Investment Bank Whistle-Blower Wants to Be CEO : Recovery: Like Popejoy, longtime Smith Barney executive Michael Lissack would do job for free. He says county should refuse to repay ‘illegal’ debts.

Michael R. Lissack, a self-proclaimed Wall Street whistle-blower, on Friday offered to be Orange County’s new chief executive officer and said the county should not pay back debt that voters didn’t approve.

Lissack, whose claims of widespread fraud and corruption in the bond industry made headlines earlier this year, has advised the bankrupt county to refuse to pay more than $800 million of outstanding bonds on grounds that the debt is unconstitutional.

Local leaders should “resist the self-serving screams from the municipal bond industry,” said Lissack, who was fired from his position as a managing director at Smith Barney Inc. in February.

While there seemed to be little support for his bid among county officials, Lissack, 36, said he is sending a letter today to all the Orange County supervisors, formally applying for the CEO job vacated by William J. Popejoy.

“The muni bond world has been living in a fantasy and Orange County taking the responsible actions for its taxpayers benefit may be the first step in a painful problem of twelve step recovery,” the letter states.

Lissack, who has recently suffered a number of emotional blows, including depression, divorce proceedings and the loss of his job, said he is a “180-degree turn” from Popejoy, who helped engineer a plan to roll over the county’s debt for a year so the bonds wouldn’t default.

Lissack argues that some county debt--especially bonds sold only to further former county Treasurer-Tax Collector Robert L. Citron’s interest rate gambles--is just plain illegal because it exceeds state limits on the amount of debt a county can accrue.

“This debt is not the citizens’ problem--it’s the problem of the bankers and the lawyers who all went along with the officials who didn’t have the authority to incur the debt in the first place,” he said.

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Now living in Manhattan, Lissack said he would work with newly appointed interim CEO Jan Mittermeier and, like former CEO Popejoy, would do the job for free, at least until January, 1997.

“I’m glad the job is attracting diversified applicants,” Popejoy said, half-joking, upon hearing of Lissack’s interest.

“Some people just look for attention. I can’t imagine that he’s a serious applicant,” Popejoy said.

Orange County Supervisor William G. Steiner predicted Lissack’s chances of becoming the county’s new CEO were “zero,” and that he would never back a debt-repudiation strategy.

“I was raised that you pay your bills,” Steiner said. “I couldn’t work with someone who had the opposite view. Ultimately the bondholders should not pay the penalty for this debt.”

Once considered a brilliant public finance banker by his colleagues, Lissack helped raise $35 billion for infrastructure projects in more than 30 states during his 14-year career at Smith Barney, the only place he has worked.

Since being fired in February, Lissack has alleged that the company and other Wall Street firms have engaged in illegal practices that have cost taxpayers hundreds of millions of dollars. Specifically, he contends Smith Barney and others charged artificially high and potentially illegal prices for securities they sold to local governments.

Smith Barney has denied all his allegations.

“This latest adventure speaks for itself,” said Bob Connor, a spokesman for Smith Barney in New York who declined further comment.

According to a complaint filed against Lissack by Smith Barney, Lissack’s salary for 1993 was $125,000 with a incentive compensation of $465,000. While acknowledging that Lissack was one of the firm’s top producers, the complaint said that Lissack was reprimanded for “inappropriate treatment of co-workers,” and that he had “poor interpersonal skills.”

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Lissack has testified before several grand juries that are investigating municipal finance scandals throughout the county and is cooperating with those investigating the collapse of Orange County, which filed bankruptcy Dec. 6.

‘The municipal bond industry has never had anyone at his level defect before,” said Joe Mysak, editor of Grant’s Municipal Bond Advisor. “And he backs up his allegations with paperwork. He’s not to be taken lightly.”

While most municipal finance specialists predicted Lissack had little chance of becoming CEO, some said investment bankers need to be more careful about the debt they sell for cities, counties and other agencies.

“He’s got a good point,” Mysak said. “The municipal bond community has been loose in underwriting debt. It’s certain his position is going to make them sit up and take notice.”

Jon Schotz, an investment banker with Saybrook Capital and a financial adviser to the county who went to school with Lissack, said he was aware of Lissack’s bid and wasn’t sure it would be successful.

“Lissack and Rufus T. Firefly would be a good team, given his views on debt repayment,” Schotz said. “He’s a banker but he’s never run a government agency.”