Ruling Deals Blow to Prosecution of 2 O.C. Supervisors

The charges against two county supervisors accused of misconduct for their roles in Orange County’s bankruptcy should be dismissed unless the judge handling their cases can come up with compelling reasons to proceed with a trial, an appeals court said Tuesday.

The ruling by the 4th District Court of Appeal was a major setback to Orange County Dist. Atty. Michael R. Capizzi’s campaign to prosecute Supervisors William G. Steiner and Roger R. Stanton--the only two supervisors still in office who were at the helm when the county declared bankruptcy.

“Obviously, this is not the result that we would have wanted,” said Wallace J. Wade, one of Capizzi’s top assistants. “But this is not the final word.”

The ruling was additional good news for the embattled supervisors, whose spirits have been buoyed in recent weeks by the likelihood that the county will emerge from bankruptcy by June 12.

“Things are looking up,” said Steiner, who flies to New York today with other county officials to sell nearly $900 million in bonds to pay county creditors who have gone unpaid since the county declared bankruptcy Dec. 6, 1994.

Under the appellate court’s ruling, Superior Court Judge John W. Ouderkirk of Los Angeles has been ordered to dismiss the charges by July 8 or be prepared to defend his ruling before the appeals court on Aug. 27.

The appeals court action does not apply to Auditor-Controller Steve E. Lewis, who also was accused by the county grand jury of misconduct for his involvement in the nation’s largest municipal bankruptcy.

All three county officials, who face removal from office if the “willful misconduct” charges are found to be true, have denied any wrongdoing. Since being charged last December, they have filed a series of legal motions seeking to undermine Capizzi’s case. Most of the motions have been denied.

But in March, Ouderkirk granted one defense motion. He sided with defense attorneys who argued that the supervisors enjoyed “legislative immunity” and could not be prosecuted for their alleged failure to adequately investigate proposed county borrowings before voting on bond issues.

The borrowed money, totaling hundreds of millions of dollars, was used to make risky investments that caused the county bankruptcy.

Ouderkirk said the supervisors’ votes on these borrowings are shielded from review by long-standing legal doctrines separating branches of government and granting lawmakers protection for their votes.

Ouderkirk said the U.S. Constitution protects lawmakers from prosecution for their votes, as long as corruption is not involved. There were no allegations of corruption in the Orange County case.

However, Ouderkirk let stand three other misconduct allegations that Stanton and Steiner failed to oversee management of the county’s ill-fated investment pool, saying those were executive functions not covered by legislative immunity.

Following Ouderkirk’s decision, both sides complained to the appeals court. The district attorney wanted the charge reinstated, while defense attorneys wanted the remaining charges dismissed.

On Tuesday, the appeals court denied the district attorney’s appeal and granted the defense’s request to throw out the cases, unless more compelling arguments are made to support Ouderkirk’s decision.

Attorneys for the supervisors praised the appeals court ruling.

“We’re pleased that the court of appeals has seen that the arguments we have been making are responsible, logical arguments,” said attorney Allan Stokke, who is defending Steiner. “This is confirmation that the judge was accurate on the first issue. The appeals court is saying that the judge may not have gone far enough.”

Wylie A. Aitken, who represents Stanton, said the ruling was a “significant victory for the taxpayers, since we are now hopeful that further taxpayer money will not be wasted on either side of a proceeding that never should have been brought forward in the first place.”

Another attorney, who has been monitoring developments in the supervisors’ cases, said it was a “stunning” ruling.

“In layman’s terms, the court of appeals is giving an indication that it is going to set aside the entire accusations,” said the attorney, who spoke on condition that his name not be used.

“As a practical matter, it delays the whole thing,” the attorney added, making it unlikely that Stanton, whose term in office expires in December, would be prosecuted at all. Steiner’s term does not expire until December 1998.

Aitken said his client hopes the charges are dropped before his term is over so “he can leave office with his head held high.”

The appellate ruling, which was written by Justice Thomas F. Crosby Jr., suspends any further proceedings against the supervisors until the matter of Ouderkirk’s decision is completely resolved.

Times staff writer Michael G. Wagner contributed to this report.

* TWO-TERM LIMIT?

Divided board puts term limits on November’s county ballot. B1