$6 Million Lost in Scandal Is Written Off by Torrance

The cities of Torrance and Orange are writing off millions of dollars that disappeared from the accounts of investment adviser Steven D. Wymer, who has pleaded not guilty to more than 30 counts of securities fraud and other charges.

The Orange City Council this week wrote off the $7 million the city had entrusted to Wymer, and Torrance officials are doing the same with $6 million missing in a financial scandal involving a number of cities in California and Iowa.

Torrance officials, who have hired private attorneys to review the alleged fraud, say they still hope to recover some or all of the money. The city is planning “appropriate legal action,” attorney George Hedges said Wednesday.

But the city’s auditors recommended that the $6 million be subtracted from the city’s books as of June 30, 1991, reducing the city’s fund balance for fiscal year 1990-91.

The loss is being spread among about 20 separate city funds, such as the general fund and the gasoline-tax fund, said Finance Director Mary Giordano. The adjustments will be reflected in the annual financial report the City Council will receive Tuesday.

The loss is not expected to affect city services such as trash collection. But, in time, it could force the delay of some capital projects, including road projects or major equipment purchases, Giordano said Wednesday.

The missing $6 million has reduced Torrance’s investment portfolio to about $68 million and has set off a fierce controversy about investment policy that is dominating the March 3 City Council election campaign.

In Orange, city officials term the $7 million it invested with Wymer as a “potential loss” and are trying, through the courts, to get some or all of the money returned. But the council’s action Tuesday officially took the money off the ledgers.

The item was treated as a routine bookkeeping matter and originally was included on the council’s consent calendar. The consent calendar is a council’s method of passing, all at one time, a group of routine, non-controversial matters.

At the council meeting, however, Councilman Mike Spurgeon asked that the $7-million item be pulled from the consent calendar and voted on as a separate item. Spurgeon said that with so much money involved, the public deserved an explanation of what the action was all about.

City Finance Director Ted L. Schoettger then briefly discussed the proposed action, saying the city would be clearing its books of the apparently lost money. “It’s an accounting convention, but when you have a loss of this nature, you record it,” Schoettger said. “So from now on, the records will show less this amount.”