Corporate O.C. Distances Itself From Fiscal Crisis

As cities and schools have grappled with layoffs and service cuts in the wake of Orange County’s bankruptcy, local business leaders have largely sat and watched behind the sidelines.

In interview after interview, officials of major corporations in the county made no apologies, instead saying that there is too little information available and that the situation is too fluid for them to get involved or make public statements.

“There’s simply too many unknowns at this point,” said a spokeswoman for Les McCraw, chairman of Fluor Corp., the multibillion-dollar engineering services firm in Irvine.

But others say that it is now--in the middle of the largest municipal bankruptcy in U.S. history--that the Orange County business community’s ample business acumen and clout is vital and perhaps essential to a recovery.

Analysts say that in New York and other cities that faced bankruptcy, top business executives moved swiftly and played a leading role in their recovery--themselves serving in government agencies or providing executives on loan as well as other resources to raise money and help administer municipal services.

“They responded immediately and quickly,” recalled Felix Rohatyn, Lazard Freres & Co. investment firm senior partner, who played a key part in New York City’s recovery after its financial collapse in the mid-1970s. While the roots of New York’s fiscal crisis were different, Rohatyn added, the problems Orange County now confronts are essentially the same.

“How to allocate sacrifices, how do you deal with service cuts and how do you deal with revenue reductions” are questions that businesses can help answer, Rohatyn said. “I think they can make a real contribution.”

Roger W. Johnson, administrator of the federal General Services Administration and former chairman and chief executive of Western Digital Corp. in Irvine, agreed: “Business leaders have a major responsibility because they have enormous skills.” And for those senior executives who haven’t come forth in Orange County, he said in an interview Friday: “It’s time to get your butts in the game.”

Certainly, local business leaders say they want to help. Many of them have had private, informal talks with county officials, they say. And some accountants and bankers have offered free services to county officials, such as giving a second opinion on advice from outside consultants and providing instruction on complex subjects, such as derivatives, which were blamed for much of the $2.02-billion loss suffered by the county’s investment pool.

A few business leaders have taken steps behind the scenes. Henry Segerstrom, a major Costa Mesa landowner and the developer of the South Coast Plaza shopping mall, contacted top Bank of America executives on Orange County’s behalf, said County Supervisor William G. Steiner.

It was unclear what Segerstrom hoped to accomplish, although two days after Segerstrom placed his call, a dozen Bank of America officials met with county officials to talk about a possible line of credit. Segerstrom declined to comment for this story.

“I don’t think people yet know what steps should be taken,” said Buck Johns, a Newport Beach developer and a prominent Republican activist. “We’ve had a colossal train wreck the magnitude of which we’re still not sure.”

Still, in the more than two weeks since the county’s financial troubles became apparent, business leaders as a group have yet to meet formally with local government officials. And, though they are now starting to form a task force to focus on the fiscal problems, there has been no public word from the county’s heavyweight corporate players.

Representatives of the Orange County Chamber of Commerce and Industry and the Industrial League of Orange County hope that senior executives from Taco Bell Corp., Rockwell International Corp., Fluor and the Irvine Co. will head a special task force to meet with county officials and, among other things, send a delegation to the East Coast to lobby Washington legislators and New York bankers.

But to date, each of the top executives from those firms, as well as some others, has refused to make a public commitment.

“They haven’t stepped up to the counter to help, have they,” said Carl N. Karcher, chairman emeritus of CKE Enterprises, the company that operates Carl’s Jr. restaurants. Karcher, who narrowly avoided bankruptcy himself last year, added that he would remain in the background. “I’m too busy myself.”

John Martin, the chief executive of Taco Bell, declined numerous requests for comment. Donald R. Beall and Donald Bren, the respective chairmen of Rockwell and Irvine Co., said through their spokesmen that, at this time, they could not offer any specific plan of action in regard to the county’s financial problems. “We’re very confident that the county will weather this storm,” said Bren’s spokeswoman, Dawn McCormick.

Privately, company officials admit that there is little to gain by getting involved in a financial fiasco in which there is a lot of finger-pointing, federal investigations and public ire.

Some businesses also say they are really stymied as to what they can do now. Orange County’s financial disaster, they maintain, is less tangible than, say, the Northridge earthquake or the Laguna Beach fire last year, when there was an immediate outpouring of help from businesses.

A few companies have attempted a quick fix. For example, Broadway Stores Inc. offered to let all Orange County government workers, along with those in the county’s cities and school districts, defer their Broadway charge-card payments for 90 days on purchases through Christmas. And Consumer Credit Counseling Service of Orange County in Tustin offered emergency financial planning to those struggling as a result of the bankruptcy.

Todd Nicholson, president of the Orange County Industrial League, remains confident that business leaders will spring into action soon with a long-term strategy. “Business has the expertise needed to respond, and once the facts are known, I think you’ll see its willingness to respond.”

But others aren’t so sure.

One problem is that no one has emerged as a coalescing force in Orange County, as Gov. Hugh Carey did in New York’s crisis, when he called senior executives from Macy’s, Metropolitan Life and other companies, as well as union leaders, to join forces.

“It’s got to be the power people in Orange County doing it,” said Dennis J. Aigner, dean of UC Irvine’s Graduate School of Management. Without them, analysts said, it will be tougher to bring business, government and labor in Orange County together to work on the crisis.

Bill Fogarty, head of the Orange County Central Labor Council, whose membership includes several thousand county workers, said he has been trying to get a meeting with the board of supervisors for the last two weeks. “They have ignored us,” he said, adding that unions have had experience working with bankrupt cities and as such, “have the resources to help the county out.” However, the board has met with the Orange County Employees Assn., an independent organization that represents 11,000 county workers.

Takashi Kiuchi, chairman of Mitsubishi Electric America Inc. in Cypress, says Orange County needs to embrace the business community as Mayor Richard Riordan has done in Los Angeles. “We should do exactly what he’s trying to do,” Kiuchi said. “He’s talking jobs, cops and efficiency. Mayor Riordan is visible to us. When he talks, we can raise questions. We like the responses we get from him.”

Some elected officials in the county say they have received offers of help from individual business executives. “I intend to take them up,” said County Supervisor Harriett M. Wieder. But she could not cite any long-term or concerted help proposed by the business community.

“I think government has to be willing to accept some of the help,” said Peer Swan, president of the Irvine Ranch Water District. But from the business community as a whole, he said, “I don’t think it’s been offered or rejected.”

Those with experience say part of the business community’s reluctance reflects a change in times.

During New York’s crisis, for example, Rohatyn said companies gave some senior executives leaves of absence or freed them up otherwise, so they could take on full-time volunteer work as deputy mayor for finance and as budget director, among other positions.

But consultant Jacob Ukeles, who helped New York City as well as Bridgeport, Conn., which filed for bankruptcy in the late 1980s, believes it will be harder for Orange County to enlist the assistance of major corporations, because big companies have laid off multiple layers of management in recent years. “That means you have to do more with (fewer people) after hours,” he said.

Indeed, said Don Murray, a partner at the Costa Mesa office of Deloitte & Touche: “Most private businesses are trying to survive.” Though Murray says his accounting firm and others have privately offered their services to county government officials, he said of the business community’s involvement: “No, I honestly don’t think it’s going to happen on a large scale.”

Some business executives candidly say that the county’s financial woes are a failure of government, not theirs to get involved in. “This is the county’s problem, they created it,” snapped one top corporate executive, who spoke only on the condition that neither he nor his company be identified. But he also acknowledged that traditionally businesses in Orange County have not adequately participated in civic affairs.

“What we do is provide housing,” said an employee of Santa Margarita Co., a big developer in South County, when asked what the builder planned to do in response to the bankruptcy.

Yet campaign records show that Santa Margarita Co., as well as many other major companies, have been big contributors to the Board of Supervisors--and over the years some of these businesses have benefited from the decisions of the board and from the county’s boom in the past two decades.

“The business community provides the majority of funds for (elections) of the Board of Supervisors,” said Rob Kling, a professor at UC Irvine and co-author of the book, “Post-Suburban California: The Transformation of Orange County Since World War II.” But Kling believes that businesses here, while themselves very sophisticated, have not encouraged astute political leadership.

“If there’s anything the business community could learn from this venture, it’s that, if you select people who think in the short-term, sooner or later, they’re going to make bad business decisions,” he said.

Sherry Bebitch Jeffe, senior associate at the Center for Politics and Economics at Claremont’s Graduate School, said that businesses like Fluor and Irvine Co. “have had an important and powerful role in the county’s politics.” Fluor has donated more than $50,000 and Irvine Co. about $40,000 to various members of the Board of Supervisors since the late 1970s, records show.

“But nobody watched (the county’s investments)--not the supervisors, not the business leaders who have been active in choosing who’s elected,” Jeffe said, adding that the business task force that is being formed is “clearly a positive move. Business has to become involved in government, not just in politics.”

George L. Argyros, a leading Orange County real estate executive and head of Arnel & Affiliates in Costa Mesa, vehemently denied that businesses have any responsibility in the county’s bankruptcy. Nonetheless, he said the fiscal crisis provides an opportunity for businesses to participate and suggest reforms in government that would put in place oversight organizations.

Specifically, Argyros said he may push for Orange County to adopt a charter, which would give county government greater leeway in managing its affairs. “We need better representation and we should have some form of county executive,” he said, echoing a view shared by others, including Johnson, the GSA administrator.

At the moment, Argyros said he knew of nothing he could do to help the county. “There’s no method to participate,” Argyros said, adding that his advice or assistance has not been sought by county officials.

Argyros said part of the business-government divide in Orange County is structural. The boards of various county and municipal agencies and districts are made up of other elected county officials--not private citizens and business leaders. “It’s kind of crazy,” Argyros said.

Swan, who is also treasurer of Pacific Scientific Co. in Newport Beach, is one of a small number of full-time business executives who is involved closely in government operations. To Swan, the general absence of business involvement in government is understandable. “It’s an ugly place where anything goes,” he said of elected offices.

But there are rewards as well. “It gave me enormous satisfaction,” said Rohatyn in New York, adding that the Municipal Assistance Corp. that he chaired raised $10-billion through bond issues for the city between 1975 and 1985. “We live here, and it would have been a terrible thing for New York. . . . The city has been very good to me.”

Like many others, Swan is hoping that the joint Chamber-Industrial League business task force being formed will make a difference. With business expertise behind them, Swan says, the county and the municipalities can help make up the losses by re-examining how government operates. “I think they need help in understanding how to run a business,” Swan said.

Ukeles, the New York consultant, put it this way: “You have to recognize that there is a crisis and that it’s everyone’s crisis. It’s not someone else’s crisis, it’s our crisis.”

Times staff writer Mark Landsbaum contributed to this report.