ORANGE COUNTY IN BANKRUPTCY : Orange County’s Up, Down and Out

A status report on major players in the multibillion-dollar bond and bankruptcy drama at the close of Week Four. Who’s lost or gained political capital since the first county investment fund loss was announced Dec. 1, leading officials to file the largest municipal bankruptcy in U.S. history Dec. 6:

The Treasurer’s Office

Robert L. Citron: Praised as a financial hotshot until his $7.8-billion county fund did a four-alarm flame-out. As investigators sift the ashes, Citron resigns, hires lawyer.

Matthew Raabe: Top aide helps blow whistle and wrest fund from Citron’s hands, but finds it tough to make people forget how effectively he hawked boss’s risky derivative wares.

The Rescue Team

Bruce Bennett: Special county bankruptcy lawyer lands biggest case of career, faces down Wall Street to stop brokers from dumping loan collateral. Holds line against investor suits.

Thomas W. Hayes: Former state treasurer lost in ’90 to Kathleen Brown but rides into town like Lone Ranger. Instantly turns chaos to order with refreshing image of fiscal sobriety.

Salomon Bros.: Only Wall Street winner in whole mess. Pulls six-figure fees for helping county unload Citron bonds. Sweet deal getting Fannie Mae to buy some at 91 cents on dollar.

Thomas E. Daxon: On loan from Arthur Andersen, Daxon gets Citron’s salary and job, temporarily. Will stay only four months because he must return to Oklahoma to fix that state’s finances.

The Administrators

Ernie Schneider: Top exec got Citron to bail, scrambled to control damage without looking panicked. But look out--some supervisors think he should have seen trouble before it made international news.

Terry C. Andrus: Lead lawyer was above fray till admitting he accompanied Citron to a Q&A; session before the SEC last spring. Supervisors now wish he had told them about that.

Steve E. Lewis: Auditor’s ’93 review of problems in Citron’s office looks great in retrospect. But Wieder flames him for not making it public earlier, claims he’s “covering his rear.”

The Firms

Merrill Lynch: Underwriter of millions in O.C. bonds, sees stock dip as loss disclosed. SEC subpoenas three brokers who made $1,000 contributions to Citron. Company says all is legal.

Rauscher, Pierce: Second underwriter hit by SEC subpoenas. Bond proceeds let some schools up their investments in risky county fund. Company says it’s not target of investigation.

Leifer Capital: Financial adviser Jeff Leifer got more than $1 million to advise Citron and county agencies on restructuring debt. Yale grad questioned by SEC, denies wrongdoing.

KPMG Peat Marwick: Auditor statements made fund look safe. Experts say they should have looked harder. But “assessing the wisdom” of fund is not their job, spokesman says.

The Fifth Floor

Sup. Thomas F. Riley: After 20 years in office, “The General” retires with “county family” in full retreat. Admits being outflanked by Citron and the whole fiasco.

Sup. Harriett M. Wieder: Another vet headed to retirement. Says she was kept in dark about Citron excesses, though critical audit in ’93 was addressed to all supervisors--including her.

Sup. Roger R. Stanton: Only supervisor to be targeted for recall (so far). Wants to lead sweeping reform of county government. Also critical of county Administrative Officer Ernie Schneider.

Sup. William G. Steiner: Appointed by governor in ‘93, has shortest tenure but offers longest apologies for leadership crisis. “How many ways can we say that we screwed up?”

Sup. Gaddi H. Vasquez: Ex-cop admits he should have kept closer watch. Debacle could pull rug from under his ample political ambition.

Sup.-elect Marian Bergeson: Sterling reputation as problem-solver. Biggest baggage is she stopped backing Citron’s opponent when spring election talk turned tough.

Sup.-elect Jim Silva: Sorry county fund crashed; delighted he had nothing to do with it. The 28-year high school civics teacher lands in middle of textbook case.

The Cops

SEC: Departing from a usually turtle-like enforcement pace, securities feds have subpoenas flying in search of kickbacks at top levels of county government. All supervisors have been served.

U.S. Attorney: Federal prosecutors want to know if U.S. mails or telephone wires were used to defraud investors in county fund. Mail fraud conviction carries a five-year prison pop.

O.C. District Attorney: Capizzi’s fraud team used yellow crime-scene tape like Christmas tree garland around the treasurer’s office, carting off a vanload of financial records.

The People

Schools: Back to basics--reading, writing and sound financial advice. Five districts may go belly up themselves after borrowing to jump in county pool. Now they’re soaked.

Cities: After back-to-back years of state funding cuts, cities already operating on parking-meter margins. Fund losses likely to mean lower services or higher fees.

Orange County: Looks like we’re losing the Rams, now county government seems headed for skid row. Yikes, suddenly we’re better known for derivatives than Disneyland.

California: Earthquakes, riots, floods, recession--the Golden State always seems to bounce back. Why should it be any different with a bankruptcy?

The Triumvirate

Brad Gates: Sheriff leads trio of officials seeking ways to cope with revenue shortfall of $120-million or more. Accused of whacking others while making cosmetic tucks in jail accounts.

Michael R. Capizzi: With one hand, D.A. investigates fiasco; with other, slices 29% from fund to provide lawyers for poor people accused of crimes. Says supervisors made the final call.

Tom Uram: Low-profile health care agency head is primary advocate for weak and poor. First $40-million cut fell softly on social services, but next round certain to hurt more.

The Political Sideliners

John M.W. Moorlach: Costa Mesa CPA cried fire, but voters tossed water on him when he challenged Citron at the polls last spring. Now prophet of doom regarded as investment sage.

Pete Wilson: Governor vows state won’t bail out GOP haven that was key to his reelection. But seems to have overcome early concern that he hasn’t set foot here since Nov. 8.

Arthur Levitt Jr.: When supervisors blasted feds for not sounding alarm last spring, SEC chairman delivered eye-poke of his own, suggesting officials who take risks be tossed out by voters.

Researched by MARTIN MILLER / Los Angeles Times