ORANGE COUNTY IN BANKRUPTCY : Angry Citizens Target School, City Leaders : Reaction: Residents are beginning to ask why local officials knew so little about investments that Orange County made for them.

A peaceful, contented citizenry has awakened with a start.

As news of Orange County’s financial debacle stretched this week into homes from Yorba Linda to Dana Point, community activists across the county say they have been deluged with calls from taxpayers demanding that someone, anyone, be held accountable.

And although most residents are reserving most of their fury for top county officials such as ex-Treasurer-Tax Collector Robert L. Citron and the Board of Supervisors, some are also pointing the finger of blame a little closer to home.

The public spotlight has fallen uncomfortably this week on city and school officials, some of whom have shifted uneasily in their chairs as they are forced to listen to outraged citizens castigate them for knowing so little of what the county was doing with their money.

“Why don’t you save us all a recall effort and resign right now?” resident Nick Lall demanded of the Orange City Council at a heated meeting Tuesday. “The city investment committee has failed miserably and the City Council has failed miserably in following (its) policies.”

In tiny Seal Beach, resident Bruce Stark also called for resignations, criticizing council members for not demanding to know more from the county officials who were investing the city’s money.

After all, Stark said, “I wouldn’t invest my own money without knowing what it was in.” Why, Stark wanted to know, had his own public officials not held to the same standards?

Bill Mello, a longtime Huntington Beach community activist, said he and other members of the countywide taxpayer group Committees of Correspondence have been swamped this week with calls from a furious public.

“I never believed people in America could be so angry about something,” Mello said Thursday, sounding amazed at the vehemence of some of his callers. “They are ready to go down and storm the Bastille.”

Oddly, though, Mello said most callers have been less upset about the actual loss of the money--now estimated at more than $2 billion from the county investment pool--than about the behavior of public officials in the aftermath. Many are especially upset about the numerous closed sessions public officials have held to discuss the matter, Mello said.

The wave of public outrage that threatens to engulf some local officials has left others relatively untouched, at least so far.

A top official of the Irvine Unified School District, which borrowed an extra $50 million to invest in the ill-fated county investment fund, said he had not received a single phone call from anyone who was angry about the choices the district made.

“There’s certainly a concern in the community and I think people are thirsting for information, but I have not seen people point fingers,” Irvine school board President Tom Burnham said Thursday. “They’re waiting for all the information to come out.”

Similarly, in some small cities, there has been more public apathy than outrage thus far.

In La Palma, which has about $5 million in the county fund, only one member of the public showed up for a special City Council meeting last week on the subject of the county’s bankruptcy. What’s more, the lone individual was there to listen, not speak.

The Cypress City Council, on the other hand, was greeted by an overflow crowd of residents at its regular meeting Monday. But the crowd had come out to protest a proposed warehouse in Cypress, not the county investment crisis and how it might affect their city.

Some school district and city leaders, perhaps anticipating angry reactions from their constituents, have taken steps to head it off.

Officials with the Placentia-Yorba Linda Unified School District, for instance, which like Irvine voluntarily invested an extra $50 million in the county investment fund, have asserted this week that they, too, were helpless victims of the plunge in its value.

In a letter sent Wednesday to parents in the district, Supt. James O. Fleming said the district never knew how the county treasurer was investing the $50 million in proceeds from taxable notes the district sold in an effort to generate interest income.

“How they invest and the types of securities involved were not disclosed to the school district,” Fleming wrote in the letter.

Fleming also said the district sought more information but was denied.

“They refused to reveal investment strategies with us,” he said at a meeting of the board of trustees Tuesday. “They said it would harm their ability to invest.”

The letter didn’t save Fleming from public wrath, with some residents insisting that it was irresponsible for the district to invest $50 million in borrowed money in investments of an unknown nature.

“I can’t imagine taking one half of the district’s operating budget and investing in a high-return pool without knowing more details,” Yorba Linda resident Thomas Turk said. “With such a high return, obviously, it was a lot more of a risk.”

Timothy D. Carlyle, newly elected board president of the Laguna Beach Unified School District, took pains to point out that school districts, unlike other participants, were required by law to invest their funds in the county pool. His district was not among the five that borrowed extra money to increase their return.

The district, Carlyle noted in a press release Wednesday, “was mandated by statute to become a player at the county casino.”

Generally, city officials appeared to be having a tougher time escaping the blame.

Luci Grismer, a longtime critic of the Placentia utility tax and of city spending, says responsibility for the city’s investment problems rests squarely on the shoulders of the council.

“I think it’s the council, because they voted to put that money into the fund,” Grismer said. “If (the bond crisis) had been two months ago, I don’t think these guys would have ever been reelected.”

Even former mayors got into the blame game.

Former Irvine Mayor Larry Agran said residents should question why the city was more heavily invested in the county pool than any other in Orange County--at $209 million.

“If the loss is 27%, then we’re talking about a $56-million loss for the city,” Agran said. “This is not a so-called paper loss. That is a total mischaracterization. This is a real loss. The only question is when and how are we going to absorb that kind of loss.”

Agran said it is inexcusable for city leaders to say they did not know the county investment pool included risky investments, such as derivatives, and reverse repurchase agreements that made the pool more susceptible to shifts in interest rates.

“When you are talking about other people’s money, it’s your job to know the nature of the investment portfolio,” Agran said. “And if that’s difficult to determine or you need help, then it’s your job to hire the requisite people to investigate the portfolio to make sure the public is protected.”

“It’s very simple for Mr. Agran, who is sitting on the sidelines, to say this is what you should have done,” Irvine Mayor Michael Ward replied. “But given all the information we were given at the time we made this investment, he probably would have made the same decision we made.”

Tom Babcock, a Fullerton activist who headed a campaign to recall three council members earlier this year, predicted that the public ultimately will blame the county officials--especially the supervisors--and not the individual city councils for the crisis.

“The city council people are paid pennies,” Babcock said. “It’s a part-time job and quite thankless.”

Nonetheless, Babcock’s magnanimity did have its limits. He faulted Fullerton city officials for not providing greater oversight of the county fund and for not alerting the City Council to potential problems.

“It’s not like this happened overnight,” he said.

Mello said that members of the Committees of Correspondence and a local chapter of United We Stand, the Ross Perot group, will hold a news conference Tuesday listing seven demands it they will present to the Board of Supervisors.

Mello refused to say what the demands are until Tuesday or to confirm whether the activists would call for the resignation or recall of county officials.

Lall, a 36-year-old building subcontractor, had never paid much attention to local news and has attended only two council meetings in the seven years he has lived in Orange. But last week, they got his attention.

“I only attend when they lose $28 million of our money,” he said.

Rebecca Trounson is a Times staff writer; Shelby Grad is a Times correspondent.