SEC Warns O.C. Officials of Civil Action : Bankruptcy: Notices are sent to supervisors. Legal filings would be the first to blame them for fiscal collapse.

Federal regulators have warned members of the Orange County Board of Supervisors who presided over the county’s $1.7-billion financial collapse that they may face civil charges for possible violations of federal securities laws.

The supervisors are among several officials and financial firms notified by the U.S. Securities and Exchange Commission that charges may be filed against them in federal court, a former board member and other sources confirmed Wednesday.

If charges are filed, it would mark the first legal action to lay blame for Orange County’s bankruptcy on its elected leaders, who repeatedly have contended that they were misled by staff and duped by financial firms that made millions of dollars in dealings with the county.

Through their attorney, the five supervisors who governed the county before the Dec. 6 bankruptcy have been given “Wells notices” by the SEC. The notices are an official alert from the regulatory agency that charges may follow, and they allow firms or individuals a chance to argue against charges in documents or on videotape before a court proceeding is initiated.

“I did get this letter this morning,” former 5th District Supervisor Thomas F. Riley said Wednesday. “It was sent to the commission by our attorneys.”

Riley said the letter described the possibility of an SEC action, but he would not elaborate.

Gerald Boltz, the attorney who represents the supervisors, did not return calls for comment.

“This is a very sensitive time right now,” said one source, adding, “There are negotiations going on with the SEC.”

Only two of the five supervisors in office at the time of the unprecedented municipal bankruptcy--Roger R. Stanton, the board’s current chairman, and William G. Steiner--still sit on the board. Gaddi H. Vasquez resigned last month. The terms of Riley and Harriett Wieder ended last year.

Barbara Brown, Stanton’s executive assistant, said he told her Wednesday that he had not received a Wells notice. Barbara Daly, former press aide for Vasquez, said,”He’s unreachable.”

Wieder could not be reached for comment.

Steiner said he would not comment, adding that the SEC had admonished witnesses subpoenaed to testify not to talk publicly about the case.

SEC Chief of Enforcement William McLucas said he could not discuss the notices.

The SEC action raises questions about whether supervisors gave “proper approval” to the issuance of more than $1 billion in municipal debt last year, said sources familiar with the investigation.

All of the county’s borrowings between June and September, 1994, were approved without board debate or discussion and appeared on the board’s “consent calendar” with other routine items of business such as equipment purchases.

Federal investigators have examined all of the county’s municipal finance dealings in 1994, sources said. The investigators have focused with particular interest on a controversial $600-million taxable note deal sold in June, 1994, and $320 million of pension bonds in September, 1994.

One source said that SEC attorneys have indicated that the agency’s 10-month investigation is nearly completed and that enforcement actions would be “sent out in stages” to various officials and financial firms.

C.S. First Boston Corp., the underwriter on the pension bonds on which the county later defaulted, has already received a Wells notice from the SEC.

So has Rauscher, Pierce Refsnes Inc. of Dallas, a financial adviser for various school and government agencies in Orange County that was involved in a $299-million note issue sold by the Orange County Board of Education on behalf of 27 local school districts in 1994.

First Boston and Rauscher, Pierce spokesmen declined to comment.

The SEC also has given a notice to former county Treasurer-Tax Collector Robert L. Citron, who managed the county’s investment pool.

In its current wave of Wells notices, sources said, the SEC also is focusing on the role of financial firms in several taxable note deals sold by Orange County school districts to invest in the county investment pool operated by Citron.

The next phase of Wells notices is expected to target other Wall Street investment firms and financial advisers that did business with the county, especially firms that participated in the $600-million deal sold by the county solely to invest in Citron’s pool, sources said.

For the financial firms, sources said, charges most likely would involve violations of federal disclosure laws, including a rule that makes it a crime to mislead investors or “omit material facts” from bond documents.