Treasury Panel, Irate at Law, May Resign en Masse

Members of the Orange County Treasury Oversight Committee said Thursday they plan to resign en masse from the panel by year’s end because of conflicts with a new state law regulating who can participate in such watchdog groups.

“It’s just plain bad legislation,” said committee member Clyde Kendzirski. “It’s the law of unintended consequences.”

Under state legislation passed long after the establishment of the Orange County committee, members of such oversight committees cannot “secure employment” with bond underwriters, legal counsel, brokerages, securities dealers or financial services firms for three years after leaving such panels.

Since all members of the Orange County committee are professionals in the fields of finance and investment, they said they fear the law interferes with their livelihoods.

Instead of encouraging professional and thoughtful oversight of treasurers, the local committee members said, the new law effectively excludes most citizens who are knowledgeable in Wall Street and municipal finance. Unless changes in the law are made, the board’s four members announced, they will resign when the statute becomes effective Jan. 1.

The threatened resignations became the latest problem to hit the oversight committee, which has had problems recruiting and retaining members since its formation by the Board of Supervisors following the county’s Dec. 6 bankruptcy. Currently, the panel is short one member.

Treasurer-Tax Collector John M.W. Moorlach said he was troubled by the situation.

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“I’ve been really happy with the oversight committee,” he said. “I’d hate to see it disappear. We’re doing a lot of good work right now and getting a lot of things accomplished.”

Supervisors Marian Bergeson and William G. Steiner said they too were concerned about the situation, but are hopeful that some sort of solution can be found to head off the resignations.

State legislators defended the law, saying the provision is intended to prohibit the sort of “revolving door” that could allow a Wall Street firm to reward cooperative panel members by hiring them after their service on the board.

Jeffery M. Thomas, the committee chairman, said the group agrees with the goal of the legislation, but has “a real problem with the way this was written.”

Thomas said the committee is also concerned about other provisions in the law, including one that prohibits members from giving campaign contributions to local officials and another that requires that the panel be “economically diverse,” politically bipartisan and have a majority of members with expertise or an academic background in public finance.

Thomas said the pool of potential candidates for the non-paying committee posts is severely limited. Essentially, only students, homemakers, academics and retirees will be able to sit on the panel, committee members said.

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“It is highly unlikely that members from the private sector will be willing to give up future job mobility in return for performing their civic duty,” said Blake E. Christian, a member of the oversight committee.

The committee members said they don’t want to step down from the panel, but feel they have no choice. They said they have been trying for months to amend the language of the bill to allow investment and finance professionals to serve on the committee, but have not received any help in Sacramento.

“It would be a shame to walk away now,” said Bruce A. Hughes, another member of the panel. “The county would have to get new people in here to finish a job that has been eight or nine months in the making. It would be very difficult to do and only end up hurting the residents of Orange County.”

The new state law, authored by state Sen. William A. Craven (R-Oceanside), calls for an oversight committee made up of the county treasurer, the auditor or finance director, a representative of the Board of Supervisors, the county superintendent of schools, a representative of the schools and colleges, and up to five members of the public. The committee would help provide advice as well as serving as a watchdog for risky investments.

The bill’s chief backer was the California Assn. of County Treasurers and Tax Collectors.

Scott Johnson, chief counsel to Craven, said the provisions now under fire sprang from the experiences in Orange County, where longtime Treasurer-Tax Collector Robert L. Citron made many of his risky investment moves based on the advice of Wall Street experts who were doing business with the county and currying favor by contributing campaign cash.

The legislation was intended to ensure that a county treasury would be overseen by a watchdog group free of any appearance of conflict, he said.

“The whole lesson of the Orange County bankruptcy was that it occurred with a lack of oversight,” Johnson said. “It was the Legislature’s feeling, along with the sponsors of the bill, that there needed to be independent review of the treasurer’s investment decisions. It’s ironic that the only county to object was the very county that seemed to have no oversight of its very independent treasurer.”

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Johnson argued that the restrictions in the bill would not prohibit the appointment to an oversight panel of financial experts from academia or retired Wall Street executives. In addition, he noted that the bill’s restrictions on campaign contributions would not apply to any donations made before the measure kicks in on Jan. 1.

“I think the intent of the law is very clear,” Johnson said. “What you’re trying to avoid is a compromised individual from serving in an oversight capacity. There’s no mystery there at all.”

But he also acknowledged that the measure, like many complex bills churned out by the Legislature, could be subjected to tinkering next year with so-called “clean-up” legislation to resolve unforeseen problems.