LOS ANGELES -- Orange County, Calif., supervisor Roger Stanton called for acting treasurer-tax collector Matthew Raabe to step down last week following reports that Raabe was the chief salesman for the county's doomed investment fund.
Several city and school officials in the county have said Raabe persuaded them to borrow money to invest in the fund without telling them about the risks.
Raabe and former treasurer-tax collector Robert L. Citron, who resigned Dec. 4, are scheduled to testify before the Securities and Exchange Commission next month regarding their management of the pooled fund. Both have hired private attorneys and turned down requests for interviews.
"The only way to restore confidence is to immediately appoint someone, even on an interim basis, who is intimately familiar with the operations of the county and widely respected in California and on Wall Street," Stanton said in an interview Wednesday with the Orange County Register.
Raabe's employment was expected to be discussed by the Board of Supervisors late Thursday in closed session, with a possible announcement that evening.
Stanton said on a local cable television show last week that he would support the appointment of Costa Mesa accountant John Moorlach, a Republican who ran unsuccessfully against Citron earlier this year and warned of the impending disaster months before the county's Dec. 6 bankruptcy filing.
The supervisor did not say what should happen to Raabe, who has also been portrayed in the local media as an unwilling participant who threatened to resign over Citron's high-risk investment strategy.
Stanton said the board may also consider appointing Tom Daxon, a former Oklahoma state auditor who was hired by the county earlier this month to help run the treasurer's office. Daxon could not be reached for comment.
Moorlach said last week he has not been approached about the job. He was a guest on the same call-in cable show on which Stanton made the remarks.
Stanton, who called the show as an unscheduled guest said he would support Moorlach for the appointment, or campaign for him if the county decides to hold a special election.
Moorlach told The Bond Buyer he has mixed feelings about the possible career change, even though he campaigned for the treasurer's post in the June election.
"A lot of my supporters are pushing the board of supervisors, and I appreciate that," Moorlach said. "But, quite frankly, if we have to push to get through the door, I don't know if that's the job I want."
During the campaign, Moorlach promised that he would unwind Citron's complex and risky investment portfolio, possibly taking a loss, but avoiding the unprecedented financial crisis that is now confronting the county's 2.6 million residents.
Since the debacle became public Dec. 1, Moorlach has been interviewed nonstop by the media and others seeking his insight. He said it has affected his job as a partner in the Costa Mesa, Calif., accounting firm of Balser, Horowitz, Frank & Wakeling.
"I'm going broke, figuratively speaking," Moorlach said. "Luckily, I'm with a good firm and my staff is working away ... but I've got tax season coming up and it's going to be real hard for me to disengage from my client responsibilities in the middle of that. So the county has got to say something soon about what they plan to do."
In other developments last week:
* Orange County administrative officer Ernie Schneider announced that the county would make an emergency distribution of funds for education and other essential services.
These payments will include $2.9 million to civic and social service organizations, and $126 million to municipalities, schools, community college districts, water districts, and transportation agencies.
Supervisors have also set up a separate account within the county investment fund for school districts to deposit their money. The funds will be put into low-risk, short-term investments, Schneider said.
Schneider also said that the sale of risky Orange County securities has gone well, reducing volatility in the investment fund and increasing its liquidity.
* Orange County supervisors Thomas F. Riley and Harriett M. Wieder attended their last board meeting Tuesday before stepping down at the end of the year. Both announced their departures long before the investment debacle surfaced.
In their final remarks, Riley and Wieder expressed remorse.
"I don't know about you, but I wish I had listened just a bit more, questioned just a bit more, and trusted just a bit less," said Riley, 82, who has served on the board for 20 years.
Riley will be succeeded by former state Sen. Marian Bergeson, a Newport Beach Republican who ran unopposed. Wieder's successor will be James Silva, a Huntington Beach school teacher who defeated five other candidates for the job.
* In neighboring San Diego County, officials have agreed on new rules to discourage withdrawals from the county's investment pool. The $3.3 billion fund has suffered a 10.7% value decline as interest rates increased this year.
Attempting to head off an Orange County-style panic, San Diego County Treasurer Paul Boland met with a newly created advisory committee last Wednesday made up of municipal investors in the pool.
The committee members agreed to impose penalties of up to 10.7% on cities and special districts that try to withdraw all of their funds. But partial withdrawals that are eventually replaced will not suffer a penalty, according to a statement issued Thursday by the treasurer's office.
