Misconduct Charges Against Stanton and Steiner Dismissed

SANTA ANA —  A state appeals court on Tuesday dismissed all charges against the two Orange County supervisors 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 at all.

Board Chairman Roger R. Stanton and Supervisor William G. Steiner, the only remaining 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 state 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.”

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 before he leaves public office to join an Arizona-based child advocacy group.

Both men were charged last December by the grand jury for failing to properly supervise Citron and Auditor-Controller Steve E. Lewis, and with allowing the county to borrow more than $1 billion without making sure the proceeds would be safely invested and that the county had the ability repay the borrowings.

Citron, who was sentenced to a year in the county jail last week for felonies uncovered as a result of the bankruptcy, used the $1 billion in question to double up his wrong-way bets on the direction of interest rates. His investments lost $1.64 billion in the fall of 1994, and the county declared bankruptcy.

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 in effect that only the voters, not the district attorney, should remove elected officials for failing to perform their duties.

Giving the district attorney 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.”

Dist. Atty. Michael R. Capizzi said his office was studying the ruling and would decide in coming weeks whether to accept the ruling or take it on appeal to the California Supreme Court.

Interviewed moments before he joined a celebration in his Hall of Administration office, 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 added, “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 in a matter of weeks, 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, “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.

Capizzi said he has no regrets about seeking the charges, noting that his office has won guilty pleas from Citron and former Budget Director Ronald S. Rubino.

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 for seeking the removal of an elected official.

The way that Capizzi 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.”

Capizzi said the published appellate ruling establishes “a new rule of law” with regard to willful misconduct by public officials. “We can’t anticipate what a court is going to do,” Capizzi said. “In saying an act must be ‘purposeful’ they’ve added another element, they’ve redefined the law.”

“We were acting under the law that has been on the books for 100 years. We had an obligation to do so and we’d have been justly criticized for not doing it.”

“The time and effort were well justified,” Capizzi added. “I think the critics will always find some area to justify their positions. But I think it’s misplaced in this area.”

Wylie A. Aitken, Stanton’s lawyer, said that one week before the accusations were issued he tried to warn Assistant Dist. Attys. Wallace J. Wade and Jan J. Nolan not to seek charges for nonfeasance.

“I told them to their faces it was a waste of time,” Aitken said. “When they began to explain their theory . . . I was absolutely aghast that I, as a taxpayer, was paying for such incompetence. It doesn’t take a rocket scientist to know that’s wrong.”

Aitken continued: “I told them then, and I’m telling them now, that the sad part is that kind of arrogance, and bad ‘lawyering.’ We’ve now spent all of this money and . . . caused all of this pain to Bill Steiner’s family and Roger Stanton’s family, and Mike Capizzi should clearly be ashamed.”

In court papers and at numerous court hearings, Aitken and Steiner’s lawyer, Allan H. Stokke, charged that prosecutors had squandered millions of dollars using dozens of attorneys and investigators to bring ill-advised charges against the supervisors, when they should have focused their attention on the financial firms that advised the county.

Wade said his office has never attempted to calculate the actual costs of investigating and prosecuting bankruptcy matters. “I think it would be difficult to break it down,” he said.

“How do you separate the general investigation cost from the cost of investigating Citron, or from [former Assistant Treasurer Matthew] Raabe, or from the other people we have looked at? It’s difficult to break these costs down discretely in terms of the entire investigation.”

Wade defended the prosecution’s efforts thus far. “The taxpayers pay our salaries to do exactly what we’ve been doing, and that is to diligently investigate substantial allegations of wrongdoing. We are confident that we are doing exactly what the taxpayers expect us to do.”

In the court’s ruling, Wallin said that accepting prosecutors’ arguments that supervisors could be charged criminally for failing to carry out their general legislative duties “would put the district attorney in the position of a super-governor in the county.”

“Supervisors would look over their shoulders before taking any discretionary action for fear the district attorney would find they had not passed muster and would subject them to the expensive and protracted proceedings we have seen in this case. On the other hand, if the supervisors failed to act, they would fear ‘criminal’ prosecution for a negligent omission. They would be hard-pressed to function adequately in such an environment,” the ruling said.

The ruling prompted a mixed reaction in Orange County.

Steve White, an Anaheim activist and member of the Committees of Correspondence, stern critics of elected officials throughout the bankruptcy, said, “We have been let down by the courts, no question about it. . . . They were caught red-handed for failing to do their jobs. Now they are walking away scot-free. No one is served by that.”

Frank Eley, president of the Orange County Employees Assn., said the dismissal heightens doubts that many employees have about the fairness of the bankruptcy, which forced the layoff of more than 500 county workers.

“Rightly or wrongly, a lot of employees see that some supervisors are still in office and ask themselves why that is,” Eley said. “They feel that the workers have taken the heat to prolong the stay of supervisors.”

Carole Walters, president of the Orange Taxpayers Assn., faulted Capizzi for his handling of the bankruptcy cases.

“He’s handled this all very poorly,” Walters said. “He spent all this time and spent all this money on a case but accomplished nothing. . . . It’s embarrassing. He should be spending time handling real crimes, not this stuff.”

While the supervisors might not be held legally accountable, said Fred Smoller, a professor of political science at Chapman University, they nonetheless have paid a clear political price.

“This might mean that there isn’t a legal reason to remove them from office,” Smoller said. “But ultimately, the citizens have a political voice in this.”

And Smoller said the dismissal should not necessarily be viewed as a defeat for Capizzi.

“Justice is an elusive and expensive thing,” he said. “The fact that there weren’t convictions doesn’t necessarily mean the [investigation] was a waste of money. There needed to be a complete investigation. The public should be angry if these charges weren’t investigated.”

Said Supervisor Don Saltarelli, “I am very happy for my colleagues. They have both been through a tremendous ordeal. These accusations were not in the public’s best interest and should not have been filed.

“I congratulate them for hanging in there and not resigning. They showed a great deal of courage,” Saltarelli added.

“This was a major event, and it seems like people are saying it’s not a big deal and we should forget about it,” said Wendy Tobiska, a parent volunteer in the Santa Ana Unified School District. “They didn’t mind the shop. It bothers me that no one seems to be taking any responsibility.”

And Lucy Grismer, an anti-tax activist in Placentia, said she was “disgusted” by the ruling. “It’s disgraceful,” she said. “After all this time and money, they are going to get away with it. There is no justice here.”

Mayor Algird Leiga of Claremont, one of 200 cities, schools and small agencies that invested in the county pool, was also disappointed with the ruling.

“I feel let down by the process,” Leiga said. “None of these guys have taken responsibility for any of their actions. It’s as if the crooks closed ranks and had that poor fool Citron take the fall. It’s business as usual, but they’ve left a disastrous legacy.”

Also contributing to this report was Times staff writer Davan Maharaj.

Who’s Clear and Who Isn’t: Of the six main county officials who Dist. Atty. Michael R. Capizzi targeted for prosecution after the bankruptcy almost two years ago, two have been sentenced, two won dismissal of the charges and two have charges pending. Meanwhile, the effects of the bankruptcy are still being felt. A10

* JUDGES’ REMARKS: Court saw danger in district attorney seeking to have elected officials ousted. A10

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Capizzi’s Targets

Almost two years after Orange County declared bankruptcy, here is a status report on six key figures whose prosecution was sought by Dist. Atty. Michael R. Capizzi:

Robert L. Citron

Position: Former treasurer-tax collector

Allegation: Pleaded guilty to six felony counts of fraud and misappropriation of funds in county’s collapsed investment pool

Disposition: Fined $100,000 and sentenced to a year in jail

Defense costs: The county stopped paying his legal bills in January 1995

****

Steve E. Lewis

Position: Auditor-controller

Allegation: Faces civil misconduct charges for failing to prevent bankruptcy

Disposition: Case pending

Defense costs: Board allocated $300,000 but rejected requests for additional funds in an apparent effort to force him to resign

****

Matthew Raabe

Position: Former assistant treasurer

Allegation: Faces six felony counts of fraud and misappropriation of funds in county investment pool

Disposition: Awaiting trial

Defense costs: Raabe was found to be indigent; his private attorneys are being paid with taxpayer funds. His legal bills are said to top $600,000

****

Ronald S. Rubino

Position: Former county budget director

Allegation: Charged with two felony counts for allegedly helping Citron divert interest earned by government agencies that placed money in county investment pool

Disposition: After a jury deadlocked 9 to 3 in favor of acquittal, Rubino pleaded no contest to one misdemeanor charge and must perform 100 hours of community service; under agreement, he can change plea to “not guilty” in one year and have his record wiped clean.

Defense costs: Board allocated about $650,000

****

Roger R. Stanton

Position: Board of Supervisors chairman

Allegation: Faced civil misconduct charges for failing to prevent bankruptcy

Disposition: Appeals court dismissed case; Stanton leaves office next month when his term ends

Defense costs: Board allocated $250,000 in taxpayer dollars

****

William G. Steiner

Position: Supervisor

Allegation: Faced civil misconduct charges for failing to prevent bankruptcy

Disposition: Appeals court dismissed case and Steiner set to become board chairman in 1997; has said he will leave office when term expires in 1998 and work for a child welfare agency in Arizona

Defense costs: Board allocated up to $500,000, but Steiner will use only about $300,000

****

SOME WAYS BANKRUPTCY IS BEING FELT

* Cuts in social programs, including those dealing with mental health, child-abuse prevention and medical services for the poor

* Higher fees for landfill dumping, planning and permits and library fines; price of camping reservations and parking at county parks and beaches also increased

* Less money for flood control projects, park expansions, redevelopment and road projects

* Layoffs of more than 500 employees

* Bankruptcy recovery plan that requires county to repay $800 million in bonds over 30 years, significantly limiting Orange County’s financial flexibility

Source: Times reports

Researched by SHELBY GRAD / Los Angeles Times