Wilson Backing Popejoy; Silva Wants CEO Out

Gov. Pete Wilson, who has maintained a hands-off attitude toward the Orange County bankruptcy for almost seven months, has quietly stepped into the fray between Chief Executive Officer William J. Popejoy and the county supervisors.

Supervisor Jim Silva, meanwhile, called for Popejoy’s ouster Friday, saying that the county administrator has “crossed the line” in the growing hostilities.

Wilson has begun secretly lobbying supervisors William G. Steiner and Marian Bergeson to make sure they keep supporting Popejoy even if the Measure R sales-tax increase, which is lagging in the polls, gets voted down on Tuesday.

The requests from the governor’s office were made earlier this week amid the growing friction between the board and Popejoy, but occurred before tensions were further heightened by Popejoy’s request Thursday that the Orange County Grand Jury investigate and oust Supervisor Roger R. Stanton from office for alleged misconduct.

Popejoy’s action so infuriated Silva that he said Popejoy should be removed from his job. Popejoy has been a critic of Silva’s and had once questioned the supervisor’s leadership abilities.

Paul Kranhold, a spokesman for Wilson, said he “would neither confirm nor deny that such calls were being made” to the supervisors. Sources, however, said Wilson wants Popejoy to remain as CEO to avert a possible state takeover of the county and to maintain the county’s credibility with Wall Street.

Because of Popejoy’s bold assault on one of their own, the supervisors have been in a quandary over how to react to their emboldened chief executive.

“Everybody is just kind of overwhelmed,” said Steiner, who declined to discuss any contact with the governor’s office. “There’s all sorts of moods around here, from feeling like we should fire him and get control of the situation, to other feelings that we need the continuity [for the bankruptcy recovery] with him here.”

Silva said his feelings, however, were certain.

“I believe Bill Popejoy crossed the line in taking this to the grand jury,” Silva said. “It reinforces my belief that Bill Popejoy should not be the CEO for Orange County.”

He said Popejoy should be removed from office.

“I believe the board must retake control and be more assertive in making decisions for the county,” Silva said.

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Bergeson disagreed, saying Popejoy’s presence in the county “is critical.” Bergeson, Popejoy and other county officials traveled to Sacramento Tuesday for a 90-minute discussion with Wilson staffers they described as an informational session “to keep the lines of communications” open.

“I think the timing for that [talk about ousting Popejoy] is inappropriate,” said Bergeson, who indicated that she will continue to support Popejoy, regardless of the outcome of the Measure R vote or his war with Stanton. “This is a time in which we have to have stability in management.”

Stanton declined to comment and Supervisor Gaddi H. Vasquez was out of town and could not be reached.

To fire Popejoy, who agreed in February to work for free as the county’s CEO until November, four of the five supervisors must vote to remove him. County observers say that both Silva and Stanton are ready to terminate Popejoy, but the other supervisors are not yet convinced the time is right.

Support for Popejoy eroded significantly late this week when he clashed with Stanton for suggesting a possible settlement figure in the county’s $2.4-billion lawsuit against Merrill Lynch & Co.

Popejoy, who indicated that the county expected to settle the case for $1.2 billion, said Stanton undermined negotiations and cost the county both time and money by mentioning a figure less than half that amount. Popejoy asked the grand jury to investigate Stanton for disclosing privileged information and violating his trust in office.

Grand jury foreman Mario Lazo said the panel’s proceedings were confidential and declined to comment on whether the grand jury would investigate Popejoy’s accusations.

Stanton has strongly denied any wrongdoing and said his proposed settlement figure was a worst-case scenario calculated from public documents released from the county’s financial advisers. He said he would not settle for anything less than $2 billion.

The county sued Merrill Lynch shortly after declaring bankruptcy in December, contending that the Wall Street firm was largely responsible for the county’s unprecedented financial collapse and $1.7 billion in investment losses.

Merrill Lynch officials have said they did nothing wrong and are unwilling to settle the county’s suit for any amount.

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The dispute between Popejoy and Stanton stunned county residents, politicians and business leaders, some of whom characterized it as a ploy by Popejoy to win support for Measure R--the cornerstone of his bankruptcy recovery plan.

Popejoy said Friday that he was disappointed that his action against Stanton, who opposes Measure R, was being construed by some as political.

“I would have gone to the grand jury even if it was one of the three supervisors who support Measure R and did what Mr. Stanton did,” Popejoy said.

Regardless of his motives, Popejoy’s action soured his relationship with his five bosses and prompted speculation that they might try to fire him, especially if the tax fails. But Bergeson and others have said that firing Popejoy could be viewed by Sacramento lawmakers as the county being unable to manage its crisis, and breathe new life into efforts to appoint a state trustee to oversee the county.

And since Popejoy appears to be popular with state officials, some county officials have even suggested that Popejoy could become the appointed trustee, even if the board fired him.

“That’s a very real possibility,” Steiner said.

Many lawmakers in Sacramento said Friday that they were keeping a watchful eye on what happens with Popejoy and the board.

Sen Lucy Killea (I-San Diego), who authored a measure vetoed by Wilson that would have allowed a state trustee to oversee Orange County’s recovery, said she was “surprised Mr. Popejoy was able to keep his cool this long.”

Any form of trusteeship inspired by the defeat of Measure R, or by moves against Popejoy by the supervisors, would require a two-thirds vote of the Legislature to take effect immediately.

Assemblyman Richard Katz (D-Sylmar), a member of an Assembly select committee on the bankruptcy, said Popejoy’s predicament could put some steam back in the push for a state trustee.

“I think it makes the case for a trustee,” Katz said. “There’s obviously so many games being played by the supervisors that voter confidence is at an all-time low. In order for them to get any assistance from the state after Tuesday, they have to show that someone other than the folks who were there creating the problems are now in charge.”

“There may be a push for a trustee by the Democrats, but I don’t see that as the will of a two-thirds majority in either house, or the will of the governor,” said Assemblyman Curt Pringle (R-Garden Grove). “Democrats don’t like Orange County because it’s dominated by Republicans and they have been jabbing at the county since Dec. 6. Having a trustee is the ultimate jab.”

Pringle also criticized Popejoy.

“It’s interesting that an appointed county official goes after elected members of the Board of Supervisors,” Pringle said. “If he wants to get rid of them, either vote against them in the next election or recall them. Don’t play some behind-the-scenes games to toss them out just because you disagree” with them.

Scott Johnson, chief counsel to a Senate special committee on the bankruptcy, said a trustee is “always a possibility,” but suggested that the Legislature might be more inclined to take a less harsh approach and provide only partial oversight to ensure “smooth repayment” of any recovery financing performed by the state.

In other fiscally troubled areas, such as New York City in the 1970s, the state stepped in to establish a Municipal Assistance Corporation to market bonds on behalf of New York City. Generally, those MACs have only served to market the bonds, not oversee all avenues of operations, as proposed in Killea’s bill.

* JUDGE REJECTS ROLLOVER

County’s plan to extend $975 million in short-term debt for one year is ruled too broad. A30