Council Candidate’s ’84 Bankruptcy Is Campaign Issue : Politics: City’s harshest critic on spending, Gary Manley, says past financial problems make him uniquely qualified to serve Mission Viejo. Others see it differently.

City Council candidate Gary Manley, the council’s harshest critic when it comes to spending, had his own financial problems in the 1980s.

While his opponents say his past financial problems raise questions about his ability to oversee the city’s $29-million annual budget, Manley said his past makes him uniquely qualified.

“People are struggling now; times are hard,” said Manley, who declared bankruptcy in 1984 after losing up to $1 million for dozens of investors. “I understand financial disaster because I’ve been through it.”

Considered a front-runner for one of two open council seats, Manley has targeted the council’s support of several multimillion-dollar projects.

“The No. 1 issue is the big spending habits of the City Council,” he said in an interview this month. “They waste money through mismanagement.”

Manley’s financial problems have become a campaign issue.

“It’s understandable that people come up short in hard times,” said Councilman Robert A. Curtis, who has had several verbal clashes with Manley in council meetings. “But this does appear to be the height of hypocrisy. I don’t think taxpayers should trust their money to somebody who terribly mismanages his own financial affairs.”

Manley, 49, said he was aware that his financial past could become a campaign issue, but he decided to run anyway.

Manley is best known in the city for spearheading a campaign that defeated plans for a proposed $18-million City Hall in June.

In September, 1991, he announced a petition drive to put the issue on the ballot and became an instant thorn in the council’s side, railing at council members for wanting to build a Taj Mahal-style municipal building.

After voters rejected the plans by a 3-to-1 margin, Manley announced his candidacy and stepped up the pressure on the council. He sharply criticized plans for a $1.8-million animal shelter, a $5-million library bond issue on the ballot Tuesday, and several other projects.

Manley said that despite reserves of $16.3 million, the city will be bankrupt in five years if the council continues its present spending habits.

“I believe in pay as you go; the council wants to get us deeper in debt,” he said. “Having gone through rough times, I understand the importance of being frugal. I understand that better than any other council candidate because I’ve been there.”

Council members said they’ve always felt that Manley was more political opportunist than fiscal conservative, that he saw the current state recession as a chance to win a council seat.

“He offers a lot of campaign rhetoric, but he lacks sincerity,” said Mayor Sharon Cody, who brought the animal shelter project to the council. “I don’t think he’s a real fiscal conservative. I think his past has made him too frightened to spend money, even when it makes sense.”

“But I think in either case, it’s possible people were hurt by his investment advice,” Cody said. “For those people I feel real bad.”

Financial problems for Manley and about 80 investors came during the last major recession in 1981-82. Manley went to friends, business acquaintances and fellow church members with a plan to purchase homes. When the real estate market bottomed out, so did the value of the homes.

Investors lost from $10,000 to $240,000.

In 1984, Manley declared bankruptcy, claiming he lost $500,000 in personal funds. With Manley’s legal obligation to investors ending with the bankruptcy, most investors say they’ve never been paid.

Teresa Vaughn, who lives off Social Security, and several other investors say they’re still affected by their losses.

“I’m getting by,” said the Garden Grove resident, “but I worry a lot about money and I can’t take vacations or do the kind of things I wanted to do in my retirement. But at least I’m getting by.”

Angering investors further is Manley’s apparent return to financial health.

The real estate agent owns four homes in Orange County and drives a Lexus automobile. Despite a severely depressed housing market, Manley says he has never failed to make at least $150,000 in annual commissions--although he adds that over 50% of his income goes for business expenses.

“That just infuriates me,” said Alice McGrady, 60, of Buena Park, who said Manley stopped paying her family in 1988 and still owes them about $14,000. “He did so much damage to our family. He got very close to us and made promises that he’d pay us back. . . . We felt betrayed.”

Manley said that the Lexus is leased and that no equity exists in three of the homes he owns.

“I plan on selling them soon,” he said. “I’ve been waiting for them to appreciate, but the recession has left no equity in those places.”

“This was a tremendously agonizing time for me and my family,” he said. “I had no legal or moral obligation to salvage anything, but I worked for two years after (the bankruptcy) to liquidate those properties and pay off my debts.”

Curtis said taxpayers shouldn’t be so quick to forgive and forget Manley’s past.

“This city is used to paying its bills in a timely manner,” he said. “Despite Mr. Manley’s claims of extravagance on our part, we have successfully salted away $20 million in reserves (the city actually has about $16.3 million in its reserve fund). We have a track record of excellence and now I guess we know Mr. Manley’s track record.”