State Files to Drop Charges Against O.C. Auditor Lewis

The lengthy criminal investigation into the causes of Orange County’s historic bankruptcy all but ended Friday when the state attorney general’s office filed a motion saying the case against Auditor-Controller Steve E. Lewis should be dropped.

In a 17-page motion filed on the eve of the bankruptcy’s third anniversary, Senior Assistant Atty. Gen. Gary W. Schons asked the Los Angeles judge with jurisdiction over the case to dismiss the charges against Lewis “in the furtherance of justice.”

With the state saying it no longer wants to prosecute Lewis, the dismissal appears to be a foregone conclusion.

Lewis was the last of six current and former county officials hit with bankruptcy-related charges to have his case resolved.

The 55-year-old auditor had been charged with willful misconduct in office for failing to properly scrutinize the operations of former Treasurer-Tax Collector Robert L. Citron, whose $1.64 billion in securities trading losses caused the fiscal calamity.

Lewis issued a prophetic warning about Citron’s reckless investment practices more than a year before the bankruptcy but was severely criticized for not calling attention to problems his office uncovered during an audit and for doing virtually nothing to follow up on the warnings.

The state’s decision not to take Lewis to trial marked yet another setback for the district attorney’s office, which last year saw similar civil accusations against William G. Steiner, the current chairman of the Board of Supervisors, and then-Supervisor Roger R. Stanton, who has since retired, thrown out by an appeals court.

Although Steiner, Stanton and Lewis were charged by the same grand jury that issued criminal indictments against ex-Assistant Treasurer Matthew R. Raabe and Ronald S. Rubino, the county’s former budget director, the two supervisors and Lewis were the targets of civil accusations that could have resulted only in their removal from office, not criminal sanctions.

Lewis claimed Friday that the attorney general’s decision to drop the charges against him amounted to vindication, and expressed the hope that he and his family could finally put the financial crisis behind them.

“I always felt comfortable that the truth would eventually come out,” he said. “I think the grand jury was manipulated into bringing these charges against me in the first place. But I am not bitter. I don’t believe that does any good.”

Other county officials said they hoped the resolution of Lewis’ case would finally put an end to the often bitter recriminations over who caused the financial collapse.

“This should bring some closure,” said Clerk-Recorder Gary L. Granville, a close friend of Lewis. “Some people have been made to hurt for this that didn’t need to be hurt, including Steve Lewis. It’s best that we close the book on it.”

*

But critics said Lewis was getting off too easy. “It’s disturbing to end this way,” said Bruce Whitaker, leader of the Committees of Correspondence, a government watchdog group that attracted numerous followers in the wake of the bankruptcy.

“It was his job to provide the early warning signs, and he didn’t do the job. At the very least, he is guilty of a dereliction of duty,” Whitaker said.

Treasurer-Tax Collector John M.W. Moorlach, who likewise issued warnings about Citron’s risky investments months before the bankruptcy, said the outcome of Lewis’ case was fitting, even though he faults the auditor-controller for failing to better communicate his concerns about Citron.

“Steve needed a strong spin,” Moorlach said. “But he shouldn’t have faced a more severe punishment than any of the others.”

Dist. Atty. Michael R. Capizzi succeeded in getting the county grand jury to bring charges against Lewis, Steiner and Stanton in December 1995. But a state appeals court later dismissed the charges against the two supervisors, saying they enjoyed legislative immunity for the actions they took.

In June, the same appeals court disqualified Capizzi from prosecuting Lewis, saying his office had obvious conflicts of interest “so grave as to render it unlikely that [Lewis] will receive fair treatment.” The case was then transferred to the state attorney general, whose office asked on Friday that the charges against Lewis be dropped.

Capizzi said he supports the attorney general’s decision, because a ruling by the 4th District Court of Appeal on the Stanton and Steiner cases effectively “rewrote” state law on official misconduct and made it impossible to obtain a conviction of Lewis in court.

“I agree with the result,” he said. “We try to be philosophical about these things. But we are not pleased the court chose to rewrite the law.”

*

In his motion, Schons wrote that in dismissing charges against Steiner and Stanton, the appellate court had revised the standard of proof in willful misconduct cases, ruling that prosecutors must now prove that the accused is guilty of “a purposeful failure to carry out mandatory duties of office.”

In revising the standard, the appellate court strongly criticized Capizzi, saying his reading of the law effectively made him a “performance monitor of elected officials” and “he could try to oust them for getting a C- on their report cards.”

Schons concluded that “the accusation against [Lewis], like those against Steiner and Stanton, and the evidence available to prove them do not establish ‘willful misconduct’ which involved ‘criminal behavior or . . . a purposeful failure to carry out mandatory duties of office.’ ”

“Rather,” Schons continued, “the accusations allege defendant Lewis, like the supervisors, was simply incompetent in failing to detect the illegal scheme . . . and in abetting the supervisors’ role in allowing it to go on.”

Even if Lewis had been convicted, Schons noted, the maximum punishment he faced was removal from office and his term ends next year, “thereby depriving [the case] of any legal effect.”

One of Lewis’ attorneys, Michael Greene, said in a statement Friday that the state’s move to dismiss the charges was long overdue.

“Mr. Lewis has performed his duties with the upmost integrity throughout a long and distinguished career in public service,” Greene said. “These charges never should have been brought by the D.A.’s office.”

Lewis, who was born in Corona, joined county government shortly after graduating from San Diego State University in 1965. He gradually rose from a $545-a-month position of entry-level accountant to the $104,582-a-year post of auditor-controller, at one point supervising 450 employees with a budget of $22 million a year.

*

Prior to the bankruptcy, Lewis was best known for his aggressive questioning of expenses submitted by county officials. Once, Lewis kicked back a $75 bill for pizza that the department director had ordered for personnel employees working late one night.

But Lewis’ reputation quickly lost its luster as supervisors and others sought to blame him for what they saw his lax oversight of Citron’s office.

After the bankruptcy, millionaire businessman William J. Popejoy, who served briefly as the county’s chief executive in 1995, joined several supervisors in publicly castigating Lewis, trying to bully him into resigning.

“Mr. Lewis has talked about the red flags he has raised along the way,” Popejoy said at the time. “But I must confess that I’ve gone through the audit reports and I don’t see the red flags. I don’t even see the caution flags.”

Virtually no one remembers seeing his infamous 1991 audit, sent to the board Aug. 5, 1993, and marked “not for board agenda,” which had the effect of keeping its contents secret.

The audit warned that Citron had bought investments prohibited by state law and needed more oversight. Lewis sent another grave warning about Citron’s risky investing practices in June 1994--five months before the bankruptcy.

Citron, who was charged with multiple felonies, quickly entered a plea of guilty to falsifying records and violating state securities laws. In October, he finished serving what turned out to be an eight-month sentence in a work-release program that allowed him to spend his nights at home.

His assistant, Raabe, was convicted of six felony counts and sentenced in October to three years in prison for his role in helping divert interest income from other investors into the county’s general fund. He is free on bail pending an appeal.

Former Budget Director Ronald S. Rubino was charged with falsifying public records. A jury deadlocked 9 to 3 in favor of acquittal earlier this year. He then pleaded “no contest” to a single felony charge under a deal that reduced the charge to a misdemeanor and will allow the judge to wipe his record clean after one year.

Capizzi said Friday he was “very pleased” with the outcome of the whole bankruptcy investigation.

Friends said the threat of prosecution has been a major hardship for Lewis, whose wife is seriously ill. Still, Lewis said Friday that he held no hard feelings toward Capizzi.

“I don’t know what his motives were,” Lewis said. “But I think he was wrong in his accusations. I think he believed this whole thing was a conspiracy from the start.”

Lewis said he is unsure whether he will run for reelection next year, but doubted that the decision to drop charges against him would totally rehabilitate his image with the public.

“I can’t expect them to fully understand all this,” he said.

A hearing on the motion in the Lewis case is scheduled for 11:30 a.m. Wednesday before Los Angeles Superior Court Judge John W. Ouderkirk.