to terminate the partnership in a year. But in late 1985, she said, a company check bounced, and she traced the $200,000 in trading losses and the $250,000 used to buy the cars and condos.

“As I looked over the records, he went from behaving perfectly to a six-month spree of tearing all over the world spending money,” Bainbridge said. “He used (the company) as his personal checkbook.”

The company was shut down and Bainbridge says she has not spoken to Wymer since.

Wymer’s attorney, Roberts, said he was not familiar with the J.A. Denman & Co. incident.

“I can’t see that he did anything wrong if he writes a company check for a company condo,” Roberts said. “If he was the president of the company, he can do anything he wants.”

Good Connections

In 1986, Wymer launched a new firm, Denman & Co. of Irvine, which invested in U.S. government securities for public agencies and institutional investors. The portfolio he managed swelled to $300 million by 1988 and $1.2 billion by October, 1991, SEC records show.

How did he grow so big, so fast, with so little scrutiny?

Good connections helped.

One of Denman’s first clients was Harold E. Brewer, then treasurer and finance director of Riverside. The 26-year veteran managed his city’s $220-million portfolio, was active in local treasurers’ associations and was highly respected by his peers.

First, Brewer invested city funds with Wymer. Pleased with the results, he referred the young man to other treasurers. In December, 1987, Brewer retired and went to work for Wymer as a salesman.

Gloria Curry, city manager of Del Mar, said Brewer introduced her to Wymer sometime in 1987. “It was obvious to me that Hal Brewer thought an awful lot of him and his expertise,” she said.

Brewer has not responded to requests for comment.

Kirby Warner, who had worked for Brewer in Riverside and later became treasurer of Palm Desert, was introduced to Wymer by Brewer in September, 1987. He invested $4.5 million, and said Wymer earned 1 to 2.5 percentage points more than what the city’s other Treasury investments were yielding. In December, 1988, Warner, too, quit to become a salesman for Wymer.

“I feel betrayed,” Warner said. “What better way to get investments and have an ‘in’ in California government agencies than to use people who were in the governmental sector and knew everybody?”

Wymer’s wealth was mushrooming, but he never flaunted it to his clients. He dressed with understated elegance and was not known to hobnob with the Newport Beach socialite set.

Yet in private, Wymer’s lifestyle was extravagant even by Gold Coast standards. According to court documents and public records, in addition to the 13 cars, the Wymers owned four boats and a million-dollar home with tennis court in Newport Beach.

They paid $186,000 to furnish a $2.8-million house near Sun Valley, Idaho, with antiques and furniture custom-made by Ralph Lauren. They also owned a Manhattan condo and property in Palm Beach County, Fla., worth more than $2 million, and Wymer owned a small jet. Almost everything had been paid for in full, records show.

Wymer also made grand gestures to employees, giving away some Rolex watches. For Christmas, 1990, Ann Marie Wymer bought three red Mazda Miatas for Denman & Co. employees--and paid for them with a company check, said Kory Johnson, general manager of Campbell Mazda in Costa Mesa.

But after Wymer learned he was under investigation, he began cashing in $2 million in assets, and putting them in his wife’s name, prosecutors say. He emptied bank accounts, withdrawing more than $600,000 from a Colorado bank.

A few investors did become suspicious. Wymer’s typical commission was 30% of a client’s profits. The treasurer of Colton, Michael Williams, said he asked Wymer to produce trading documents to show that the city was getting its 70%. When Wymer did not, Williams fired him. Several other treasurers said they shied away from the company because Wymer’s yields seemed too good to be true.

But most thought they were safe because Wymer was not supposed to have direct access to their funds. In the early days, he did not.

For a brief period, Gloria Curry paid Wymer for advice, but executed the trades for Del Mar through the city’s own brokerage account. Wymer earned fees only if the trades were profitable. When she heard about Wymer’s indictment, she thought: “His modus operandi had to have changed (since 1987). . . . How the hell did he get his hands on any money?”

Brokerage Account

Though details are still sketchy, the government alleges Wymer’s fraud began as early as 1986. By 1988, he had allegedly commingled funds from a number of clients into an account he controlled at Refco Securities, a New York brokerage. It is from clients who had--or thought they had--accounts at Refco that most of the money seems to have vanished.

Clients thought their money was turning a tidy profit because Wymer allegedly mailed them fake statements, sometimes on a Refco letterhead. In some cases, prosecutors say, he reported profits from trades that either never took place or netted losses. Wymer could then claim a percentage of the nonexistent profits as fees. By 1991, two-thirds of Wymer’s 105 clients had received such fraudulent confirmation, the government says.

How Wymer intended to make up the shortfall, how he hid his activities from his employees, whether he was operating a sophisticated pyramid scheme, and whether he had accomplices are unknown.

The SEC last week settled a civil suit against Wymer, and is now concentrating on recovering client money. The cities, meanwhile, are hiring attorneys and licking their wounds.

Ken Adams, the retired treasurer of Indio, said he used to send job applicants to the police chief for a background check. Yet when Indio’s auditor recommended Wymer, Adams invested $4.3 million.

“Let’s face it, I was too busy just trying to keep my head above water to do an awful lot of research on everything that came along,” Adams said. The $4.3 million has been found, but Indio and Iowa Trust each claim it. That case, like dozens of other lawsuits by former Wymer clients, could take years to litigate.

“If I have to feel snookered,” Adams sighed, “I feel like I’m in fairly good company.”

Times researcher Ann Rover in Denver contributed to this report.

Untangling the Web

STEVEN DAVID WYMER

* Born: March 6, 1948, in Fullerton.

* Education: Graduated from Fullerton High School, 1965. Obtained a bachelor’s degree in mathematics from UC Irvine in 1969.

* Family: One daughter, Megan, from his first marriage; second wife, Ann Marie.* The setup: Touting its ability to produce double-digit returns by investing in high-yield Treasury securities, Wymer’s firm, Institutional Treasury Management Inc., persuaded recession-weary cities to use his services to counter falling interest rates. He used political allies for introductions to cities.

* The allies: Harold Brewer, finance director for Riverside; Kirby Warner, former assistant city manager and treasurer of Palm Desert; Joseph Welsh, president of the Iowa Senate.

* The method: Instead of charging the customary commission, Wymer’s contract with cities called for his firm to get 30% of the net trading gains and the cities to get 70%. To keep managers off his scent, he allegedly mailed fake statements of their accounts.

* The casualties:

State of Iowa: $65 million

Palm Desert: $12.3 million

Coachella Valley Joint Powers Authority: $8.1 million

City of Orange: $7.1 million

Torrance: $6.2 million

Indio: $4.3 million

Sanger, Calif.: $2.8 million

Loma Linda, Calif.: $2.7 million

Big Bear Lake, Calif.: $2.5 million

La Quinta, Calif.: $1.6 million

Grand Terrace, Calif.: $700,000