IOWA TRUST FUND

Entry in development

IOWA TRUST FUND. The Iowa Trust was formed in January, 1989, to pool dozens of small and medium investment accounts to create better investment opportunities. Unknown to many members who thought that Iowa Trust was a local operation--Wymer was hired as an adviser to invest the money. He was recommended by Marshalltown, Iowa which liked what Wymer had done with other investments of city money. A few cities joined, the trust gained credibility, and others followed. (1)

In 1992 Steven D. Wymer, 43, faced criminal charges alleging that his Irvine-based company, Institutional Treasury Management, defrauded clients in Iowa and elsewhere of $113 million they had given him to invest. Authorities charged that Wymer deceived his clients into believing that their money was safe. The federal indictment alleged that Wymer sent false monthly statements overstating the amount of money in clients' accounts, and had employees forge brokerage confirmation documents to support the fake monthly performance statements. Federal officials froze Institutional Treasury Management assets and began sorting out the dozens of claims filed against the company. They seized more than $10 million in assets of Wymer and his wife, including bank accounts, real estate, cars and furniture from a Sun Valley, Idaho, vacation home. He pleaded not guilty. (2)

The issue dominated lawmakers' attention. On the first day of the legislative session IN 1992, the president of the state Senate resigned his leadership post while an ethics committee investigates his role as a salesman for Iowa Trust. Iowa Gov. Terry E. Branstad moved to restore public confidence by appointing an investigative panel and proposing legislative reforms to keep the debacle from happening again. (3)

While officials in other states--particularly California and Colorado--were also scrambling to find lost money, no place suffered more than Iowa, where 88 government agencies invested more than $70 million with a Wymer client called Iowa Trust. The Des Moines Register dubbed "the Iowa Trust Scandal" the biggest financial disaster in state history. A city most severely affected was Dubuque, which invested more than $23 million, much of it from police and fire pension accounts. (4)

On May 4, 1993 a federal appeals court agreed that $44 million in a Colorado bank belonged to dozens of Iowa communities. The bank said it would close if the funds were returned to Iowa. Iowa, however, won an earlier federal court suit; it was that ruling that the federal appeals court in Colorado upheld. (5)

Wymer pleaded guilty in September, 1993 to defrauding cities in Iowa and California of $105 million. Wymer has admitted not only taking clients' money for personal use, but also to shifting money from one client to another to hide his investment losses. (6)

His clients feuded over what remained of the money. The Iowa Trust, which invested the cities' money through Wymer, was the biggest loser. It was out $75 million when the fraud was discovered in late 1991. Of that, $44 million ended up at Jefferson Bank & Trust in Lakewood, Colorado in what the Iowa attorney general described was "a complicated set of financial transactions engineered" by Wymer. (7)

With $17 million the Iowa Trust recovered earlier, the additional $44 million meant that the trust had recovered $61 million of the $75 million it was missing. The trust also sued the California desert cities of Palm Desert, Indio and La Quinta for millions of dollars it said Wymer transferred fraudulently from the trust's accounts to those cities' accounts. (8)

Additional Information:

Arnold, Bill and Japson, Bruce, "Banks Rap 'Poor Judgement,' " Telegraph Herald, January 2, 1992, p. 1. Online: https://news.google.com/newspapers?nid=aEyKTaVlRPYC&dat=19920102&printsec=frontpage&hl=en

Japsen, Bruce, "County Laboring With Trust Shortage," Telegraph Herald, January 6, 1992, p. 1. Online: https://news.google.com/newspapers?nid=aEyKTaVlRPYC&dat=19920106&printsec=frontpage&hl=en

Japsen, Bruce. "Trust's Bankruptcy May Delay Payment," Telegraph Herald, January 6, 1992, p. 1. Online: https://news.google.com/newspapers?nid=aEyKTaVlRPYC&dat=19920106&printsec=frontpage&hl=en

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Source:

1. Lesher, Dave. "California Scandal Hits Iowa Towns : Finances: Millions of Dollars were Lost by Cities and Counties after Alleged Fraud by an Irvine-based iInvestment Firm. Governments There are Imposing Cutbacks and Weighing Layoffs," Des Moines Register, February 2, 1992, Online: http://articles.latimes.com/1992-02-02/news/mn-1988_1_iowa-trust

2. Ibid.

3. Ibid.

4. Ibid.

5. Flagg, Michael. "Iowa Cities Get $44 Million in Wymer Case," Los Angeles Times, May 5, 1993. Online: http://articles.latimes.com/1993-05-05/business/fi-31615_1_iowa-cities

6. Ibid.

7. Ibid.

8. Ibid.

In almost every corner of the Hawkeye State, officials tell horror stories about the financial disaster that swept through Iowa like a cyclone across the prairie.