Scandal Becomes a Trend in Fashionable Newport : Image: Residents assess City Hall crime, budget hardship, police crisis and school district probe.

Betty Seamans has seen her share of dirt and character drift by this 24-hour coin-op laundry in West Newport, from the low-down to the rich guys who bring her their Armani shirts in chauffeur-driven limos. She’s found the homeless in dryers and naked women waiting for their clothes to dry.

“Forget the front page,” she says, patting down stray silver hairs from her simple bun. “Spend three weeks in here!”

It takes a lot to shock this queen of Fluff and Fold, who offers such philosophic tidbits as, “Laundry’s a great common denominator. Everyone needs clean clothes whether they do it on a rock by the river, or I do it.”

But hard times and three scandals in this upscale burg have grabbed even Betty’s attention.

“I think the old adage is true: Where there’s smoke, there’s fire . . . and that about covers my deep wisdom,” said Seamans, scanning the morning newspapers.

From the marble corridors and koi-stocked ponds at Fashion Island to the beer bar funk of Blackie’s by the Sea, Newport Beach residents have been bombarded with bad news about their city this year, including a welter of economic woes, white-collar crime and the worst controversy in the history of its Police Department.

Recessionary pressures have forced a $10-million cut in the city’s $100-million budget and defense contractors want $2.4 million in wrongly collected sales taxes returned.

Former Utilities Director Robert Dixon financed an ostentatious lifestyle with almost $2 million stolen from the city.

Police Chief Arb Campbell and one of his top assistants stand accused of rape and sexual harassment, and have been placed on administrative leave by the city manager pending the outcome of a lawsuit filed against them by former and current department employees.

And last week, a high-ranking school district official with a fondness for mink and the debt of a leveraged buyout gone sour came under investigation after a fellow employee discovered that he had written a $57,000 check from the district’s health benefits fund to a shoe repair company he owns.

Already dubbed “Cote de Fraud” and the bunco capital of the nation, none of these recent scandals has bolstered the city’s reputation for fiscal responsibility or its image as the former home of actor John Wayne, the greatest white hat of all time.

“It bothers me personally,” said Paul Burnett, co-owner of Surfside Sports near the Newport Beach Pier, “but my customers don’t really care. They’re more concerned about a city ordinance to ban skateboarding on the boardwalk.”

From the grade school car-pool drop-off to the hallowed Balboa Bay Club, reaction to the dismal current events shifts as much as the wind in a spinnaker sail on the city’s pleasure boat harbor, which at 9,000 craft is the nation’s largest.

Home to beach-loving college students, middle-class families and harried careerists, the city still boasts an average per capita income nearing $60,000, with a median-priced home approaching $550,000. With a reputation for conspicuous consumption, it was the setting for the latest novel of Joseph Wambaugh, who called Newport a place where an ordinary Mercedes is “considered a Chevy Nova.”

Buck Johns, president of Inland Group Inc., is a developer based in Newport Beach and active in the Republican Party. He grants no special importance to the round of bad news pummeling the city.

“I think these things kind of go in cycles, you know,” Johns said. “Bad things come in threes, but it seems like bad things are coming in fours for Newport. I attach no real significance to it.”

The city’s latest cycle of problems began shortly after New Year’s Day when Dixon, 48, a trusted employee and director of the Utilities Department, was arrested in connection with a 10-year-old scheme that drained the municipal treasury of more than $1.8 million.

Police said Dixon submitted phony purchase orders to the city’s Finance Department. When a check was issued, he collected it, forged a signature and deposited the money into his own accounts.

Over the years, Dixon bought a new BMW, gold cuff links worth $120,000 and a $250,000 wardrobe that included 600 sweaters, 60 wool scarves and 20 umbrellas. He thoroughly indulged his taste for artistic black-and-white photographs from the 1920s and ‘30s, amassing a collection of 220 pieces worth an estimated $400,000.

In June, Dixon pleaded guilty to two felony counts of embezzlement and was sentenced to four years in prison. He was also ordered to make restitution to the city, which has sued Dixon’s banks and credit card companies in an attempt to recover the lost funds.

As a college student, Dixon was convicted of theft.

“Newport Beach has always had a tremendous image throughout the country. It is unfortunate that guys like him have smudged the name,” said Richard Luehrs, president and chief executive officer of the Newport Harbor Area Chamber of Commerce. “All of this is unfortunate, but we are doing what we can, and we will come out of it. If anyone is pushing the panic button, they shouldn’t be.”

While Dixon caught civic leaders by surprise, the city’s budget woes did not. Anticipating the impact of the recession on sales tax revenue and state funding, municipal leaders began planning a year ago to trim the city’s $100-million budget.

They saved more than $10 million by reducing working hours, postponing capital improvements, laying off maintenance workers and refusing to fill 20 vacant positions. But the outlook remains clouded by an uncertain economy and the likelihood the city will have to refund as much as $2.4 million in sales taxes improperly collected from local aerospace firms.

Although they are considering a 10-year repayment plan, city officials dispute the amount owed to defense contractors and have joined an effort to persuade President Bush to forgive the debt.

The dust had barely settled from the bruising budget battles of August when a cloud formed over the Police Department.

On Sept. 24, three current employees and a fired police officer sued Chief Campbell and Capt. Anthony R. Villa Jr., the chief’s close friend and partner in a real estate deal. The women charged that they were sexually harassed on- and off-duty by Villa, and that Campbell did nothing to stop it though he knew about it. Villa also was accused of touching the women’s breasts, making sexual overtures and suggestive remarks that included graphic descriptions of a pornographic movie he had seen.

At a news conference two weeks later, a fifth employee, dispatcher Peri Ropke, joined the lawsuit and publicly accused Campbell and Villa of raping her 11 years ago during a raucous party held by the Police Department at an Irvine landfill.

An attorney for Campbell and Villa deny the rape charges or any sexual relationship between his clients and Ropke, scoffing at Ropke’s contention she had an earlier affair with Villa as “fantasy.”

Now, a month later, Stephen A. Wagner, 40, the boyish finance officer for the Newport-Mesa Unified School District, has come under investigation for the $57,000 check he wrote last year to Cobbler Express Corp., a shoe repair business he co-owns. The school board moved to fire Wagner last week for improperly diverting the money from the health benefits fund to a company the school district has never done business with.

Wagner and his wife, Linda, 37, were hit last July with federal liens totaling nearly $2.4 million for unpaid income taxes, which are out of sync with his $75,000-a-year school district salary.

Other questionable checks have turned up in the district’s own inquiry, and a check-by-check audit of the health insurance fund has been commissioned. A source familiar with the investigation has said the tally of diverted funds could far exceed the $57,000 known so far.

Wagner, who rose through the ranks at the district after starting as an accountant 20 years ago, had a reputation as a savvy investor. In his off-duty hours, he set up businesses and bought real estate, amassing enough money to buy a $975,000 home near Upper Newport Bay, luxury cars and expensive clothes, even sporting a mink tuxedo jacket.

“That check would have bought a lot of books,” said a librarian who is working at two different schools in the district to keep up her hours due to work cutbacks and a huge budget shortfall.

It’s late afternoon and the librarian, who doesn’t want her name used, is sitting under a dryer with a plastic bag covering hair color goop at the Allen Edwards Hair Salon in the city’s posh shopping center, Fashion Island Newport Beach.

“I used to teach in that district,” she said with a sad look. “Everything (Wagner) did was so flagrant.”

Across the shop, co-owner Frank Chirico is saying that few of his clients really talk much about the city scandals, but he personally questions why it took the female employees of the Police Department so long to make their allegations.

“I have more people talking about the election; every one of my clients mentions that,” says Chirico, pumping up the cutting chair. He prunes a woman’s wet bangs. “People are negative. They’re not so much voting for someone as voting against someone. It’s how the world is. All of this stuff is.”

Mary Bryant, a neighbor of Police Chief Campbell on the pricey Balboa Peninsula Point, says she can hardly believe the charges against him.

“I see him at the beach,” she said. “He is helpful, thoughtful, friendly and a real nice guy. I see him in the summertime, see him at the beach, with his grandchildren. Personally, I don’t feel he is guilty. It’s a witch hunt in a way, obviously something is going on, but I don’t know. From my experience he is an honorable man, and (his wife) Lavonne is a very dear friend.”

The tony Balboa Bay Club is a kind of Fun Zone for the well-to-do on Lido Channel off Coast Highway. Like the rest of the city, it has been a rough year for this high-end establishment, with public opposition at least temporarily halting ambitious expansion plans.

To add insult to economic injury, Campbell, good friend and drinking buddy of Balboa Bay Club President Tom Deemer, has been making too many headlines lately.

“I don’t know the women, but I do know Arb Campbell,” Deemer said. “I would trust him with my wife, my house, my business, my money and my hunting dog. . . . As far as I’m concerned, (you are) innocent until proven guilty. He couldn’t have done what he is accused of.”

Burnett’s Surfside Shop is filled with the latest beachwear, surfboards, skateboards and snow boards.

“Where are all the checks and balances to catch this stuff?” Burnett asked as he prepared to meet with representatives of a surfboard line. “It makes it all very sad. Look at the police, just a charge taints the department and makes it harder for them to do their jobs, and it might affect women who want to call for police service.

“So often, people are living high, beyond their means, and no one is asking any questions about this,” he adds, in reference to the Dixon and Wagner cases. “The city appears to be well run, but no one seems to be checking out the backgrounds of these guys when they are hired. I understand Dixon had problems in the past.”

Blackie’s by the Sea is a rustic beer bar near the Newport Beach Pier. Patrons would be in serious trouble from some of the marine life on the walls, if not for the taxidermist.

The snout of an 10-foot hammerhead shark caught near the Santa Ana River mouth in 1969 angles menacingly into one booth. A big barracuda is above the beer cooler, and a sea turtle hangs over the bar in the rigging of an old harpoon.

The habitat is shared with an upside-down snow board advertising Miller Beer, a golf bag suspended from the ceiling, and the lunch-hour patrons, who line the bar. Drag racing is on the big-screen TV, but the screaming engines are muffled by the latest selection on the jukebox--Aerosmith’s “Walk This Way.”

“A lot is what you read,” said Mike Kelly, the bartender. “I don’t know what is true ‘til it all goes all the way through to the end. But it’s a shame. The Police Department gets such a bad rap. They have a tough job as it is. They don’t need something like this. It’s got to hurt morale. . . . Dixon, now that was incredible. People really talked about that around here.”

It is a slow day at the Fun Zone’s Ferris wheel. Operator Brent Broaddus, 21, an Orange Coast College student, takes a break from his book. He is dressed patriotically in red shorts, white shirt and blue fingernail polish. Broaddus has only had a few riders, and the boardwalk is deserted. A silver-haired man in a charcoal gray business suit is playing a video game nearby, Terminator 2.

“It’s indicative of the times,” Broaddus said. “Look at all the lies. Bush lied to us about taxes and the environment and this has disseminated down to the local level.

“The police do a good job here, but people seem wary and cautious of the cops. Kids don’t seem to respect them as much anymore. It just seems like power corrupts. It can create good men and it can destroy good men.”