Sixteen years after its treasurer drove Orange County into the largest municipal bankruptcy in U.S. history, the man now holding the office -- haunted by his own legal battles -- has announced that he would surrender his investment powers and bow out of his reelection bid.
Amid calls for his resignation and a stern rebuke from a federal judge, Treasurer Chriss Street said he would give up authority over the county's roughly $5-billion investment pool. The drama has rekindled painful memories in a county that is still paying off the debt from a history-making 1994 bankruptcy that cost thousands of people their jobs.
Street's troubles stem from the eight years he spent at the helm of a bankruptcy trust before he was elected treasurer in June 2006. Last week, a judge ruled that Street had, as a bankruptcy trustee, breached his fiduciary duty by failing to protect and liquidate the trust's assets.
Instead, the judge ruled, Street lost millions in an ill-fated attempt to build an empire by buying bankrupt trailer manufacturers. "This is a case where a fiduciary lost sight of his mandate . . . by engaging in unsuccessful business ventures, self-dealing and violations of the liquidating trust agreement," wrote Judge Richard Neiter, the U.S. Bankruptcy court judge who presided over a two-day civil trial in February.
Ruling that Street had kept improper records and used the trust to pay himself an additional $240,000 in salary and cover personal expenses including personal charges on a company credit card and a trip to South America, the judge ordered him to pay more than $7 million in damages.
Street, a former investment banker, denied mishandling the bankruptcy or seeking personal profit from the case, but said he accepted the judgment. "Every American deserves his day in court, and I had mine," Street said in a memo to county supervisors.
The treasurer's position in Orange County has been a sensitive post going back to the county's $1.6-billion bankruptcy, a financial collapse that was blamed on the risky and capricious investment strategy developed by then-Treasurer Robert Citron, who was ultimately charged with six felonies and sentenced to five years' probation.
Street was among those who had predicted the county's bankruptcy, along with John Moorlach, who succeeded Citron as treasurer. Moorlach later brought Street aboard as his assistant.
When Street decided to run for treasurer, he sought Moorlach's endorsement and the pair had dinner with their wives to discuss their future.
"We asked, 'Well is there anything we should know in case anything comes up?' And he said, 'No, everything's fine,' " said Moorlach, who is now a county supervisor. "Whoever's in that position should be Caesar's wife, with no hint of impropriety."
Street won Moorlach's endorsement and enjoyed a reputation as a reformer, but controversy has dogged his time in office. He faced criticism for using taxpayer money on a costly remodeling of his office, and allegations that he tried to improperly award county contracts.
Moorlach's opinion of Street changed radically, and he has called for Street's resignation repeatedly since 2007.
He did it again in the wake of the judge's ruling. "Why put the residents of this county through your drama, what makes you so special?" Moorlach said last week. "Why does someone with this kind of baggage run into public office?"
Street's decision to surrender his investment powers came days before the board was set to vote on whether to strip him of his authority over the pool of money.
In his memo to supervisors, Street recommended that Auditor-Controller David Sundtrom temporarily step in to watch over the county's investment pool. Street said he intends to "weigh my legal options."
Street could not be reached for comment, but his attorney, Phillip Greer, characterized Street's decision as "best for the county," adding: "I think there's just too many distractions." He said Street did not resign because he felt that wouldn't be "appropriate" or "necessary."
Supervisor Bill Campbell initially endorsed Street's run for treasurer, but withdrew that endorsement once he learned of the lawsuit. He said he thought Street should now resign. "I think it's a black eye for the county," he said.
Keith Rodenhuis, Street's deputy treasurer and spokesman, said the outcome of the trial was "disappointing" and factored into Street's decision not to run for reelection. "There's really no problem in the treasurer's office," he said. "It's really a perception problem." He said the treasurer's office has the highest rating by Standard & Poor's.
Assemblyman Jim Silva (R-Huntington Beach), who served on the Board of Supervisors during the bankruptcy, said he had had great confidence in Street.
"Aside from his private dealings, his public dealings with Orange County have been great," Silva said. "He is probably one of the most respected treasurers in the history of California, if not the best the county has had."
Fred Smoller, director of a public administration master's degree program at Brandman University in Irvine, had a far less rosy view.
He said that long before Street's announcement, Citron and convicted former Orange County Sheriff Michael S. Carona had set the stage for Orange County politics.
"We have a long, unfortunate history of corruption and incompetence," Smoller said.