TORRANCE : Reactivation Sought of $40-Million Fraud Suit

Torrance and 13 other Southern California cities and public agencies have asked the state Supreme Court to reactivate a $40-million lawsuit arising from the Stephen D. Wymer financial scandal.

Torrance, which lost $6.2 million in Wymer’s fraudulent investment schemes, joined in asking the high court to lift a stay imposed by a Los Angeles Superior Court judge until Wymer’s bankruptcy is resolved.

The suit says the $40 million was wrongfully transferred to other public agencies by Wymer, who managed $1.2 billion through his Newport Beach investment company. According to the suit, Wymer set up an elaborate Ponzi scheme--in which later investors’ contributions are used to pay artificially high returns to original investors, thus attracting more funds--and improperly transferred investors’ funds from cities to other public agencies to mask losses.

Wymer, who pleaded guilty in 1992 to fraud, was sentenced to 14 years in prison and ordered to pay $209 million in restitution. Authorities termed it “one of the most significant and financially devastating” cases of its kind.

Cities in California and elsewhere lost an estimated $100 million through Wymer investments.

Torrance also attempted to recoup some of its money by suing its auditors, Deloitte & Touche, but a Torrance Superior Court jury voted 11 to 1 in late April that the firm should not have to pay the city.