Newport Beach Schools Fire Official in Fraud Case : Education: Business director is accused of diverting at least $175,000 from insurance fund to his personal use.

Stephen A. Wagner, the Newport Beach school district business director who is under criminal investigation, was fired Tuesday night for allegedly diverting to his personal use at least $175,000 from an employee health insurance fund.

That same fund was cited by auditors in the summer of 1990 as having bookkeeping errors, and school district officials acknowledged at the time that “proper controls were not maintained,” it was learned Tuesday.

Officials for the Newport-Mesa Unified School District said they implemented corrective procedures recommended by the auditors the same year. But Forrest K. Werner, president of the district’s elected Board of Trustees, said any tightening of procedures is only as good as the person who would implement it--and in this case, it would have been Wagner.

The district’s seven trustees voted unanimously Tuesday night to immediately fire the 40-year-old Wagner.

Wagner has been suspended without pay since Oct. 23, when the first of four checks written to a shoe repair company he co-owns came to light as part of an ongoing criminal probe by the Orange County district attorney’s office.

Wagner did not attend the board meeting in Newport Beach or send a representative to appeal the dismissal. He could not be reached for comment on the trustees’ action.

Two years ago, an auditor hired by the district to examine its books discovered bookkeeping deficiencies in the health plan fund that is now at the center of the Wagner investigation.

The Long Beach accounting firm of Lemke and McDade made several recommendations to school officials in a fiscal 1990 report. In the audit report, school officials cited staff shortages for the problems.

Thomas Godley, the district’s assistant superintendent for budget, said they adopted the audit recommendations. But on Tuesday, Wagner was fired for writing four checks totaling $175,357 from the health fund to Cobbler Express Corp. between June, 1991, and April, 1992. The health insurance fund singled out by the auditor’s report is a revolving account used to reimburse medical claims by the district’s approximately 1,800 employees. As claims are paid out, it is replenished by transfers from the district’s self-insured health account, which is kept at about $5 million, Werner said.

Wagner’s attorney, Paul S. Meyer of Santa Ana, could not be reached for comment Tuesday. Also at Tuesday night’s meeting, several parents demanded that the trustees begin a national search for someone to replace Supt. John W. Nicoll as early as July 1, 1993, when his contract runs out.