Bankruptcy Misconduct Case Dismissed

A state appeals court Tuesday dismissed all charges against the two highest ranking Orange County officials accused of “willful misconduct” in connection with the nation’s worst municipal bankruptcy, saying the district attorney had failed to show they had done anything willful.

County Board Chairman Roger R. Stanton and Supervisor William G. Steiner, the only remaining county supervisors who were serving at the time of the December 1994 bankruptcy, faced removal from office if convicted by a jury of civil accusations that they had not adequately performed their duties.

A three-judge panel of the 4th District Court of Appeal noted that Dist. Atty. Michael R. Capizzi alleged that Steiner and Stanton had “failed to realize that former Treasurer Robert L. Citron’s investment decisions could bring financial ruin to the county, because they did not pay close enough attention to his activities.”

“In a nutshell, the accusations assert Steiner and Stanton did a shoddy job of minding the store while Citron committed acts which plunged the county into bankruptcy,” the panel said.

But, the justices ruled, “something more than neglect is necessary to constitute willful conduct.” Because the only punishment is removal from office, the ruling effectively ends the case against Stanton, who leaves next month after 16 years on the board, and creates enormous legal obstacles to continuing the case against Steiner, who has two more years to serve.

Both men were charged in December by the grand jury with failing to properly supervise Citron and Auditor-Controller Steven E. Lewis and of allowing the county to borrow more than $1 billion without ensuring that the proceeds would be safely invested and that the county could repay the borrowings.

In the blunt, 23-page opinion, Justice Edward J. Wallin, writing for the panel, rebuked the district attorney’s office for attempting to seek Stanton’s and Steiner’s removal without evidence of corruption or criminal acts, saying that only the voters, not the district attorney, should remove elected officials for failing to perform their duties.

Giving a prosecutor such power “would have ominous public policy implications,” Wallin wrote.

“It would effectively make the district attorney a performance monitor of elected officials, and allow him to subject them to the expense and rigors of accusation and trial if he deemed their performance to fall below that of the ‘reasonable’ public officials.”

Wallin continued: “In plain terms, he could try to oust them for getting a C-minus on their report cards.”

Assistant Dist. Atty. Wallace J. Wade, who heads the office’s bankruptcy team, said prosecutors would decide within the next two weeks whether to accept the ruling or appeal it to the California Supreme Court.

Speaking from his car phone on his way to an office celebration, Steiner said he was “very relieved, more than you can imagine.” When he arrived at his office, he was welcomed by popping champagne corks and a banner that read “Justice Prevails.”

Steiner said: “I’m looking forward to completing my final two years and serving as the [board] chairman in 1997. This certainly removed a dark cloud, and hopefully it will allow us to look to the future. I have no bitterness and intend to just focus on the future.”

Stanton, who leaves office Jan. 6, said, “This is vindication.” He continued, “My wife and I are celebrating our 29th anniversary, and this is a very nice present.”

An outspoken critic of the district attorney, Stanton recalled that earlier this year a member of his staff testified at a hearing that a district attorney’s investigator told her before the charges were filed last year that, “We’re going to ruin their Christmas.

“Well, they did not ruin our Christmas, and they didn’t ruin our Thanksgiving this year. I thank God for that,” Stanton said.

Wade, who was fielding calls to Capizzi for comment on the ruling, denied that prosecutors singled out anyone for blame. “The action brought by the grand jury was not to blame somebody for the bankruptcy. I don’t think we, or the grand jury, ever said, ‘Let’s blame X.’ We have a statutory duty to assist the grand jury, and we did.

“I think the public wants the elected district attorney to assist the grand jury, and it wants a grand jury that is going to have the courage to inquire,” Wade said.

In its ruling, the appellate court said that elected officials enjoy a certain amount of legislative immunity when they consider matters that come before them, such as bond issues to raise money.

It also said that absent any indication of outright corruption or criminal activity, the district attorney could not use “nonfeasance”--the failure to perform an official act--as grounds to seek the removal of an elected official.

The way the district attorney chose to seek the ouster of the supervisors, Wallin wrote, “must be reserved for serious misconduct . . . that involves criminal behavior or, at least a purposeful failure to carry out mandatory duties of office. The allegations against Steiner and Stanton fall well short of that standard.”