ORANGE COUNTY IN BANKRUPTCY : Capizzi Rejects Investor’s Call to Let State Head Probe : Investigation: Officials from Claremont see seeming conflict of interest, but county district attorney vows staff will be aggressive.

Claremont city officials have asked the state attorney general to take over the reins of the criminal investigation of Orange County’s bankruptcy from Dist. Atty. Michael R. Capizzi, citing possible conflicts of interest in the case.

In a letter dated Wednesday, Claremont Mayor Algird G. Leiga asked Capizzi to step aside, pointing out that his salary and his office’s budget comes from the county general fund, which former Treasurer-Tax Collector Robert L. Citron fattened with money diverted from other investors.

The city of Claremont, which is eastern Los Angeles County, had about $5.8 million invested in the now-collapsed investment pool, which suffered $1.7 billion in losses before the county declared bankruptcy on Dec. 6.

“As public officials, we are required to step aside when there is an actual conflict of interest, and when there is an appearance of conflict,” Leiga wrote on behalf of the City Council.

“Our personal integrity is irrelevant; good government requires both that justice be done and that it be seen to be done. Given the extent of wrongdoing in Orange County, this cannot be achieved by an investigation by your office.”

Reached at his home Friday evening, Capizzi rejected any idea that he step aside. “I am confident no conflict of interest exists which could in any way impact or compromise the investigation being conducted by this office in conjunction with two state investigative agencies”--the state attorney general’s office and the state Department of Corporations.

Capizzi pointed out that his office “has a long and unparalleled record of aggressively investigating potential misconduct in local government” and pledged that his investigators would “be no less diligent in the present case.”

Since the county declared bankruptcy Dec. 6, officials have revealed that money belonging to other investors, such as Claremont, had been illegally skimmed into Orange County’s general fund. Similarly, losses that the county incurred were shifted to the other investors.

The suggestion that state Atty. Gen. Dan Lungren take over from Capizzi is one that has crossed the minds of city officials in Orange County as well, but they have been reluctant to speak up about it.

“I’ve had the same thoughts, and I’ve been really curious why no one has raised this before,” said an official from one Orange County city with money in the pool who asked not to be named because of delicate relations between his city’s police department and the district attorney’s office.

“Here’s someone who receives direct compensation from the general fund and had close contact with some of these people. I don’t see how he can be impartial.”

Leiga said Friday that city officials have informed several state lawmakers about the request.

“It’s not that we’re saying that Capizzi is doing anything wrong. But it looks like there could be an appearance of conflict of interest,” he said.

While investors initially believed the bankruptcy was caused solely by Citron’s mismanagement, recent revelations have raised the possibility of criminality, Leiga said.

“The whole thing is starting to look like it’s going beyond mismanagement. I’m a layman, but to me it looks like fraud. And I don’t know who’s doing it,” he said. “(Capizzi’s) money comes from the Board of Supervisors. If we start digging and we start getting close to there, it becomes a problem.”