LOS ANGELES -- A federal judge Friday released a substantial amount of municipal funds frozen after a California investment firm was accused of fraud by the Securities and Exchange Commission.

Dozens of local governments were denied access to millions of dollars when Institutional Trust Management Inc. of Irvine, Calif., was put into receivership and its assets frozen two weeks ago.

But U.S. District Judge Richard G. Gadbois provided some relief last week by signing an order recommended by the court-ordered receiver, Robert E. Carlson, that more than $750 million of the company's assets be released.

The receiver's lawyer, Todd E. Gordinier, said he did not know how much of those fund were municipal but that it was a 'substantial amount."

"The freeze accomplished what it set out to do," Judge Gadbois told the court. "It's hardly the desire of this court to bring a municipality or other governmental agency to its knees during this holiday season.

The firm managed about $1.5 billion for approximately 107 clients, which included cities, counties, and financial institutions throughout the country, some of which had trusts or pooled funds. Officials estimate the firm lost about $95 million in bad transactions. Many of the clients are in Iowa.

The judge approved a 21-page interim report prepared by Mr. Gordinier, recommending continued receivership status for the company and release of most municipal funds.

Some of the funds released by the judge include 12 accounts held at Refco Securities by the firm for various California municipalities: Big Bear Lake, Grand Terrace, Indio, La Quinta, Orange, Palm Desert, and the Coachella Valley Joint Powers Authority, according to Mr. Gordiner.

Municipal officials from the California cities of Orange and Big Bear Lake said immediately after the hearing that they were concerned about the release and wondered what specific conditions would be attached. Orange has $7 million invested with the firm.

An attorney for Investment Trust of Colorado, Edwin W. Duncan, with Arter, Hadden, Lawler, Felix & Hall, said his client had $260 million tied up with the firm and said after the hearing he was not sure if Colorado would get its money.

In its complaint earlier this month, the SEC charged the investment adviser, its predecessor firm, Denman & Co. and owner Steven Wymer with defrauding clients. The SEC charges concern alleged fraud concerning the withdrawal and sale of $65 million in Treasury notes from one client's account without the client's consent and the funneling of the cash proceeds into other client accounts.

Iowa officials have said $65 million is missing from the Iowa Trust, a pooled investment account that was being managed by the California firm on behalf of Iowa municipalities. The money was reportedly transferred from Refco Securities to Shearson Lehman Brothers two to five days before the Dec. 11 court order freezing the company's assets.

Mr. Gordinier said Iowa would not receive the $65 million under the judge's order.

"What Iowa needs to do is take some action to get their funds back," he said.

Mr. Gordinier said the judge approved continued receivership, although Michael F. Peris, an attorney for Mr. Wymer had reportedly wanted a bankruptcy court proceeding.

"I don't think it is appropriate for me to declare bankruptcy for these organizations," said Judge Gadbois.

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