Newport Beach / Costa Mesa : Schools, Bank Settle Negligence Lawsuit

The Newport-Mesa Unified School District has received a $575,000 settlement from Wells Fargo Bank in exchange for dropping its $3-million lawsuit alleging that the bank failed to protect district funds from an embezzlement scheme by former budget chief Stephen A. Wagner.

Edward H. Decker, president of the district’s Board of Education, said at Tuesday night’s board meeting that the settlement was reached last month and approved in concept by the board on Dec. 24.

“We are certainly pleased that this phase of the whole incident is complete,” district Supt. Mac Bernd said. “There are an awful lot of people who want to move forward and put this behind us.”

Bernd said the settlement stipulates that district officials cannot comment on its details.

Wagner pleaded guilty in December, 1992, to embezzling about $4 million from district bank accounts, primarily from two employee health insurance accounts at Wells Fargo Bank, which district officials had thought were closed out.

The district’s lawsuit contended that the bank had acted negligently in handling those accounts.

Between 1987 and 1991 at the Costa Mesa branch of Wells Fargo, Wagner withdrew funds from the accounts by obtaining either cashier’s checks made out to himself or blank “counter checks” payable to a shoe repair firm that he co-owned. In some cases, Wagner was able to cash those checks with only his signature as authorization, whereas school district regulations require two signatures on such transactions.

In other instances, Wagner cashed the checks using his signature and a facsimile of Deputy Supt. Thomas A. Godley’s signature, which the district has said was forged.

According to the settlement, Wells Fargo bank does not acknowledge any wrongdoing or negligence.

Wagner is serving a six-year term in state prison.