Prosecutors Ask Maximum Prison Term for Wagner : Courts: They say former Newport-Mesa school official did not keep promise on restitution of funds he embezzled.

Orange County prosecutors, arguing that embezzler Stephen A. Wagner did not keep his promise to make the fullest possible restitution of the $3.5 million he stole from the Newport-Mesa Unified School District, have asked that he receive the maximum prison term.

Instead of helping investigators find and liquidate his assets, the district’s former top financial officer may have stashed some of his ill-gotten gains, prosecutors suggest in a sentencing brief that asks for an eight-year, eight-month prison term.

Wagner, 41, promised to make restitution and cooperate with investigators when he pleaded guilty last December to misappropriating school district funds. But his “actions have been to provide little help, to admit nothing that could not already be proven, and his actions and demeanor show no true remorse,” the brief states.

Additionally, Wagner’s total assets do not appear to match the stolen sums, “raising the question of whether Wagner spent the entire $3.5-$4 million--or is some of it secreted?” according to the brief by Deputy Dist. Atty. Carlton P. Biggs.

Wagner is scheduled to be sentenced Friday by Orange County Superior Court Judge John J. Ryan for what is believed to be the largest school embezzlement in state history. That hearing is likely to be postponed, officials said.

The former school district official’s attorney, Paul S. Meyer, was out of town Wednesday and could not be reached for comment. In the past, Meyer has maintained that Wagner felt remorse and wanted to cooperate fully with authorities. Wagner remains in Orange County Jail.

Prosecutors said Wagner deserves no leniency because he took advantage of a trusted position, and the crimes were especially destructive.

The theft contributed to the removal of the district’s superintendent, to financial strains that led to the layoffs of 200 district employees, to elimination of several school programs and to larger class sizes, the sentencing brief states.

Wagner pleaded guilty in December to diverting school district funds to his own personal accounts between 1986 and 1992. He used the money to support a lavish lifestyle that included a mink-lined bathrobe, doorknob-sized gems and luxury cars.

Investigators also believe that Wagner may be responsible for as much as $500,000 in additional missing funds, but some records needed to document funds that disappeared before 1986 are not to be found, the legal brief states.

The assets Wagner turned over to authorities for auction are either heavily mortgaged or worth less than Wagner claimed, dimming hopes for a hefty reimbursement to the district, said Theodor Albert, bankruptcy trustee.

“At this point, unless I get lucky, we’re looking at a few hundred thousand dollars at most” going back to the district, said Albert, who said he also has concerns that some assets have been hidden.

“He’s been so doggone cagey--he hasn’t told us anything we don’t already know,” said Albert, who said that Wagner at one point assured officials that all the assets were at his home--but forgot to mention eight fur coats placed in storage one day earlier.

Wagner and his wife, Linda, filed for bankruptcy last July. They face $2.4 million in Internal Revenue Service liens for unpaid taxes. And the FBI is investigating whether any of the stolen school funds included federal money.

According to the legal brief, the embezzlement came to light after a citizen--believed to be a co-worker of Wagner’s--tipped off authorities that Wagner was “living above his means,” and IRS officials found there were major discrepancies between his taxable income and the sums moving through his bank accounts.

Prosecutors later uncovered 170 transactions in which Wagner misappropriated district funds.

Defendants normally serve about half their given sentence, with credit for time served, good behavior and work.

But even if Wagner serves every day of the maximum sentence, it will amount to one month in prison for every $33,000 stolen, “not bad considering his (annual) salary at the district was $75,000,” the brief notes.