San Juan Capistrano still is trying to get to the bottom of the city coffers to find out how they came to be a personal bank for City Manager Stephen B. Julian. In a move that only can lend some badly needed credibility to an investigative effort that began with the decision to hire outside attorneys and accountants, the City Council wisely has decided to call in the district attorney.

The larger problems with the nearly $400,000 in municipal loan debts have been obvious enough from the beginning. In its approval of personal loans, the council acted more like a lending institution than a public body with a fiduciary responsibility to taxpayers. Along the way, Julian was able to get oral agreements on repayment schedules. And the transactions included the council's approval of a remarkable and apparently unprecedented escape clause in his employment contract. It could excuse the city manager from repaying outstanding financial obligations to the city if he leaves his job for reasons other than "misconduct" or "willful or habitual breach of duty."

This is a lousy way for a city to do business with its own manager, regardless of what the district attorney decides. The obvious question to engage his office, however, is whether anybody broke the law in the course of agreeing to what could amount to a giveaway of public funds.

Mistakes should be examined in Julian's disclosure statements, in particular the fact that he said in a statement for 1987 that he had repaid the city a house loan on which, in reality, he still owes money. And what about the city's legal responsibilities in agreeing to a pattern of loan extensions, without public discussion?

The City Council was asleep at the switch in its routine approvals, but even if some diligent soul in city government had wanted to trace the trail of loans and extensions, it would have been difficult to do because of the verbal nature of some of the agreements. The district attorney's office may see some light by gaining access to city records that offer a more complete accounting of the loans and payouts.

Meanwhile, the City Council has come in for its due share of heat from taxpayers who correctly wonder how complete an investigative job can be done by consultants hired by the very same officials whose actions bear examination.

Bringing in the district attorney now can advance the investigation a needed step, to ensure that there are no questions of criminality, and to ensure some much-needed impartiality.

For the Record Los Angeles Times Sunday March 1, 1992 Home Edition Part A Page 3 Column 4 Metro Desk 5 inches; 162 words Type of Material: Correction Stephen B. Julian, city manager of San Juan Capistrano, filed a lawsuit last month against The Times and several of its employees for libel. The lawsuit claims, in part, that the articles and editorials published during January and February, 1991, accused Julian of illegal and corrupt conduct in his financial dealings with the city of San Juan Capistrano. The Times wishes to make clear that the articles did not state and were not intended to imply that Julian is a corrupt public official. Additionally, the articles did not state, nor were they intended to imply, that Julian participated in any illegal activity or that any of the terms and conditions of his employment were illegal. As The Times reported on March 9, 1991, the Orange County district attorney's office declined to investigate Julian's dealings with San Juan Capistrano, stating that it had no evidence suggesting that any crime had been committed. Julian contends that the articles harmed him and caused him and members of his family to be the subject of harassment. The Times does not condone or encourage any harassment of Julian or his family and regrets any harm that may have occurred.
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