Newport-Mesa Triples Embezzlement Estimate : Scandal: School district suit says suspended finance officer forged checks made out to his shoe repair firm.

SANTA ANA —  The financial scandal at Newport-Mesa Unified School District worsened Thursday with the disclosure that district officials now believe its suspended chief financial officer, Stephen A. Wagner, misappropriated more than $175,000 of school funds and forged the signature of another top school official on two checks.

The Newport-Mesa district filed a six-page complaint in U.S. Bankruptcy Court on Wednesday, alleging that Wagner wrote at least four checks totaling $175,356.88 to a shoe repair company he co-owns.

The complaint triples the amount of money that the district believes Wagner diverted to his personal use. Previously they had identified only a $57,861 check, which was the basis of his suspension without pay on Oct. 23.

The checks outlined in the district’s complaint were allegedly written between June 25, 1991, and April 10 of this year.

The school’s complaint, filed as part of Wagner’s personal bankruptcy case, is the first public record to reveal the preliminary findings of an Orange County district attorney’s investigation into Wagner and possible wrongdoing at the school district.

Wagner, 40, has not been charged with any wrongdoing but the district attorney’s office said the investigation is ongoing. His attorney, Paul S. Meyer, said he was unaware of the school district’s latest findings.

“I have not heard any accusations made by the district attorney of this county. . . . If there is an accusation, we will be happy to respond to it but at this point the investigation continues, “ Meyer said, adding that “a preliminary review of all the facts in this case has not revealed that the district is presently out any money.”

In its complaint, the school district said that Wagner “misappropriated (the) district’s property by fraud and dishonesty.” He used school documents to carry out the alleged scheme and “forged endorsements and deposited forged checks in his bank accounts,” according to the complaint.

After Wagner was suspended for the check he allegedly wrote to his shoe repair company in Victorville, Cobbler Express Corp., Newport-Mesa trustees voted to seek his dismissal at their next board meeting Tuesday.

School officials say the checks in question drew on a health insurance fund used to reimburse employees for covered health costs.

As director of business support services, Wagner oversaw the district’s $91-million budget and co-signed virtually all checks paid to employees and vendors alike. In his 21 years with Newport-Mesa, Wagner worked his way up the ranks from bookkeeper to top financial officer for the 17,500-student district. His salary was approximately $78,000 a year.

Wagner filed for Chapter 11 bankruptcy protection from creditors July 30, two days after the Internal Revenue Service filed nearly $2.4 million in liens against him. In his bankruptcy statement he listed as income rent paid on several homes he and his wife own, but those payments barely covered his mortgages.

He also owns a 5,000-square-foot home in the exclusive Dover Shores neighborhood of Newport Beach and was known for driving expensive cars and living lavishly. He and his wife appeared several times at Orange County arts events in matching full-length mink coats, and he turned up in a mink tuxedo jacket at the district’s 25th anniversary banquet within the last two years.

The allegations and reports of his opulent lifestyle have incensed parents and teachers. They are especially indignant because the district had to slash $2.7 million from this year’s budget, forcing teacher layoffs, classroom overcrowding and a shortage of some supplies.

“If it is true that we have a management person in the district wearing mink tuxedos to district functions at a time when we have massive layoffs of classroom teachers, not only is that callous but it’s flatly stupid,” said Maya Decker, president of the Newport-Mesa teachers’ union, said Thursday. “The contrast, of course, is outrageous.”

School officials, however, blame the budget cuts on the recession and an accompanying drop in property tax revenue.

Wednesday’s complaint documents four different transactions now under investigation by the district attorney’s office.

On June 25, 1991, Wagner had a $48,295.44 check issued from the school district’s health plan fund trust account at Wells Fargo Bank made payable to Cobbler Express Corp., according to the complaint. Though school district policy requires a second signature on checks, only Wagner’s signature appeared on the June 25 check.

Cobbler Express has outlets in San Bernardino and Palmdale.

Three weeks later, a $57,861.25 check from the same account was issued to Cobbler Express, the complaint said. There was no second signature on this check either.

“Wagner is an officer of Cobbler Express Corp. and personally benefited from the checks that were deposited to the account of Cobbler Express or Cobbler Inc.,” the complaint said. “The District has not done business with Cobbler Inc. or Cobbler Express and has never authorized any payment to Cobbler Inc. or Cobbler Express from the Trust Account.”

On Dec. 17, 1991, another district check--this one for $54,880--was issued to Cobbler Inc. with the “unauthorized and purported signature of Thomas A. Godley,” according to the complaint.

Godley was Wagner’s boss and is the assistant superintendent of the Newport-Mesa district.

On April 10 of this year a school check for $14,320.19 was made to Cobbler Inc., again with the “unauthorized” signature of Godley.

“I didn’t sign them,” Godley said Thursday. Wagner “was not authorized to use my signature whether it be facsimile or otherwise.”

Newport-Mesa attorney Spencer Covert said the district filed the claim against Wagner to be able to recoup any funds from his estate.

The complaint said an ongoing district audit and investigation will “determine whether Wagner committed other instances of fraud,” and school district officials said the complaint will be amended if more questionable checks are found.

Times staff writers Kristina Lindgren and Jodi Wilgoren contributed to this article.

The Checks in Question

The Newport-Mesa Unified School District alleges that Stephen A. Wagner diverted $175,356.88 in district funds to personal accounts. The district cited four checks made payable to Cobbler Express Corp., a shoe repair business that Wagner co-owns.

June 25, 1991: Wagner drew $48,295.44 from the district’s health insurance fund. No second signature appeared on the check, as required by district policy.

July 16, 1991: Wagner drew $57,861.25 from the health insurance fund. No second signature was on the check. A school official alerted the Orange County Grand Jury to this check in the spring, prompting a criminal investigation by the district attorney. On the basis of this check, the district has taken steps to fire Wagner.

Dec. 17, 1991: Wagner drew $54,880 from the health insurance fund. District alleges that Wagner forged signature of Assistant Supt. Thomas A. Godley.

April 10, 1992: Wagner drew $14,320.19, from the health insurance fund. District alleges that Wagner again forged Godley’s signature.