ORANGE COUNTY IN BANKRUPTCY : Adviser Urges Outside Money Manager for Now : Investing: Member of oversight committee not convinced Moorlach and staff are competent to handle $5-billion portfolio.

One member of a recently formed watchdog committee monitoring the Orange County treasurer’s office proposed Thursday using outside money managers to invest the county’s funds until newly appointed Treasurer-Tax Collector John M.W. Moorlach and his staff are proven competent to handle the $5-billion portfolio.

“By being on this committee I’m putting my reputation on the line,” said Gary A. Pulford, a vice president of First American Trust Co. who sits on the Treasury Oversight Committee, whose members were appointed by the Board of Supervisors.

“I have to feel confident that the treasurer’s office is competent before I endorse letting the money be handled in-house,” Pulford said in an interview Thursday.

Since the county’s Dec. 6 bankruptcy declaration, funds belonging to the county and nearly 200 schools, cities and other government agencies have been invested by the Wall Street firm of Salomon Bros., which currently charges about $200,000 a month for its services. During the initial months of the crisis, the firm charged $400,000 a month.

Earlier this week, Moorlach said he and his staff are ready to assume control of the investment pool but asked the oversight committee to study whether it would be more cost effective to have the portfolio managed in-house or by an outside money manager.

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Pulford said Moorlach may be too eager to manage the county’s investment pool. In a letter to his colleagues on the five-member oversight panel, Pulford indicated that he is not yet convinced Moorlach and his crew are up to the task of managing a multibillion-dollar portfolio.

“Until we, as a committee, can unanimously gain confidence in the investment capabilities of the treasurer’s office, we need to promote the sound idea of using capable, outside investment managers to handle the county’s pool,” Pulford wrote.

Moorlach said Thursday that he was “very upset” by Pulford’s written remarks.

“I didn’t know if I should be encouraged because he was trying to help out, or I should be very insulted,” Moorlach said. “It was very irritating. I would prefer that we work as a team. I need people working with me, not going around, over or under me.”

He said the letter clearly challenged his qualifications as treasurer.

Two committee members reached Thursday said they thought the references to the qualifications of the Moorlach and his staff in Pulford’s letter were unfair. But they agreed that it was too early to bring the investment responsibilities back to the treasurer’s office. The committee’s chairman, Jeffrey M. Thomas, a vice president of Van Kampen Merritt Management Inc., could not be reached for comment.

“They told me to slow down,” Moorlach said. “They said I was going too fast.”

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William K. Mawhorter, chief executive officer of Huntington Beach-based Allegiance Capital Inc. and a member of the panel, said the committee needs to establish guidelines for investment strategies before it can decided who should manage the money.

“It’s premature to even address that right now,” he said.

Mawhorter added, however, he was not concerned about the competence of Moorlach or his staff. “I think they have very talented people there,” he said.

Committee member Blake E. Christian, a certified public accountant from Holthouse Carlin & Van Trigt in Long Beach, said the panel also was waiting for an opinion from the county counsel on the legality of using an outside investment manager.

He said he also wanted to postpone a decision on the matter until there is a formally approved settlement between the county and the other pool investors on how to absorb the $1.7-billion loss that the investment pool suffered when the investment practices of former Treasurer-Tax Collector Robert L. Citron soured.

One of the provisions in a proposed pool settlement currently on the table calls for a “joint powers agency” of investors who would manage the county’s portfolio. The cities, schools and other investing agencies would appoint a board of directors and hire staff to manage the group’s funds.

“It’s too early to pull the investment function back into the treasurer’s office,” Christian said. “It has nothing to do with any lack of confidence in Mr. Moorlach and his staff. . . . I have quite a bit of confidence in Moorlach’s abilities. I feel he is asking the right questions and doing the right things.”

Moorlach was appointed to the treasurer’s post last month after undergoing a confirmation hearing conducted by the oversight committee and winning it endorsement by a 4-to-1 vote.

Moorlach gained prominence for being the first to warn of Citron’s risky investment strategies when he ran unsuccessfully against the former treasurer for the elective office last June.