Wymer to Lawmakers: Collusion Is ‘Common’ : Securities: The ex-financier says some broker-dealers aided him in bilking government clients out of more than $100 million.
Orange County financier Steven D. Wymer, who has pleaded guilty to defrauding a number of cities, counties and government agencies in securities transactions, told Congress on Thursday that some broker-dealers aided him in defrauding clients.
“The principal reason I was able to get away with diverting money from one client to another was that the broker-dealers with whom I dealt agreed not to send confirmations and monthly statements to my clients,” Wymer told members of the House subcommittee on telecommunications and finance. “As a result, some of my clients never learned the real status of their accounts.”
Wymer did not publicly name the firms he alleged cooperated in his schemes, but he continued testimony in a closed session with committee members.
Wymer, who spoke publicly for the first time about his role in bilking scores of local governments from California to Iowa out of more than $100 million, also contended that investment swindling is “common” and that federal reform measures are needed to curb abuses.
In fact, he said he also was aided by regulatory ineptitude. He said although authorities investigated his firm three separate times in the late 1980s, he was able to placate investigators with elaborate documentation that suggested his firm’s financial affairs were in order.
“It was that attention to detail that prevented earlier detection,” said Wymer, who claimed that the SEC dropped one inquiry over a falsified company financial statement that he blamed on his father, who had worked for a time as the firm’s bookkeeper. Wymer said he breathed a huge sigh of relief when the SEC never questioned his father about the matter.
But William McLucas, director of the SEC’s division of enforcement, said Wymer escaped attention only through the complicity of a broker-dealer employee who actively participated in his fraud by falsifying documents and giving Wymer access to his clients’ money.
“I’m not sure if we had given his firm the (financial) equivalent of a proctological exam we would have found something unless this (broker) employee told us the truth,” McLucas said. “But the fact of the matter is this fraud came undone in the end because one of our examiners was still not satisfied” and began raising deeper questions about Wymer’s dealings.
The appearance of Wymer, who was under oath and accompanied by his lawyer, capped more than three hours of testimony on a House measure aimed at placing more stringent regulation on financial advisers and planners.
Congress is now considering the most restrictive federal legislation governing investment advisers since the Investor Advisory Act was enacted in 1940.
The Investment Adviser Regulatory Enhancement and Disclosure Act of 1993 would impose higher fees on the nation’s estimated 17,000 advisement firms to pay for stepped up inspections of practitioners by the Securities and Exchange Commission. The SEC now has a 46-member staff, and advisers pay a one-time $150 registration fee, said Rep. Edward J. Markey (D-Mass.), chairman of the House subcommittee.
The measure would also require financial advisers and planners to be bonded as well as make extensive disclosures about their backgrounds, the amount of commissions and fees they charge and issue periodic summaries of charges incurred by their customers.
The proposed measure, however, has been criticized as unfair by some financial planners, whose industry grew rapidly in the 1980s amid the nation’s economic expansion and deregulation of banks and other financial institutions. They noted that lawyers, accountants and some other professionals who often provide financial advice aren’t covered by the legislation.