Orange Alleges Conspiracy in Wymer Lawsuit
Newport Beach investment adviser Steven D. Wymer conspired with an employee of a New York brokerage firm to defraud the city of Orange of $7 million, the city alleged in a lawsuit filed Wednesday.
The lawsuit names Wymer, Refco Securities Inc. in New York, the brokerage where he traded, and Kimberly Goodman, the Refco employee who handled Orange’s account.
Wymer also is thought to have bought a Jaguar and a Mercedes-Benz for Goodman, according to a Colorado attorney involved in other litigation in the Wymer case. Motor vehicle records show that a Jaguar and a Mercedes, both bought in Southern California, were registered to Goodman, a New Jersey resident.
Wymer is free on bail as he awaits trial on federal criminal charges of defrauding 15 clients--including 10 small California cities and government agencies in Iowa and Colorado--of about $113 million in taxpayer funds entrusted to him for investment in U.S. government securities.
Orange’s lawsuit marks the first formal allegation that the 43-year-old money manager had an accomplice.
Neither Refco nor Goodman have been charged in the criminal case, and federal prosecutors declined to comment on Orange’s allegations. Refco denied any wrongdoing Wednesday, while Goodman and her attorney did not return telephone calls.
Wymer’s promotional literature assured clients that their money would be kept in segregated bank accounts and would be invested in U.S. government securities, a pitch that appealed to cities that wanted high yields from a safe investment.
But when Orange invested $7 million in late 1989, the lawsuit alleges, Wymer and Goodman diverted the money to Wymer’s own accounts at Refco. They then forged documents and mailed fake statements that for two years lulled the city into believing its $7 million was safe.
When the Securities and Exchange Commission shut Wymer down last December, Orange learned that its account contained just $4,032.
“They were dealing with a con artist,” said Michael B. Jeffers, a Newport Beach attorney hired by Orange to try to recover the missing money. “They were getting what appeared to be totally legitimate documents that were fake.”
Orange’s auditors also wrote to Goodman at Refco in a bid to verify the city’s account balance, and received a letter signed by Goodman falsely confirming that the balance was more than $7 million, and was being held in a segregated account at Manufacturer’s Hanover, the suit alleges.
In fact, no Manufacturer’s Hanover bank account ever existed, Jeffers said.
The civil suit, filed in U.S. District Court on Wednesday, charges Wymer, Refco and Goodman with fraud, negligence, breach of fiduciary duty, violations of state and federal securities law, and racketeering. Orange alleges that Refco failed to supervise Goodman or enforce policies that would have prevented or detected the fraud.
The Racketeering Influenced Corrupt Organizations (RICO) charge, if proven, would entitle Orange to collect triple damages against Refco.
For all practical purposes, the suit against Refco is Orange’s best hope for collecting the lost money, as Wymer’s Newport Beach companies, Institutional Treasury Management Inc. and Denman & Co., have been placed into bankruptcy.
At one point, Wymer and his wife owned 13 cars--including three BMWs, two Mercedes-Benzes and a 1991 Ferrari--as well as four boats, expensive properties in Newport Beach, Idaho, New York City and Palm Beach County, Fla., and a private Cessna jet.
Those assets, valued at more than $10 million, were seized by the federal government. Orange hopes eventually to receive some of that money, but it must share proceeds with 14 other victims.
Refco attorney Joseph Collins said the brokerage has not received a copy of Orange’s lawsuit and declined to comment on reports that Goodman is no longer employed there.
“Mr. Wymer had no association with Refco Securities and the company has no responsibility for his actions,” Collins said.
Goodman handled all of Wymer’s clients’ accounts at Refco, and Wymer showered her with favors, including the Jaguar and a ski weekend at his home in Idaho, according to Denver attorney Philip Lowery, who represents a Colorado bank in a separate lawsuit stemming from the Wymer affair. Other Wymer associates said Wymer had given Goodman both a Jaguar and a Mercedes.
According to New Jersey motor vehicle records, Goodman owned a 1990 Mercedes-Benz bought from a dealership in Beverly Hills, although the registration has expired. She now owns a 1988 Jaguar XJS bought from Newport Imports in Newport Beach.
Neither dealer would reveal who paid for the two cars, and assistant U.S. Attorney Jean A. Kawahara, who is prosecuting Wymer, declined to comment.
The SEC, whose investigators are still pouring over all of Wymer’s personal and business financial records trying to trace the missing millions, also declined to say whether Goodman and Refco are being targeted.
“We’re continuing to investigate the culpability of others,” said Lori A. Richards, SEC assistant administrator for enforcement in Los Angeles.
Also named in the Orange lawsuit is First Interstate Bank of Denver, which is accused of negligence and securities laws violation, but not with racketeering.
The bank, acting on Wymer’s instructions, opened an account in Orange’s name without getting proper approval from the city, which had no idea that the bank account existed, Jeffers said.
Wymer then commingled Orange’s money with his own money and that of other clients, in violation of securities laws and contrary to normal practice for investment advisers, who typically do not have direct access to funds, he said.
“That should have raised red flags and caused the bank to inquire as to why an investment manager would be making transfers between those accounts,” Jeffers said.
A representative of First Interstate, Lillian Suffolk, said the bank would not comment.
Wymer is free on $650,000 bail but is required to wear an electronic ankle monitor, such as the one sported by arms dealer Adnan Khashoggi, that confines him to his Newport Beach home. Since his arrest in December, he has been permitted to travel to Colorado to visit his daughter, who was injured in an accident there.
Wymer has never commented on the charges against him, though his attorneys have said that the money was lost in bad investments, not stolen. His attorney, Mark Roberts, also declined comment Wednesday.
