Cooking Up Solutions : Popejoy Relies On Volunteers, but Lack of Diversity Criticized
Shortly after William J. Popejoy took over as Orange County’s chief executive, he faced a crisis.
He had set a date for giving county supervisors a list of county assets that could be sold. Department heads, however, had pulled together a uselessly massive inventory of county-owned property. Much more was needed.
In a bind, Popejoy turned to trusted advisers from his past: Neil N. Stolz and Paul S. Nussbaum, executives who had been part of a Popejoy team that struggled unsuccessfully in the 1980s to resuscitate American Savings & Loan Assn., in part by disposing of its troubled real estate.
The two told the county staff to assume everything was up for grabs, insisting that they figure out which assets could be sold quickly, which couldn’t be sold for years, and which could be sold and leased back. The staffers slogged their way through the minutiae of property appraisals, income statements, lease agreements, bond documents and the like.
As a result, Popejoy made his deadline.
Relying on friends and former business associates has been Popejoy’s style as he seeks to lead Orange County out of bankruptcy, and his “kitchen cabinet” has been exercising considerable influence behind the scenes.
But critics question whether the group, the first eight of whom were white, male, well off and, with one exception, Republican, can comprehend how drastic measures being considered to save the county financi lly will affect the less advantaged.
“For goodness’ sake. Is the message that we don’t have any competent Latino to be represented there? Where is the linkage of Mr. Popejoy to our community?” said Amin David, chairman of Los Amigos of Orange County, a Latino advocacy group of community representatives, business people, educators and students. “They have missed the boat.”
“It’s my experience that those coming out of the financial community place more emphasis on debits and credits than they do human beings,” said Eugene Wheeler, a marketing executive who is president of the Orange County chapter of 100 Black Men of America, a nonprofit service organization of successful black professional men who mentor young black men.
“Why not add some women in there to bring some sensibility to this thing? Or a capable Hispanic, or Asian, or black?”
On Friday, Popejoy did just that, adding a black man--Daryl Carter, chief investment officer of real estate advisory firm Carter Primo Chesterton--and a woman--Layna J. Browdy, a communications manager for the Automobile Club of Southern California and former aide at American Savings.
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Popejoy bristles at any criticism of his advisers, whom he has dubbed VETs, for Volunteer Executive Team. All are highly talented business people, he says, and deserve only praise for offering their time and talents.
He intends to expand the group further, but said that poring over resumes and selecting an advisory team takes time. “You can’t just dump a hundred people in and say, ‘Help us!’ ” he said.
The group has won high praise within the business community for the credentials of its members. “All of them are absolutely first rate,” said David L. Smith, a financial consultant at accounting firm KPMG Peat Marwick who advised Popejoy’s management team at American Savings.
Of Popejoy’s advisers, Walter Gerken, former chairman of Pacific Mutual Life Insurance Co., may be the best known in Orange County because of long years of leadership in charitable and civic circles.
Gerken is “a world-class intellect,” said Stan Oftelie, chief executive of the Orange County Transportation Authority, which had $1.1 billion in the county’s bankrupt investor pool. Gerken led a business community effort in the 1980s to solve the county’s growing traffic congestion problems, Oftelie said.
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Another well-known VET is Merrill Butler, a former real estate developer who was part of Popejoy’s American Savings management team. His assignment is to deal with Orange County’s municipalities, and his early efforts have been productive, said Paul O. Brady Jr., Irvine’s city manager.
Brady, vice chairman of a committee of local municipalities and public districts with a total of $5 billion in the county investment pool, said he has known Butler for more than 20 years and describes him as a “fine professional” and “a good listener.”
Cities’ communication with county officials has improved markedly since Butler became Popejoy’s point man, Brady said: “I now know who I can call.”
Some observers are troubled, however, that most of Popejoy’s cabinet is composed of such familiar faces.
“Look, we got into this mess because of secrecy, collusion and back-room dealing,” said Mark Petracca, associate professor of political science at UC Irvine. “You won’t get yourself out of it with the same characteristics of decision-making.”
Though the group now wields considerable clout within the county bureaucracy, Petracca said, its members are not accountable to the electorate. “Bringing in a group of businessmen from the outside to help Popejoy run the county,” he said, “only increases the public’s alienation from the only five people they’ve placed in charge”--the supervisors.
Experts in public policy say the competence of people involved in a rescue mission like Popejoy’s is far more important than who the individuals are.
“The credibility of the private-sector people is the biggest asset,” said Felix Rohatyn, a partner in investment bank Lazard Freres & Co. who was among business executives who volunteered to help New York City through its financial crisis in 1975.
He cautioned against embracing diversity for its own sake but added, “If you can do it within the framework of the needs you have and the talents your require, it’s a good thing to do.”
The volunteer board of New York’s Municipal Assistance Corp., created to back the city’s refinancing, included Donna E. Shalala, now U.S. secretary of Health and Human Services, and African American Robert Weaver, an academic, now retired, who served as secretary of Housing and Urban Development in the Lyndon Johnson Administration.
Whatever the composition of an advisory group, Rohatyn said, it will be most effective if its work is done in plain view. “You must be very open about what you’re doing,” he said, “so people can see you don’t care whether you are helping a Republican or a Democrat and that, when you get out . . . you won’t run for office.”
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Openness has not been the watchword of Popejoy’s advisers to date. His office staff has turned down repeated requests to let reporters attend kitchen-cabinet meetings and canceled an appointment for Popejoy to be photographed with the group. Popejoy ordered county department heads three weeks ago to quit discussing the county’s bankruptcy or budget cuts publicly. Both his kitchen-cabinet members and department heads have been told to refer all inquiries to his office.
Group members and observers are quick to point out, though, that the advisers aren’t elected officials. Most are retired executives who are providing their time and considerable expertise without compensation.
The pressure on them has been intense, the hours erratic and often long. Popejoy’s job is “a very, very large undertaking,” said Thomas P. Kemp, a VET who was formerly an executive with Beatrice Cos. “It’s happening in real time. It’s moving real fast.”
Said Nussbaum, a 37-year-old executive on loan from Wells Fargo Bank who has emerged as de facto vice chairman of the advisers: “We’re fighting on multiple fronts. You’re done, you go on to something else.”
The group often has early-morning meetings in Popejoy’s conference room, his schedule permitting, then fans out across the county to tackle individual tasks. Popejoy outlined general goals for the volunteers three weeks ago but left specifics up to them.
After all, he said, most are former chief executives who “don’t have to be patted on the head or told what to do.” As such, they are carving out roles for themselves, reaching out to groups they know best or capitalizing on their areas of expertise.
One volunteer, Paul E. (Ed) Dundon, a respected former superintendent of the Garden Grove Unified School District, immediately got involved with about 30 local school officials who as a group represent $1 billion in the county investment pool.
J. Kenneth Jones, superintendent of the Fullerton Joint Union High School District, said his former colleague has been highly effective. Speaking at a March 6 gathering of school officials, Jones said, Dundon explained terms of the county’s proposal for recovering education funds and received a warm response, partly because the superintendents viewed him as one of their own.
Dundon didn’t stop there. He also set up a superintendents’ meeting with Bruce Bennett, the county’s bankruptcy counsel. Jones, who attended, said, “We were able to talk directly about some of the issues and concerns the creditors committee needs to have happen.”
Bennett said Dundon and former developer Butler have been “terrifically helpful. They have helped dissipate what had been an atmosphere of distrust between the schools and cities, on one hand, and the county on the other.”
The composition of Popejoy’s advisory team--largely white, male, corporate and older--is hardly surprising to some observers. Experience in the financial world also has its limitations, noted Allen Baldwin, executive director of Orange County Community Housing Corp. and a former savings industry official.
When Popejoy and his colleagues were financial leaders during the 1970s, Baldwin said, “the only thing multicultural in (the industry) was that some of us were Jewish and some of us were not.”
Political scientist Petracca sees the kitchen cabinet as a reflection of the prevailing political view that Orange County’s salvation lies with the business community. He describes it as a “traditional sort of 1950s-style blue-ribbon commission made up of bluebloods.”
Popejoy is adamant that he welcomes women, minorities and people of all political persuasions to the process but isn’t inclined to seek diversity among his advisers, he said, simply for appearance’s sake. “I’m trying to get a job done now,” he said.
The advisers’ background, however, may come in handy if Popejoy succeeds in getting county supervisors to put a sales tax increase on the ballot this June. With connections to the county’s conservative Republican majority, they may serve as effective ambassadors to a population traditionally leery of proposed tax hikes.
Walter Gerken, the only Democrat among the eight original advisers, says that persuading voters to pass a tax hike may not be as difficult as some might guess. He notes, for instance, that some of his wife’s tennis buddies, who are staunch Republican women, favor a tax increase to prevent further cuts in services to children, the indigent and the severely ill.
“The notion that everybody is dead set against a tax increase,” Gerken said, “isn’t necessarily true.”
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Times librarians Sheila Kern and Val Tkach contributed to this report.
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
Popejoy’s Kitchen Cabinet
Orange County Chief Executive Officer William J. Popejoy’s team of 10 advisers consists mostly of past associates in the savings and loan industry. Each will focus on a particular aspect of the county financial dilemma.
William J. Popejoy Role: County chief executive officer
Paul S. Nussbaum Role: All-around trouble-shooter; accompanied Popejoy to Sacramento for meetings with state lawmakers
Neil N. Stolz Role: Proposed sales of county assets
Walter B. Gerken Role: Reorganization
Thomas P. Kemp Role: Refinancing
Gerald D. Barrone Role: Privatization of services
Merrill Butler Role: Analyze how libraries, other county operations might be shifted to cities
Robert Barton Role: Tracking bankruptcy, lawsuit against Merrill Lynch
Paul E. (Ed) Dundon Role: Persuade school districts to approve investor settlement plan
Daryl Carter Role: Financing and proposed asset sales
Layna J. Browdy Role: Communications strategy
Team Popejoy
Here’s the full lineup of county CEO William J. Popejoy’s team and their backgrounds:
Paul S. Nussbaum
Age: 37
Residence: Newport Beach
Background: Vice president, Commercial Banking Group, Wells Fargo Bank; former executive vice president of American Savings Bank
Walter B. Gerken
Age: 72
Residence: Corona del Mar
Background: Chairman, California Nature Conservancy and Hoag Hospital Foundation; former chairman of Pacific Mutual Life Insurance Co.
Thomas P. Kemp
Age: 64
Residence: Laguna Beach
Background: Co-chairman, U.S. Committee to Assist Russian Reform at Pepperdine University; former chairman, Coca-Cola Bottling Co. of Los Angeles; was president of former Beatrice Cos. Grocery Group; served as director of Financial Corp. of America, American Savings & Loan Assn.’s former holding company
Gerald D. Barrone
Age: 63
Residence: Glendale, Newport Beach
Background: Former president, Coast Federal Bank
Daryl Carter
Age: n/a
Residence: n/a
Background: Co-chairman and chief investment officer of Carter Primo Chesterton
Neil N. Stolz
Age: 59
Residence: Palos Verdes, Newport Beach
Background: Former executive vice president and chief administrative officer at American Savings Bank
Merrill Butler
Age: 70
Residence: Newport Beach
Background: Former developer; worked on Popejoy’s American Savings rescue team
Robert Barton
Age: 72
Residence: Newport Beach
Background: Counsel to Barton, Klugman & Oetting, Los Angeles law firm; former board member at Financial Corp. of America
Paul E. (Ed) Dundon
Age: 63
Residence: Orange
Background: Former superintendent, Garden Grove Unified School District
Layna J. Browdy
Age: 43
Residence: Irvine
Background: Corporate communications manager, Automobile Club of Southern California; former senior vice president of corporate communications, American Savings
Source: Times reports; individual companies; researched by BARBARA MARSH / Los Angeles Times
