Newport-Mesa Moving to Freeze Assets of Budget Director in Probe

Newport-Mesa Unified School District officials on Monday asked a legal adviser to explore ways to put a hold on assets belonging to its budget director, Stephen A. Wagner, who is under criminal investigation for allegedly diverting district funds.

“As far as seizing assets, I have contacted our school district’s attorney and asked him to explore ways to seek restitution, if such a decision were necessary,” Newport-Mesa Supt. John W. Nicoll said.

As superintendent, Nicoll can initiate such legal action without approval of the district’s five-member board of trustees. Tonight in a closed session of the board’s regular meeting, he said he will brief trustees on the separate investigations involving Wagner that are being conducted by the Orange County district attorney’s office and the school district.

Wagner was suspended without pay from his $75,000-a-year job on Friday, after Nicoll met with members of the district attorney’s office, which for several weeks has been investigating Wagner for allegedly diverting funds from district employees’ health insurance fund.

Nicoll confirmed Monday that Wagner wrote a $57,000 check in July, 1991, payable to Cobbler Express Corp., a shoe repair business that Nicoll believed was controlled by Wagner. The district’s own investigation has turned up other questionable checks from the same time period and a check-by-check audit of the health insurance fund has been ordered.

Wagner’s was the lone signature on the check. In itself, that is a violation of district policy requiring two signatures on any disbursement of district funds. Wells Fargo Bank cashed the check in July, 1991, even though it lacked a necessary second signature, the superintendent confirmed.

Nicoll said that, to his knowledge, the district never conducted any business with Cobbler Express.

Wagner was known to have outside business interests that helped pay for an expensive lifestyle, including a million-dollar home in Newport Beach, expensive cars and clothes. He has not spoken publicly about his suspension and could not be reached for comment again on Monday.

Wagner has not been charged with any criminal offense.

But Trustee Roderick H. MacMillian, a 28-year member of the school board representing Newport Beach and Costa Mesa, said the fact that a check was signed by him and made out to his company “is grounds for dismissal in any case.”

MacMillian said Wagner still has the right to appeal the suspension and a possible termination that may result. “We haven’t heard his side of the story, and as far as I know, he hasn’t tried to give it to us,” MacMillian said.

He said trustees and district employees are stunned by the allegations against Wagner, who was widely regarded as a trusted and highly respected employee.

“It’s like a mother finding out her child is in trouble . . . it’s a shock because you can’t believe something like this from his behavior or his work pattern,” MacMillian said. “He’s an intelligent young fellow, and he did a good job. This has put everybody in such a terrible position. . . . In 28 years on the board, there has never ever been anything like this happen. We thought we were running a very tight ship, that we were immune from this kind of thing.”

Nicoll said he believed that Wagner owned Cobbler Express Corp., based in Victorville. But Edward D. Golden, who identified himself in a telephone interview as the owner of Cobbler Express, said Wagner was a friend of 20 years who had no financial interest in the company.

Golden said that he had read news accounts about the allegations against Wagner but that he has not been contacted by anyone from the Orange County district attorney’s office or the school district.

Guy Ormes, supervising deputy district attorney, said his investigation began in early October. It was launched after an unidentified district employee came forward and complained to the district attorney’s office about irregularities in the health insurance fund.

So far, Nicoll has authorized the district attorney’s investigators to review the district’s bank records and documents, Ormes said. He said that investigators are in the process of obtaining bank documents and that he does not know when the investigation will be completed because it “may take a while to get financial records from the banks.”

Wagner, 40, lives with his wife, Linda, and their young son in a 5,000-square-foot home in the exclusive Newport Beach neighborhood of Dover Shores, overlooking Upper Newport Bay. The couple bought the home for $975,000 in July, 1990, according to property records.

The couple also owns homes in Fullerton and in an upscale Santa Ana neighborhood, as well as condominiums in Stanton and Rancho Mirage. Also registered to him are a classic 1964 Rolls-Royce with the vanity license plate “SWAGNER,” a 1990 Mercedes Benz station wagon with the personalized plate “LNDZBNZ,” and a converted 1989 Dodge van.

The couple are major donors to the Orange County Philharmonic Society, an affiliation Wagner began before he married his wife about six years ago, according to sources familiar with the society. While the couple were said to be well-dressed, their penchant was for expensive but conservative attire. That’s why their appearance at a Philharmonic fund-raiser in matching full-length mink coats turned heads not long ago.

“It always struck me as so out of character,” said a source who attended the event and knew the Wagners.

Wagner also showed up in a mink tuxedo jacket at last year’s dinner honoring the school district’s 25th anniversary.

“I really kidded Steve about it,” said Norman Loats, a former district deputy superintendent who retired in 1989.

Both Loats and Terry Zimmerman, the district’s former finance officer and Wagner’s former boss, said no one ever thought twice about Wagner’s expensive lifestyle because they knew of his success in outside business endeavors, including the shoe-repair business and a limousine service.

Zimmerman recommended Wagner to replace him as finance chief when he retired in 1989. Zimmerman also said any disbursement of health insurance funds to a shoe repair company would have “stuck out like a sore thumb.” Nor could he understand how the checks and balances of school district fund transfers could have permitted disbursement of funds with only one signature.

The Wagners, particularly Linda Wagner, were said to be distraught over his suspension. “They were both in a state of shock, I guess, but many people were calling them to offer their support and their prayers,” said one friend who asked not to be identified.

Teachers, meanwhile, were concerned about the safety of their health insurance fund and Supt. Nicoll sought Monday to reassure them. He told Maya Decker, president of the teachers’ union, that funds from the health insurance program were not at risk.