Costly hunt for embezzled funds fails // COURTS: Investigators spend $55,000 searching for the $4 million Stephen Wagner stole, but find only $284

DATE                  11/17/93
NEWSPAPER             THE ORANGE COUNTY REGISTER
SECTION               METRO
EDITION               MORNING
PAGE                  b01
STORY LENGTH          25 INCHES
HEADLINE              Costly hunt for embezzled funds fails // COURTS: 
                         Investigators spend $55,000 searching for the $4 
                         million Stephen Wagner stole, but find only $284.
BYLINE/CREDIT          DAN FROOMKIN:The Orange County Register
SUBJECT TERMS         OC:SCHOOLS:THEFT:FRAUD:SENTENCE:INVESTIGATIONS

     Yet another effort to recoup some of the millions of
  school-district dollars embezzled by Stephen Wagner has backfired.
     Bankruptcy court documents obtained Tuesday by The Orange County
  Register show that the attorney in charge of liquidating Wagner's
  estate recently paid $54,879 -- almost one-fourth of the total
  recovered -- to private investigators who spent weeks, at rates of
  up to $165 an hour, uncovering little more than a $284 bank account
  in the Caribbean.
     And that was only the latest ill-fated attempt by bankruptcy
  trustee Ted Albert to find out what Wagner did with approximately
  $4 million he stole from the Newport-Mesa Unified School District
  while he was its budget director.
     Wagner was sentenced in June to six years in state prison for
  embezzlement. He was back in Santa Ana on Tuesday for an appearance
  in federal court to face mail- and wire-fraud charges that could
  extend his time behind bars.
     As he sat manacled in the courtroom, Wagner refused to answer
  questions about what happened to the money. In previous statements
  he has said he lost most of it to unscrupulous gem dealers.
     Albert said he doesn't believe Wagner's story. But he also
  hasn't had much luck finding the "pot of gold" he said must be out
  there somewhere.
     Albert received court permission last March to dip into the
  estate's small bank account for $10,000 to pay a Toronto gem dealer
  to examine gems Wagner allegedly had bought for as much as $3
  million.
     It turned out the gems were essentially worthless.
     And in May a much-heralded auction at Wagner's million-dollar
  Newport Beach home -- featuring beaver-fur-lined bathrobes, possibly
  forged Salvador Dali lithographs and aging luxury cars -- raised
  only $130,000. Wagner's properties, including his Dover Shores
  home, turned out to be heavily mortgaged.
     Albert said he has done what any trustee would do: followed
  leads that seemed to suggest that Wagner hid much of the money.
     "You hope that it leads to something because it looks good in
  the press," Albert said. "If you're lucky, you're a hero. And if
  you're not lucky, at least you've done what you were supposed to
  do."
     John Warren, vice president of Murphy & Maconachy Inc., the
  Santa Ana investigation company that got a $54,879 check last
  month, said the money was well-deserved.
     "We did a great deal of work on that case," Warren said. "We ran
  out all the logical, rational leads -- and we didn't come up with a
  great deal."
     That's the nature of investigation, Warren said. "A lot of times
  we find it, and a lot of times we don't."
     Newport-Mesa school Superintendent Mac Bernd said Tuesday that
  he is still hoping to get some restitution from Wagner's estate.
  And he said it's a shame so much money has to be eaten up in the
  investigating process.
     "Any bit of that money could certainly have been used in the
  classroom," he said.
     "But in some respects it's hard for me to second-guess. Let's
  say the guy had turned up a milion dollars -- then we'd think the
  expenditure was wonderful."
     All in all Albert has liquidated about $240,000 in assets from
  the Wagner estate. And much of that has been consumed by legal fees
  -- at least $40,000 -- and costs related to the sale of Wagner's
  properties -- including $14,314 for a real estate broker.
     Albert said that as of Tuesday, $61,542 is left in the Wagner
  estate bank account, with more disbursements to come before the
  school district will see any of it.
     Albert himself, for instance, has yet to be paid for his
  services, he said.
     If there's anything left when the process is over, Albert said,
  the school district is second in line for the money -- after the
  Internal Revenue Service, which says Wagner owes $2.4 million in
  back taxes.
     There may be one glimmer of hope for Wagner's creditors,
  however. Albert said he still thinks Wagner has a lot of money
  hidden somewhere, and he said he has hired another private
  investigator to keep digging.
     This one was hired on a contingency basis.