County Counsel to Resign; Popejoy Targets Auditor : Crisis: Terry C. Andrus says he will step down in March. Chief executive wants Steve E. Lewis to give up his elected office for his role in bankruptcy.

TIMES STAFF WRITER

Terry C. Andrus, the county counsel who kept Orange County supervisors in the dark last year when federal authorities first raised questions about the county's ill-fated investment pool, became a casualty of Orange County's financial collapse Monday, saying he would step down when his term expires.

Also on Monday, Auditor-Controller Steve E. Lewis was publicly targeted in the continuing purge of officials being blamed for the county's bankruptcy--the largest municipal bankruptcy in U. S. history.

After word of his impending departure was announced by the county's new chief executive, Andrus confirmed that he would step down and not ask county supervisors to renew his four-year contract when it expires March 21.

But Lewis, an elected official who can't be fired, has reportedly vowed that he would not leave office without a fight. Lewis was unavailable for comment.

County Chief Executive Officer William J. Popejoy said Monday he had sought the removal of both Andrus, who serves at the pleasure of the county supervisors, and Lewis, whose term does not expire until 1998, as part of an effort to sweep from office all of the county officials who share blame for the bankruptcy fiasco.

Late last week, Popejoy fired former County Administrative Officer Ernie Schneider and arranged for the termination of Assistant Treasurer Matthew Raabe.

"We're moving forward with people who are not tainted" by the county's financial collapse, Popejoy said, adding that the four individuals who have been asked to leave had "varying degrees of culpability" for the county's problems.

Supervisors Roger R. Stanton, Gaddi H. Vasquez and William G. Steiner are the only top county officials who still remain active in county government despite oversight roles in the Dec. 6 bankruptcy. Stanton is the object of an active recall effort.

Popejoy said he is cleaning house to restore credibility in the county's leadership.

"When you have a wound, one of the first things you do is clean it," Popejoy said.

"Probably hundreds, if not thousands, of people will lose their jobs because of the actions or inactions of these people," Popejoy added. "Much of this (financial mess) could have been avoided."

Steiner said he was "not really surprised" by Popejoy's decision to move against Andrus and Lewis. "I guess these are the new realities. Terry is a good man who will find there is life after county government. The process for Lewis' removal is outside the scope of the board and Popejoy."

"It's not business as usual in the county," said Supervisor Marian Bergeson. "The county is trying to gain the support and confidence of the public. We're moving in a new direction."

Andrus and Lewis had come under increasing criticism in recent weeks for their involvement in actions leading to the county's financial collapse.

Andrus angered some county officials because he did not inform them about a meeting he had last April with Securities and Exchange Commission officials, who were concerned about the risky investment practices of then-Treasurer Robert L. Citron, who resigned Dec. 4 following disclosures that the county's investment pool had lost nearly $2 billion.

Andrus told a state Senate committee looking into the county's bankruptcy that he did not tell the supervisors about the April meeting because he was worried that leaks about the meeting could cause a run on the investment pool by the almost 200 outside investors.

He said he also believed the SEC inquiry was an outgrowth of last spring's bitter political campaign for the treasurer's office in which Citron's challenger, John M.W. Moorlach, was accusing Citron of making risky investments. Andrus said when he left the SEC meeting, the SEC was satisfied and the investment pool was safe.

But his explanations didn't sit well with some supervisors, or with Popejoy.

"He was counsel to the board, and the counsel does a disservice to the client if they try to protect the client from information," Popejoy said.

Popejoy said he met with Andrus last week and they agreed that his departure would be in the best interest of the county.

"I'm the one who brought it to a head and talked to him," Popejoy said of his meeting with Andrus. "Terry agreed with me that he should resign. (He) agreed with my assessment that his credibility had been damaged."

Andrus, who at $114,732 a year was the county's fourth highest paid official and who worked on-and-off for the county for 20 years, said his decision was made a week ago, and Popejoy was not a factor.

"My wife and I decided last week that I would not ask the board for a new term of office," Andrus said. "I will stay for whatever period of time is appropriate to facilitate an orderly transition."

Popejoy said he is having a tougher time trying to convince Lewis, who earns $104,582 a year, that he should resign from office. Because Lewis is elected, Popejoy can't fire him as he did Schneider.

But Popejoy said he has budget authority over Lewis' office, and may use that to force Lewis' resignation.

"I indicated my unwillingness to use the audit operation of Mr. Lewis to audit county operations under my responsibility," Popejoy said, adding that it would be "irresponsible to use an auditor whose abilities appear to be so seriously flawed."

As the county's auditor, Lewis was responsible for overseeing the county treasurer's operations, and in its controller function, Lewis' office actually executed cash transfers that have since been found to be improper. One set of transfers involved the skimming of other investors' profits into a county account, while another set shifted county losses to other pool participants.

Popejoy said Lewis told him that he had thought about resigning a couple of times but now intends "to fight" any attempt to remove him.

Although Lewis had conducted two audits of Citron's office that resulted in sharply critical findings--one in 1987, and another in 1993--he has acknowledged that he was not aware of the degree of risk the investment pool faced.

"If he didn't know what (Citron) was doing, that's almost as bad as if he did know what he was doing," Popejoy said.

Popejoy said he has no problem in asking top county officials to step down from office.

"I have no compunction, no remorse," he said. "Whenever I do, I think of the huge number of people that will be out of their jobs because of what these people did or didn't do."

"Just on what I know, I'd say (the firings) were justified," said state Sen. John R. Lewis (R-Orange), who sits on the state Senate committee investigating the bankruptcy.

State Sen. Tom Hayden (D-Santa Monica) said the firings were appropriate but fail to address what he sees as the real culprit in the Orange County financial debacle--the "fund-raising culture" of politics that let Wall Street firms reap huge profits at taxpayer expense.

"What I'm worried about is that they'll lop off a few heads, but leave the Wall Street firms and their investment practices very much in the saddle," Hayden said. "And that's what very much needs to be changed."

Popejoy's efforts to remove Lewis and Andrus were also praised by members of the Committees of Correspondence, a local anti-tax organization monitoring county government in the wake of the crisis.

"This is great news," said Carole Walters, a member of the group. "I think the county needs new blood and needs to get rid of the people who caused this to happen. They can't get to any new business until they do that."

Times staff writer Eric Bailey and correspondent Shelby Grad contributed to this story.

More Coverage: O.C. in Bankruptcy

* OFFICIALS' FUTURES--Two longtime county leaders face erosion of trust after fund crisis. A8

* CHANGING POLICY--Orange County Transportation Authority puts strict controls on funds. A8

* SARCASTIC BARBS--Assembly members rib county, reject resolution to block Rams' move. B1

* CUTS PONDERED--Santa Ana Unified trustees consider $5 million in possible program reductions. B1

* RELATED STORIES: A8-9, B1, D1

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Cleaning House

Orange County's newly appointed chief executive officer, William J. Popejoy, wasted no time in seeking the ouster of four longtime officials involved in the county's bankruptcy. Popejoy fired Ernie Schneider, initiated the firing of Matthew Raabe, urged the resignation of Terry C. Andrus and is publicly advocating the resignation of Steve E. Lewis.

Steve E. Lewis

Position: Auditor-controller since 1984

Age: 52

County employee: 30 years

Popejoy says: "I have no confidence that Mr. Lewis can do the auditing job the county needs. I have great difficulty moving forward and reorganizing county government with Mr. Lewis as auditor."

***

Terry C. Andrus

Position: County counsel since 1991

Age: 50

County employee: 20 years

Popejoy says: "I told Terry on Friday that I didn't think it was in the best interests of the county for him to move forward in his current position. Mr. Andrus did not report a number of things to the Board of Supervisors, not the least of which was his meeting with the SEC."

***

Ernie Schneider

Position: County administrative officer since 1989

Age: 48

County employee: 24 years

Popejoy says: "I'm certainly not going to have Schneider moved out to some cushy job when he was the chief officer throughout this."

***

Matthew Raabe

Position: Assistant treasurer since 1993

Age: 38

County employee: 10 years

Popejoy says: "Mr. Raabe's ducking of subpoenas is embarrassing to the county. It is very difficult for me to imagine that Mr. Raabe, sitting next door to Mr. Citron, was not involved in his programs."

Source: Times reports

Researched by CAROLINE LEMKE / Los Angeles Times

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