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Encyclopedia Dubuque


"Encyclopedia Dubuque is the online authority for all things Dubuque, written by the people who know the city best.”
Marshall Cohen—researcher and producer, CNN

Affiliated with the Local History Network of the State Historical Society of Iowa, and the Iowa Museum Association.


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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. Many clients said they felt secure because Mr. Wymer dealt primarily in government securities and they liked his associates. In Southern California, Wymer hired Harold Brewer, former treasurer of the city of Riverside, as his chief salesman, giving him instant credibility. In Iowa, Wymer retained Joseph J. WELSH, president of the State Senate. (1) A few cities joined, the trust gained credibility, and others followed. (2) In less than two years, the Trust account grew to $129 million. (3)

The city of Dubuque originally invested $5 million of its operating funds on February 23, 1990. Another $12.5 million was invested in five installments, the last on June 4, 1991. It withdrew $4.3 million in three transactions between May 3, 1991 and June 26, 1991. Dubuque fire and police retirement funds were placed in the Iowa Trust for the first time in May, 1991. (4)

In December 1991 Securities and Exchange Commission attorneys alleged that all $10 million from the trust fund for Marshalltown, Iowa, was missing and that Wymer conducted many securities transactions in the Marshalltown account without the client's knowledge. Commission attorneys further stated that when Wymer found that the SEC was checking the municipality's fund, he transferred cash from other accounts into that account to compensate for the discrepancy. (5)

Wymer then allegedly tried to cover the new shortages by buying Treasury notes in his own account at Institutional Treasury Management and reselling them to at least two other clients at inflated prices. The lawsuit charged that he netted more than $10 million in five fraudulent transactions. (6)

The SEC alleged that the other funds turned up missing in November, when Wymer withdrew $65 million in Treasury notes from the Iowa Trust and sold them without the client's permission. Some of the money was then funneled to other client accounts, according to commission attorneys. (7)

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. (8)

The issue dominated Iowa lawmakers' attention. On the first day of the legislative session in 1992, Joseph Welsh, the president of the state Senate, resigned his leadership post while an ethics committee investigated 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 scandal from happening again. (9)

No state or municipality 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. The city most severely affected was Dubuque, which invested more than $23 million, much of it from police and fire pension accounts. (10)

An ad hoc citizens' review committee was approved by the city council on January 6, 1992 to study the investment of surplus funds in the Iowa Trust. Written questions from residents of Dubuque were to be sent to city council members or the city clerk. (11) Among the questions the committee wanted answered was whether the city still had a written contract with A. G. Edwards & Sons to provide investment monitoring. The committee also wanted to know why the fire and police pension boards never took a formal vote in participating in Iowa Trust. (12)

While the citizens' review committee was meeting, the city of Dubuque and Dubuque County were among 18 Iowa local governments allowed to borrow from a $15 million special fund to cover cash flow problems. (13) Money from the Municipal Investment Recovery Program administered by the Iowa Finance Authority would be used by the city to pay more than $3 million it owed to the Iowa Municipal Fire and Police Retirement System. Mayor James BRADY was "angry" that the city's investment consultant, Dennis HOULIHAN of A. G Edwards and Sons Inc. had been hired to monitor the performance of four of the city's money managers "in exchange for first chance at executing trades and 'behind the scenes' finders fees." Houlihan responded by letter defending his role and commissions paid on transactions for the city. (14)

The citizens' review committee found that the city council "bears the responsibility of the city's funds...The (city) staff has blundered and probably misled you." This brought a strong 20-page memo from the city manager, Kenneth GEARHART outlining areas of disagreement. Gearhart wrote that Wymer, the Iowa Trust custodial bank and attorneys bore the responsibility and not the council. Gearhart went on to state his belief that the $17.1 million in assets still held by the fund would be recovered with interest and legal expenses. He believed the committee had gone beyond its task of answering questions submitted by the community to one of fixing blame at the local level and claimed the Telegraph Herald had not been accurate in reporting. The paper responded that neither Gearhart nor his staff had ever insisted on a correction of clarification. (15) On June 29, 1992 Gearhart was given the option of resigning or being fired. He resigned the following day.

On June 29, 1992 a lawsuit filed by the city of Dubuque and Algona Municipal Utilities accusing the Iowa Trust Board of Directors of fraud was dismissed by the U. S. District Court in Des Moines. This board included Robert M. CARR, Dubuque County Treasurer. Directors had said they too were victims of Steven Wymer. (16) The following day an ad hoc investment policy committee tentatively adopted a new policy and created an oversight panel for future investments. The committee based its policy recommendations on a new state law governing public investments. The committee felt that the oversight committee should set its own agenda and report directly to the city council. The oversight committee, it was felt, should not be a part of the city administration or be appointed by the city manager. (17)

As part of a plea agreement, Steven Wymer cooperated with Iowa authorities in recovering $75 million belonging to the Iowa Trust investors. Federal investigators were at first hindered in their work because Wymer had destroyed many of the documents in the Institutional Treasury Management office. In addition to his cooperation, Wymer had to forfeit $11 million in personal assets to cover the remaining shortage of money. He also gave up his securities license. (18)

In October 1992 the City of Dubuque and seven other governmental bodies with money tied up in the Trust were given clearance by District Judge Michael Streit to proceed with a $71 million law suit against a prestigious Des Moines Law firm. The firm of Davis, Hockenberg, Wine, Brown, Koehn & Shors was charged with failing to monitor investments and protect the investment pool from fraud. The judge also ordered the man leading the effort to recover the money to join the suit. (19)

Efforts to recover the money were led by David J. LYONS, Iowa Insurance Commissioner and court-appointed receiver for the Iowa Trust. (20) In December 1992 $7 million was recovered that had been in the account of an insurance program for California towns. (21) The Coachella Valley Joint Powers Insurance Authority, a pool by which 23 towns insured themselves, settled part of the case out of court by agreeing to turn over the $7.1 million to Iowa Trust, keeping only the remaining $1 million in the account for itself. (22) Faced with a $300,000 shortfall in the city budget, the news meant that the city would be receiving an estimated $1.6 million which would be distributed as early as the second week in February 1993. (23)

"This will be the first money that's actually come back to the state," said Bill Roach, a spokesman for the Iowa attorney general, who represented the trust. The trust continued to negotiate a settlement with the desert towns of Palm Desert, Indio and La Quinta over the remaining $19.5 million in the Shearson Lehman accounts. (24)

$43 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. (25) On May 4, 1993 a federal appeals court agreed that the $44 million 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. (26) In what made the situation even more unique, a federal judge ruled in late September that the Federal Deposit Insurance Corporation (FDIC) which guarantees money kept in banks, owed the Iowa Trust more than $510,000 in interest. The ruling found that the FDIC was in contempt of the federal court because it did not pay interest on the $43 million in the Lakewood, Colorado bank when the Iowa Trust collapsed. David Lyons said it was first time the FDIC had been found in contempt. (27)

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. (28)

Wymer plead guilty in September, 1993 to defrauding cities in Iowa and California of $105 million. He admitted not only taking clients' money for personal use, but also to shifting money from one client to another to hide his investment losses. (29) He was sentenced to 14 years in prison in 1993.

In hindsight, the question was asked if the scandal could have been avoided. The Iowa Public Agency Investment Trust, a competing trust fund, warned municipalities that earnings announced by Iowa Trust were suspect. (30) Warnings were raised twice and both times the "whistleblower" was fired. As one of the two people fired remarked,"It's amazing what normally intelligent people will do for an extra two percent." (31) A former deputy Iowa treasurer later filed a lawsuit against State Treasurer Michael Fitzgerald, another deputy treasurer, and Welsh claiming she had been illegally fired for raising questions. A Des Moines jury, however, found in favor of the defendants. (32)

In February 1992 as Iowa Trust assets remained frozen, the City of Dubuque was losing $1,202.17, the city pension fund was losing $708.69, and the county was losing $433.33 in interest every day. (33)

In August 1992 the city of Dubuque announced a new administration and new investment policy to change the way it handled surplus funds. The emphasis would be on safety rather than return. The monitoring service with A. G. Edwards & Sons, which had required that investment transactions be run through the investment firm, was discontinued. Investment monitoring would be done "in house" with a committee including the city manager, the manager of administrative services for the city, city treasurer, and the city finance director. The city council also approved a three-person advisory committee to oversee the city's investment practices. (34)

The investigations of Joseph Welsh continued. In December 1991 after being reprimanded by the Senate for using his position as a lawmaker to sell the investments to Iowa cities and counties, Welsh faced the possibility of Wymer testifying against him. Wymer claimed Welsh initiated the employment arrangement and asked for and received "substantial" cash payments to push laws favorable to the Iowa Trust. (35) Welsh stated he was eager to confront the embezzler and expected the investigation to end quickly because of lack of proof. (36) By way interactive television, Wymer made his charges against Welsh in five hours of testimony. The Senate Ethics Committee then met and announced that the charges made by Wymer had not been satisfactorily proven and that the matter was considered closed. (37)

Wymer was sentenced to a federal prison camp for 14 years and 7 months and began serving his sentence on July 12, 1993. (38)

In October, 1996 city of Dubuque officials announced that the city would recover $500,000. The money represented the interest the city would have received on its principal in Iowa Trust had it not been misappropriated by the fund's manager. The money was part of a $2 million settlement Dubuque and 87 other municipalities reached with Davis, Hockenberg, Wine, Brown, Koehn and Shors, the Des Moines law firm that represented Iowa Trust. The firm had been found guilty of negligence in December 1995. Pauline Joyce, the Dubuque city budget manager, said that the city had now recovered its entire $23.9 million investment in the fund plus more than $916,000 in interest. (39)

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

Japsen, Bruce. " 'Trust' War Delays Return of $19 Million," Telegraph Herald, January 7, 1992. p. 7A. Online: https://news.google.com/newspapers?nid=aEyKTaVlRPYC&dat=19920107&printsec=frontpage&hl=en

Arnold, Bill. "Gearhart: City Should Borrow $7.78 Million, Telegraph Herald, January 7, 1992. Online: https://news.google.com/newspapers?nid=aEyKTaVlRPYC&dat=19920107&printsec=frontpage&hl=en

Arnold, Bill. "Bankruptcy Nixed; Fund Thaws Out," Telegraph Herald, January 10, 1992, p. 1. Online: https://news.google.com/newspapers?nid=aEyKTaVlRPYC&dat=19920110&printsec=frontpage&hl=en

Japsen, Bruce. "Officials Will Take Wage Freeze," Telegraph Herald, January 12, 1992, p. 1. Online: https://news.google.com/newspapers?nid=aEyKTaVlRPYC&dat=19920112&printsec=frontpage&hl=en

Japsen, Bruce. "Trust Scandal Dogs County," Telegraph Herald, January 28, 1992, p. 1. Online: https://news.google.com/newspapers?nid=aEyKTaVlRPYC&dat=19920128&printsec=frontpage&hl=en



1. Perez-Pena, Richard. "Investment Manager Faces Charges of Securities Fraud," New York Times, December 18, 1991. Online: http://www.nytimes.com/1991/12/18/business/investment-manager-faces-charges-of-securities-fraud.html

2. 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

3. "Yields Prompted High Interest," Telegraph Herald, February 2, 1992, p. 1. Online: https://news.google.com/newspapers?nid=aEyKTaVlRPYC&dat=19920202&printsec=frontpage&hl=en

4. Ibid.

5. Weikel, Dan. "Irvine Adviser Accused in $75.4-Million Fraud Case : Trust Funds: Iowa's Governor Assesses Potential Damage to as Many as 86 Public Entities, Whose Surplus Revenue was Managed by Steven D. Wymer's Two Companies.

6. Ibid.

7. Ibid.

8. Lesher

9. Ibid.

10. Ibid.

11. Arnold, Bill. "Citizen Review OKd," Telegraph Herald, January 7, 1992, p. 1. Online: https://news.google.com/newspapers?nid=aEyKTaVlRPYC&dat=19920107&printsec=frontpage&hl=en

12. Dickel, Dean. "City Panel Wrapping Up Probe," Telegraph Herald, April 28, 1992, p. 3A. Online: https://news.google.com/newspapers?nid=aEyKTaVlRPYC&dat=19920428&printsec=frontpage&hl=en

13. Japsen, Bruce. "Supervisors Accept Loan for Trust Loss," Telegraph Herald, August 5, 1992, p. 3A. Online: https://news.google.com/newspapers?nid=aEyKTaVlRPYC&dat=19920805&printsec=frontpage&hl=en

14. Arnold, Bill. "City, County on Trust Loan List," Telegraph Herald, June 10, 1992, p. 1

15. Dickel, Dean. "Gearhart Disagrees with Panel's Findings, Telegraph Herald, January 27, 1992, p. 3A

16. Japsen, Bruce. "Lawsuit Against Trust Board Dropped," Telegraph Herald, July 7, 1992, p. 1. Online: https://news.google.com/newspapers?nid=aEyKTaVlRPYC&dat=19920707&printsec=frontpage&hl=en

17. Dickel, Dean. "Investment Safeguards Adopted," Telegraph Herald, June 30, 1992, p. 1

18. Dickel, Dean. "Wymer to Aid Trust Recovery," Telegraph Herald, September 5, 1992, p. 1

19. "Judge Orders Trust Receiver to Join Suit," Telegraph Herald, October 29, 1992, p. 3A

20. Dickel, Dean. "Wymer's Deception Called Smooth, Well-Planned," Telegraph Herald, October 10, 19923, p. 1

21. Flagg, Michael. "Iowa Towns Trust, Biggest Victim in Wymer Scam, Will Recover $7 Million : Lawsuit: Insurance Pool that Includes Stanton Will Give Up Part of $100 Million Embezzled by Newport Beach Investor," Los Angeles Times, December 3, 1992. Online: http://articles.latimes.com/1992-12-03/business/fi-2128_1_iowa-trust

22. Ibid.

23. Arnold, Bill. "City to Receive $1.6 Million Trust Settlement," Telegraph Herald, February 2, 1993, p. 3A

24. Flagg

25. 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

26. Ibid.

27. Webber, Steve. "FDIC Owes Iowa Trust $510,000," Telegraph Herald, October 2, 1993, p. 1

28. Flagg

29. Ibid.

30. "Many Red Flags But Investors Not Personally Liable," Telegraph Herald, February 2, 1992, p. 1. Online: https://news.google.com/newspapers?nid=aEyKTaVlRPYC&dat=19920202&printsec=frontpage&hl=en

31. Glindinning, Mary. "Iowa Trust," Telegraph Herald, January 26, 1992, p. 1. Online: https://news.google.com/newspapers?nid=aEyKTaVlRPYC&dat=19920126&printsec=frontpage&hl=en

32. Webber, Steve. "Verdict in Lawsuit Seen as Welsh Vindication," Telegraph Herald, April 26, 1994, p. 3A

33. "Misplaced Trust," Telegraph Herald, February 2, 1992, p. 6A. Online: https://news.google.com/newspapers?nid=aEyKTaVlRPYC&dat=19920202&printsec=frontpage&hl=en

34. Dickel, Dean and Arnold, Bill. "City Funds Safer," Telegraph Herald, August 30, 1992, p. 1

35. Webber, Steve. "Attorney Expects Wymer to Testify," Telegraph Herald, December 8, 1992, p. 1

36. Webber, Steve and Dickel, Dean. "Welsh Wants to Confront Wymer," Telegraph Herald, November 12, 1992, p. 3A

37. Webber, Steve. "Ethics Panel Clears Welsh," Telegraph Herald, December 31, 1992, p. 1

38. Dickel, Dean. "Wymer Gets Jail," Telegraph Herald, May 12, 1993, p. 1

39. McDermott, Brad. "City 'Closes Books' with Iowa Trust Payment," Telegraph Herald, October 18, 1996, p. 1.