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Accounting Firms to Pay Newport-Mesa Schools $525,000 : Settlement: Money compensates for their failure to detect embezzlement by former district financial officer.


NEWPORT BEACH — The Newport-Mesa Unified School District will receive $525,000 in settlements from two accounting firms that failed to discover embezzlement by the district's former chief financial officer.

Board President Edward Decker announced the settlements, which preempt a district lawsuit, at the board's meeting Tuesday evening.

Long Beach-based Lemke & McDade Certified Public Accountants and its principals, Michael McDade and Eric Lemke, will pay $325,000. The firm acted as the district's auditor from July, 1988, to June, 1991.

The multinational firm KMPG Peat Marwick, which acted as outside auditor from June, 1982, to July, 1988, will pay $200,000.

Because no lawsuit was filed, no specific allegations were ever made against the firms, district director of fiscal services Michael Fine said.

"The person who caused the loss was Stephen Wagner," Fine said, but the district and the accountants "both felt in some sense there was some form of responsibility here."

A district attorney's investigation revealed Wagner's $3.7-million embezzlement in October, 1992. Wagner was convicted of the theft and is serving a prison sentence. He has not yet paid any restitution, Fine said.

Wagner's personal bankruptcy proceedings are pending, and Fine said Wagner's assets that have been sold have not brought market value.

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