Refco, 3 Former Employees Settle With SEC

Refco Securities and three of its former employees Tuesday agreed to pay $3.5 million to settle claims stemming from their involvement with notorious California investment advisor Steven D. Wymer, the U.S. Securities and Exchange Commission announced.

SEC officials said settlement proceeds will be apportioned among the 17 municipalities, mostly in California, that Wymer defrauded of at least $80 million through trading accounts at Refco, a large New York brokerage firm. Among cities that will share in the settlement are Torrance, Orange, Loma Linda, Indio and Palm Desert, said Cliff Hyatt, an SEC spokesman in Los Angeles.

Wymer, 48, of Newport Beach pleaded guilty to mail and securities fraud in 1993 and received a 14 1/2-year prison term--a sentence reduced earlier this year to seven years and three months.

He invested more than $1 billion for municipal clients, but improperly shifted funds between accounts to hide trading losses and siphoned off millions to buy vacation homes, expensive cars and a private plane.

In its actions Tuesday, the SEC simultaneously filed and settled legal claims against Refco and three individuals, who did not admit wrongdoing.

In U.S. District Court in Los Angeles, the agency filed suit against Kimberly D. Goodman, Wymer’s alleged accomplice at Refco, accusing her of helping Wymer to conceal his misappropriation of funds in exchange for about $183,000 in cash and an additional $130,000 in costly gifts, including a Jaguar convertible and Mercedes-Benz.

According to the SEC complaint, Goodman lied to Wymer’s clients and their auditors about the amount of cash and securities they had in their Refco accounts between 1988 and 1991. Among other things, she signed at least 20 letters verifying fictitious account balances ranging from $400,000 to $75 million, when in fact balances were often near zero, the SEC claimed.

Without admitting or denying the allegations, Goodman agreed to an injunction barring future securities law violations and also agreed to be barred from the securities industry. Her lawyer, James A. Moss, declined comment.

The SEC also filed administrative complaints against Refco and former employees Douglas L. Blair and Robert J. Dantone, who allegedly processed transactions that resulted in Wymer’s theft of about $2.9 million.

Refco was accused of failing to have adequate compliance procedures and failing to supervise Goodman. In addition to paying the $3.5 million, the company was censured and agreed to retain an independent consultant to review its procedures, the SEC said.

Refco attorney Gary Lynch, former chief of enforcement for the SEC, couldn’t be reached for comment.

“It’s a significant case, and a very good settlement from our perspective,” said Elaine Cacheris, regional director for the SEC in L.A.

SEC officials said that in addition to settlement proceeds, municipalities swindled by Wymer will also split millions of dollars worth of assets seized from their former investment advisor.

SEC officials declined comment on published reports that Refco Inc., an affiliate of Refco Securities, is under criminal investigation for its dealings with Beverly Hills investment advisor S. Jay Goldinger, who allegedly lost an estimated $100 million through improper trading practices.

Refco Inc. also agreed earlier this year to pay a $925,000 fine to the U.S. Commodities Futures Trading Commission to settle a complaint accusing it of violating rules regarding segregation of customer funds.