Controversy Colors Race for Treasurer
What otherwise promised to be a low-key race for Orange County treasurer/tax collector has been anything but, with one candidate stung by allegations that he mismanaged the assets of a bankrupt trailer company, resulting in a district attorney’s investigation.
At a time when first-time candidate Chriss W. Street should have been introducing himself to voters and building support, he has lost three key endorsements -- including one from Dist. Atty. Tony Rackauckas -- amid the controversy.
He has also found himself deflecting charges that his friend and political mentor, Treasurer/Tax Collector John M.W. Moorlach, bent county hiring rules in January to bring Street on as his assistant, giving him a leg up on the job.
Leaders of the county’s employee unions pounced on the allegations, Street said, in an attempt to discredit him and, by association, their chief nemesis on the June 6 ballot: Moorlach.
Moorlach, who has endorsed Street, is running for county supervisor on a pledge to reform the county’s pension system.
“This is all about the unions going after John Moorlach,” said Street, 55, an investment advisor registered with the U.S. Securities and Exchange Commission, who brings a crowded resume of private and public financial experience to the race.
“For someone who went along as long as I did ... to be trashed like this is amazing,” Street said of his role with the trailer company, Fruehauf Trailer Corp.
Challenging Street for the nonpartisan county post is Patrick Desmond, 59, an auditor-appraiser with the county assessor’s office also running for the first time.
Desmond’s candidate statement says he joined the county in 2002 after working for a car dealership and as controller for technology companies. He also worked for accounting firm Deloitte & Touche.
He denied that the county’s employee unions recruited him. Some treasurer’s office employees asked him to run, he said, because they disliked Street and didn’t want him to be able to walk into the job unopposed.
He said Street was tainted by a sweetheart job deal from Moorlach and by the district attorney investigation, which prosecutors have declined to characterize.
Whoever wins will be in charge of the county’s $5.6-billion treasury and sit on the board that oversees the $6-billion Orange County Employees Retirement System fund.
The allegations about Street’s business dealings have dominated the campaign.
They involve a dizzying burst of claims over the fate of Fruehauf Trailer Corp., which filed for bankruptcy in 1996. None of the claims have been ruled on by a judge.
After bankruptcy was granted in 1998, Street took over a successor company formed to liquidate Fruehauf’s remaining assets as well as its pension plan. He resigned in August 2005, replaced by a new trustee, Daniel Harrow.
On March 15, five days after Street filed his candidacy papers to run for Moorlach’s seat, Harrow filed a 63-page statement with the Bankruptcy Court in Delaware accusing Street of “mismanagement, conflicts of interest and greed” while in charge of the trust.
Street said the statement was rife with falsehoods. He defended his actions, saying that creditors had recouped their money and that he had shored up the company’s ailing pension fund.
When the federal Pension Benefit Guaranty Corp. announced its takeover of the fund in 2004, its news release said that a $7-million deficit would be covered by insurance.
In April, Street filed a defamation and conspiracy lawsuit against Harrow and a union official who criticized Street before Orange County supervisors.
Supervisors Bill Campbell and Chris Norby endorsed Street, but withdrew support once the district attorney investigation began.
But the endorsements remain listed in Street’s candidate statement and on some campaign literature.
Street said his most treasured endorsement is from Moorlach, whom he met in 1994 after both men took out forms to run against Treasurer/Tax Collector Robert L. “Bob” Citron.
Street said he had investigated Citron’s risky investment strategy after the treasurer stepped in to help the financially troubled Newport-Mesa Unified School District, which kept its money in the county’s investment pool.
Worried that Citron could lose the district’s money, Street said he soon realized the county’s investments were also in jeopardy.
Street threw his support to Moorlach, who was defeated by Citron. Six months later, Citron’s investment scheme collapsed and the county declared bankruptcy, citing losses of $1.7 billion. The county is still paying off that debt.
Street later was appointed to the county retirement board and the treasurer’s oversight committee -- experience he said made him uniquely qualified to take over for Moorlach and protect taxpayers.
“The most important issue affecting this election is whether public employee unions will control the future of the county’s investment fund and the pension fund,” he said.
Desmond said he had been mystified about why Moorlach continued to back Street in light of the Fruehauf allegations.
At a recent supervisors meeting, board members rejected his request to have Street fired from his assistant treasurer’s job.
He also disputes Moorlach’s assertion that the county risks a second bankruptcy if it doesn’t reform its pension system.
Moorlach has said the county needs another $2.3 billion over 30 years to cover pension payments for its employees.
“I do not know that we’re headed into a crisis with the unfunded pension liabilities,” Desmond said. “And I think it’s reckless to play on people’s fears.”
Desmond said he took out an equity loan of $16,000 on his Lake Forest home of 22 years to pay for his candidate statement and filing fee.
He said he had raised about $14,000 for his campaign.
He expects other campaign help thanks to endorsements from the Orange County Employees Assn. and the Assn. of Orange County Deputy Sheriffs.
A Jesuit seminarian in Northern California in the 1960s, Desmond has a bachelor’s degree in theology from Gonzaga University and a master’s degree from Notre Dame.
Street earned a bachelor’s degree in economics from UC Irvine and attended the executive program at Stanford Business School.
He lent his campaign $215,000, infusing $100,000 last week, and had raised about $8,000 as of mid-March. Street lives in Newport Beach. Updated reports for both candidates are due Thursday.