Court Pulls Capizzi Off Lewis Misconduct Case

A state appeals court on Friday removed Dist. Atty. Michael R. Capizzi from the bankruptcy-related misconduct case against Auditor-Controller Steve E. Lewis, saying the district attorney’s office has apparent conflicts of interest “so grave as to render it unlikely [Lewis] will receive fair treatment.”

The scathing, 11-page ruling by the 4th District Court of Appeal raised questions about whether the district attorney’s office could properly investigate and prosecute any of the six public officials charged with bankruptcy-related misdeeds, because the department had suffered financially.

As a “victim” of the bankruptcy, the judges said, it could be argued that the office was hardly impartial.

The appeals court also questioned Capizzi’s “personal involvement” in the Lewis case, particularly a conversation the district attorney had with then-Supervisor Don Saltarelli a day before Saltarelli was to vote on Lewis’ request that his defense attorneys be paid with taxpayer funds.

Capizzi has said he placed the call after watching Saltarelli on a television program describe the charges against Lewis as “civil accusations.” Capizzi said he called the supervisor to inform him that the accusations were actually criminal in nature.

“Although he denied the call was an attempt to persuade Saltarelli to vote against furnishing a defense for [Lewis],” the court wrote in its opinion, “a reasonable inference could be drawn that [that] was the district attorney’s intent,” because Capizzi would know there was a county policy against paying the defense costs of county officials facing criminal charges.

“The apparent attempt to limit [Lewis’] resources to defend himself adds substantial weight to the appearance of a conflict,” it added.

In disqualifying the district attorney, the justices also noted that Capizzi was on the distribution list of Lewis’ audits of the ill-fated county investment pool, whose collapse caused the December 1994 bankruptcy.

The court cited the audits that warned--to no avail--of illegal county investments as “evidence potentially implicating the district attorney in the alleged misconduct which led to the financial disaster.”

If the appellate court’s order stands, the case against Lewis would be transferred to the state attorney general’s office for prosecution. But state officials said Friday they would immediately appeal the decision in concert with the Orange County district attorney’s office.

Deputy Dist. Atty. Devallis Rutledge said, however, his office was still reviewing the ruling and probably won’t decide whether to appeal for several days.

Capizzi’s office lost its most recent bankruptcy case appeal to the California Supreme Court, which rejected his bid to have misconduct charges reinstated against former Supervisor Roger R. Stanton and current Board Chairman William G. Steiner who, like Lewis, were charged with “willful misconduct” for failing to prevent the bankruptcy--charges that were tossed out by the same appeals court.

Rutledge disputed many of the points made in the new ruling, and said it should not necessarily be viewed as critical of the district attorney’s office.

“I don’t think it draws any conclusions of fact one way or another,” he said. “They are saying that these allegations are potential trial issues. Lewis might use these arguments as part of his defense.”

Appearance of Conflict Concerns the Justices

Indeed, the court sidestepped a finding of fact in several of the alleged conflicts raised by Lewis’ attorneys. Instead, the justices dwelt on the appearance of conflicts, and how they might undermine public confidence in the case’s outcome.

“When dealing with appearances of conflict, we are concerned with public perception. Considering this evidence, there is a serious danger this perception will be adverse to the integrity of Orange County’s justice system,” the ruling said.

Lewis could not be reached for comment Friday. But his attorney, Brian Sun, hailed the opinion as a vindication for the embattled auditor.

“We are very hopeful that the district attorney will look upon this is a strong signal not to waste anymore taxpayer dollars pursuing Mr. Lewis and these meritless accusations,” Sun said. “We hope this is a step toward the end of this painful and needless process.”

Sun said the appeals court has yet to rule on his request to review the overall merits of the case. If convicted, Lewis would be removed from office.

In its earlier decision in the Stanton-Steiner case, the court found that the district attorney should not be allowed to seek an official’s removal without evidence of corruption or a specific intent to break the law.

The district attorney’s record on bankruptcy cases has been mixed.

Longtime Orange County Treasurer-Tax Collector Robert L. Citron, whose wrong-way bets on interest rates caused the financial collapse, pleaded guilty to six felony counts of falsifying documents and misappropriating public funds. He was sentenced to a year in county jail and ordered to pay $100,000 in fines. Citron, 71, performs clerical work at the jail during the day and goes home at night.

A jury deadlocked 9 to 3 in favor of acquitting former Budget Director Ronald S. Rubino on felony charges related to the bankruptcy. Rubino later pleaded guilty to one misdemeanor under an agreement that will allow him to change his plea to “not guilty” in one year. He was sentenced to perform 100 hours of community service.

This week, the trial of former assistant treasurer Matthew Raabe, who faces the same charges as Citron, got underway in an Orange County Superior Court.

Ruling’s Affect on Other Cases Unclear

It remains unclear what impact, if any, the appeals court ruling could have on the cases of Raabe, Rubino and Citron. Their attorneys were unavailable for comment Friday.

Gary Schons, the state’s senior assistant attorney general, criticized the appeals court ruling in the Lewis case, saying it contradicts the court testimony and the finding of trial judges.

“My concern is that it totally ignores and contradicts the rulings and findings made,” he said. “The findings are contradictory to the record.”

But Stanton, a longtime Capizzi critic, said the ruling was on target.

“It’s pleasurable today to see the court recognize Mike Capizzi for what he is, and the shallowness of what he’s done,” the former supervisor said.

The appeals court listed several reasons for removing Orange County prosecutors from the case, including Capizzi’s service on an “executive council” that essentially ran the county in the chaotic weeks following the bankruptcy.

As a member of this council, Capizzi worked almost daily with William J. Popejoy, then the county chief executive officer who was trying to sort out the bankruptcy, and who openly called for Lewis’ resignation.

The court noted that Capizzi had testified he did not take part in discussions about Lewis’ resignation. “Nevertheless, the difficulty is separating the district attorney’s activities in managing county operations . . . from his contemporaneous prosecutorial investigation adds to an appearance of a conflict. . . . “

Judges also noted that the district attorney’s office suffered cutbacks because of the bankruptcy, and that some prosecutors lost promised pay increases.

But Rutledge said the difficulties should not disqualify the office from handling the Lewis case.

“In a sense, everyone in the county was a victim of it,” he said. “That doesn’t mean [prosecutors] are so directly and personally affected that their judgment is impaired. If that is the case, we couldn’t try any cases in Orange County.”

Rutledge also rejected the idea the Capizzi was trying in influence Saltarelli during their phone conversation mentioned in the court ruling.

“All the district attorney was attempting to do was correct a misunderstanding by the supervisor,” he said. “It sounds like a far jump to say that he was trying to influence the vote on defense costs.”

Lewis Praised When Bankruptcy First Hit

In an interview Friday, Saltarelli said that their conversation was limited to discussing one legal point, and that Capizzi did not lobby him on the defense funding issue.

“He stated at the beginning of our conversation that he was in no way trying to prejudice my vote,” said Saltarelli, who left office in January.

“He did not influence me at all,” he added. “I pretty much took it as a department head passing on information up the chain of command.”

The Board of Supervisors allocated $300,000 in defense costs to Lewis. The auditor sought additional funding twice but was rejected. Finally last December, the board agreed to boost his spending cap to $665,000.

Lewis, 52, has worked for the county for 31 years. He was hired as an entry-level accountant fresh out of San Diego State University in 1965 and worked his way up through the auditor’s office. In 1984, he was elected auditor-controller and ran unopposed in the last three elections.

When the bankruptcy first hit, Lewis was praised for having detected problems at the treasurer’s office in two previous audits. But critics later faulted him for not highlighting his concerns and was also criticized for failing to uncover improper transfers within the now-failed investment pool.

In its ruling, the appeals court noted that Lewis claims he provided Capizzi with a 1991 audit pointing up problems with the county’s investment practices. Capizzi denies receiving the audit.

“The issue here is not whether the district attorney received the [audit] report,” the court stated. “The relevant fact is: There is evidence the report was transmitted. [Lewis] may attempt to assert that he satisfied his responsibilities by advising the district attorney . . . [who] failed in his responsibilities. Thus, the jury may be asked to judge . . . whether the district attorney himself carried out his responsibilities.”

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In the Court’s Opinion

The state’s 4th District Court of Appeal on Friday removed Orange County Dist. Atty. Michael R. Capizzi from prosecuting Auditor-Controller Steve E. Lewis on bankruptcy-related charges. Excerpts from the ruling:

Why Capizzi should be removed from case:

“We hold there exists the appearance of a conflict so grave as to render it unlikely [Lewis] will receive fair treatment.”

*

On phone call Capizzi made to then-Supervisor Don Saltarelli just before supervisors voted on a request by Lewis that his defense attorneys be paid with taxpayer funds:

“Although [Capizzi] denied the call was an attempt to persuade Saltarelli to vote against furnishing a defense for [Lewis], a reasonable inference could be drawn that [that] was the district attorney’s intent. . . . The apparent attempt to limit [Lewis’] resources to defend himself adds substantial weight to the appearance of a conflict.”

*

On Lewis’ claim he supplied Capizzi with an audit pointing up problems with the county’s investment practices before the bankruptcy. Capizzi denies receiving the audit.

“The issue here is not whether the district attorney received the [audit] report. . . . The relevant fact is: There is evidence the report was transmitted. [Lewis] may attempt to assert that he satisfied his responsibilities by advising the district attorney . . . [who] failed in his responsibilities. Thus, the jury may be asked to judge . . . whether the district attorney himself carried out his responsibilities.”

Source: 4th District Court of Appeal