Tustin Councilman Jeffrey Thomas, who helped advise city officials to withdraw $4 million from an investment pool managed by Orange County Treasurer-Tax Collector Robert L. Citron, proposed a deal with at least one other county pool member that would have allowed the brokerage firm where Thomas works to manage some of its investments.
Thomas, also a campaign finance committee member for Citron’s election rival, met with Montebello municipal officials earlier this year seeking some of that city’s investment business on behalf of the Laguna Hills-based firm.
The proposition would have required Montebello to remove some of its money from the Orange County-managed pool, city Finance Director Ted Nix said.
At the same February meeting, Nix said, Thomas disclosed that he would be supporting a challenger to Citron in June. Costa Mesa certified public accountant John M. W Moorlach is running against Citron.
Traditionally considered a low-profile post, the treasurer’s office has become the focus of local political scrapping in recent days as the longtime incumbent has faced increasing criticism for his aggressive investment practices.
Thomas acknowledged Friday that he met with Montebello officials but said he did nothing to influence them to pull away from Orange County. He said he did not know until he spoke with city officials that Montebello was a member of the Orange County pool and that city officials told him they were happy with their association with Citron and would not consider sharing business with Van Kampen Merritt, the brokerage firm where Thomas works.
“I probably wouldn’t have wasted my time meeting with them had I known they were with Orange County,” Thomas said. “Most people with Orange County are very happy. I’m not one to move money if people are happy.”
Citron, however, characterized Thomas’ meeting with Montebello officials as further evidence of a sophisticated plan to unseat him, adding that Nix called his office about the meeting Thursday after reading of Thomas’ involvement in the withdrawal of Tustin money from the Orange County account.
“It’s a political fact of life,” Citron said Friday, “that a finance committee member of my opponent’s campaign is an employee of a brokerage company. And it appears to me that he has a personal financial interest in the outcome of this election.”
Thomas said he only discussed his plans to support Moorlach for Citron’s seat in the June 7 primary as a matter of “full disclosure” for those attending the Montebello meeting.
“When I told them that, it was clear that they were Bob Citron fans and we had nothing more to discuss. It was like, ‘Hey, we really have nothing to talk about, but can I have another martini,’ ” Thomas said, describing the luncheon meeting arranged by officials with Sanwa Bank.
The treasurer is facing the first opposition for his seat in more than two decades. Most of the criticism has centered on Citron’s management of a $7.5-billion portfolio for 187 public agencies.
Critics have taken issue with the treasurer’s use of an investment strategy called “reverse repurchase agreements.” Under the strategy, the investor typically borrows bonds against existing collateral and then sells them to invest in higher-yielding bonds. As long as the investor borrows at a lower rate than the return on the security in which the agency invests, the strategy remains profitable.
Earlier this week, Tustin officials cited Citron’s “risky” philosophy for withdrawing $3 million of city money from the county-managed pool. That move, coordinated in part by Thomas, followed a $1-million Tustin withdrawal two months earlier.
Tustin Treasurer Ronald Nault said Thomas offered financial expertise during discussions with the city audit committee before the decision was made to remove the funds from the county pool. Thomas suggested leaving the pool and Nault made the final decision.
Thursday, Chriss Street, a local business executive and Newport Beach contributor to Moorlach’s campaign, said he is concerned about the safety and stability of the county’s pool, specifically its management of $50 million in bonds borrowed by the Newport-Mesa Unified School District.
Street acknowledged that in several recent phone calls to Standard & Poors Ratings Group in New York, the Wall Street Journal and Forbes magazine, he has expressed concern about the safety and stability of the county’s portfolio, managed by Citron’s office.
In recent days, Citron said he and his staff have worried that the criticisms could somehow damage the county’s credit rating.
Friday, the treasurer suggested that Thomas’ meeting with Montebello officials was part of political maneuvering to position the Tustin councilman’s company for a piece of county business should Moorlach win in June.
“If John Moorlach won, I would not manage any money for the county pool,” Thomas said. “I would never touch a dime of that money. It would be a conflict of interest. . . .
“The minute you make a charge or a claim, he (Citron) is going to say it’s all political. Bob is running for his political life right now.”
Thomas said that long before the current political season, he has railed against the treasurer’s investment philosophy, fearing that a misstep along the way could lead to trouble for over-leveraged accounts.
That concern, he said, led him to support Tustin’s decision to leave the county pool after eight months and more than $100,000 in returns. He said Citron’s investment decisions went against the city’s “very conservative” investment philosophy.
Citron, however, said city officials never expressed their concerns to him when they entered the pool last year or when they began withdrawing their funds.
“They seemed pretty comfortable with things when (Assistant Treasurer Matthew Raabe) explained it,” Citron said Friday, recalling a meeting with Tustin city officials last summer.
The city’s withdrawal from the county pool has angered some officials, including Tustin Mayor Jim Potts, who said Friday that he is considering a proposal to return the money to the county pool.
Potts said he also would consider a policy that would require such decisions be made in public with full City Council participation. He said he did not learn of the withdrawal until after it happened.
Potts said the action and Thomas’ support of it was “pure politics.”
“If he’s been playing politics with the citizens of Tustin’s money, he’s going to have hell to pay,” Potts said. “To me, it looks like he’s playing politics.”
Until this action, Potts said, he had never heard anyone in the city voice concerns about county investment strategies.
Tustin Councilman Thomas R. Saltarelli, however, said he believes politics were not involved in the city’s decision.
“This has all kind of been blown out of proportion,” he said. “There’s no implication that we believe the county is doing anything improper.”
Saltarelli, who was not involved in the action, said he is comfortable with the city’s fiscally conservative approach.
“We don’t try to make a lot of money on our funds, we just want to make sure we don’t lose it,” he said.