O.C. Supervisor Investigated Over Lawsuit Remarks

The Orange County district attorney’s office is investigating Supervisor Roger R. Stanton for allegedly disclosing confidential information and possibly undermining the county’s $2.4-billion bankruptcy-related lawsuit against Merrill Lynch & Co., officials said Thursday.

Stanton confirmed that he was questioned by district attorney’s investigators about two weeks ago, but he downplayed the probe.

“I can unequivocally state that I have not released any confidential information about negotiations,” Stanton said.

The district attorney’s investigation centers on a complaint by former county Chief Executive Officer William J. Popejoy, who went to the Orange County Grand Jury two months ago asking the panel to investigate and remove Stanton from office. He accused Stanton of disclosing confidential information by publicly suggesting that the county might be able to settle its lawsuit against Merrill Lynch for $500 million.

The county sued the Wall Street firm in December, blaming it for illegally selling the county risky investments that led to the bankruptcy. Merrill Lynch officials have denied any responsibility in the county’s Dec. 6 financial collapse.

A spokesman for the district attorney declined to discuss any investigation involving Stanton or the bankruptcy. But a high-ranking law enforcement source said the grand jury investigated Popejoy’s accusation and found enough evidence of possible wrongdoing to warrant an investigation by the district attorney’s office.

Stanton’s attorney, Wylie Aitken, dismissed suggestions that investigators had evidence against his client. Aitken, who was present during the district attorney’s interview with Stanton, said it was his impression that the investigators were only “following up” on Popejoy’s complaint because they felt compelled to “follow through” and resolve the matter.

“As an experienced litigator, and as an experienced negotiator in matters of these types, the suggestion by Mr. Popejoy that Stanton’s [statement] somehow has compromised the county’s ability to resolve the case with Merrill Lynch is totally absurd,” Aitken said.

Stanton and Aitken declined to discuss details of the interview with investigators.

“These folks have an obligation to make a courtesy inquiry to follow up on even the most absurd of accusations such as these,” Stanton said.

Popejoy said he was “extensively questioned” by the district attorney’s investigators two weeks ago and that it was his impression they were taking his complaint seriously. But he declined to elaborate on his interview with investigators.

When Popejoy went to the grand jury June 22, he accused Stanton of undermining the county’s settlement negotiations with Merrill Lynch. He told the panel that Stanton publicly released a settlement figure, despite his briefing by Popejoy during a closed-door meeting with other board members that the county could expectto reach a settlement of about $1.2 billion. Popejoy told the grand jury that Stanton’s subsequent statement was “irresponsible” and may have cost the county hundreds of millions of dollars in a possible settlement.

The alleged violation that the district attorney is reviewing falls under an obscure state government code section that prohibits “willful or corrupt misconduct in office,” officials said. A violation, if proven to be true, would force an official’s ouster.

It is believed to be the first time in county history that a supervisor’s actions have been investigated under that section of law, known as Government Code Section 3060. The law was used in the mid-1980s to investigate trustees in the Orange Unified School District.

Stanton’s comments about the Merrill Lynch lawsuit were made in June in the midst of a heated campaign over a ballot measure proposed by Popejoy to raise the county’s sales tax by half a cent to help pull out of bankruptcy.

Stanton, who opposed the tax, outlined possible solutions to the bankruptcy that did not involve raising taxes. Among his options, which were detailed in a position paper, Stanton said the county could expect to receive at least $500 million from its lawsuit against Merrill Lynch.

On Thursday, Stanton said he never intended to suggest that $500 million would even come close to being an adequate settlement.