Three years ago, during the now infamous credit crunch of 2008, Jefferson County, Alabama, found itself up against the fiscal ropes with its interest rate swaps. The FOX News affiliate from Birmingham flew into the OC and interviewed a few of us. That interview resurfaces in the first piece below from FOX News WBRC Channel 6. Several of the facts are not accurate. It took us much longer than 6 months to exit bankruptcy protection. Also, one billion dollars is a little larger than “hundreds of millions of dollars.” Rest assured, when a municipality considers filing for Chapter 9 bankruptcy protection, you can bet your sweet bippy that Orange County, California, will be mentioned. The expert that Jefferson County will meet with is UCLA law professor Kenneth Klee. He is a renowned municipal bankruptcy expert and it was his firm that the OC called in, only to find that a few of his partners spun off and created a new firm to handle this new and very lucrative client. That firm would become Hennigan, Mercer and Bennett. For a current update, Bruce Bennett represents another celebrity bankruptcy client: the Los Angeles Dodgers and team owner Frank McCourt.
In another court-related story, the OC Register brings us up to date on Chriss Street. Chriss Street failed to mention one minor issue in his life when I asked him about possible skeletons in the closet: Fruehauf. Obfuscation by silence or withholding critical information is inexcusable. Rest assured, when Chriss Street is mentioned in the media, you can bet my hiring of the next potential elected County Treasurer (for succession planning purposes) will be mentioned. The verb “recruited” is not an accurate description, but “hired” is.
Jefferson County to meet with bankruptcy expert Thursday
By Jonathan Hardison
Jefferson County commissioners will meet with a municipal bankruptcy expert Thursday. He’s the same man who helped Orange County, California get through it’s bankruptcy experience in 1994.
Orange County’s problems came because of bad investments by their county treasurer. When the county board of supervisors discovered the problem, they filed for bankruptcy in 3 days, and nearly 6 months later, they were out of it. They faced hundreds of millions of dollars in new debt, and they slashed more than 1,000 jobs.
"It was just a bomb going off, and you had to adjust to it," Orange County’s Public Finance Manager Thomas Beckett told FOX6 News in a March 2008 interview.
Jefferson County has cut more than 500 jobs so far, but that’s mainly because of losing the occupational tax, similar to Orange County losing money from its investments. UAB finance Professor Andreas Rauterkus says that’s where the similarities end.
"It was the beginning of a major economic boom when that happened," said Dr. Andreas Rauterkus, finance professor at UAB. "We’re not at the beginning of a major economic boom."
In Orange County, growth fueled by the booming Los Angeles-area economy and the roaring ’90s helped the county get back to where it had been within a decade.
But with the economy still limping along, Jefferson County can’t count on new tax dollars, it could mean more cuts that affect you.
"That’s gonna mean any kind of services," Rauterkus said. "If it is for senior citizens, if it is maintenance, if it’s the sheriff’s office, whatever it might be. Any kind of services the county offers will be cut altogether or cut down significantly."
If there’s one way Orange County’s example can still help here, it could be the lesson of making sure bankers who helped get the county into this mess can also help it back out.
"A lot of the ingredients we had in Orange Co. in ’94 are back, and you gotta step back and slap somebody in the face and say, ‘hey, timeout. You brought us here, you take us out," said John Moorlach, an Orange County Supervisor.
The meeting is scheduled for 9am Thursday at the Jefferson County Commission chambers.
Court denies Street’s suit against fund
Ex-O.C. treasurer’s political career was destroyed by $7 million judgment.
A Delaware bankruptcy judge refused to let former Orange County Treasurer-Tax Collector Chriss Street pursue a $40 million lawsuit against the same people who won a $7 million judgment against him last March.
That $7 million judgment wrecked Street’s political career.
Street, a non-lawyer who is representing himself in the Delaware case, said he will “go forward” with the original lawsuit, a straightforward contract dispute, filed in 2008. Judge Peter Walsh on Friday denied him permission to pursue an amended lawsuit alleging embezzlement at the End of the Road Trust, which Street formerly ran.
“It’s almost over,” said Dan Harrow, the Los Angeles money manager who replaced Street at the End of the Road Trust. “It’s almost over.”
Harrow has been trying for more than a year to collect the $7 million judgment.
Street headed the End of the Road Trust, the poetically named successor to the Fruehauf truck-trailer manufacturing company, from 1998 until August 2005, when creditors forced him out. Then county-Treasurer John Moorlach recruited him as assistant treasurer and political heir in January 2006.
Street was elected to a single term as treasurer. His four-year term was marked by controversies over investments and ultimately derailed by the Fruehauf lawsuit and judgment.
Within days after U.S. Bankruptcy Judge Richard Neiter imposed the judgment, county supervisors stripped Street of his authority to invest county money. Street withdrew his re-election bid.
FIVE-YEAR LOOK BACKS
The OC Register had a weekly paper for West Orange County called, appropriately enough, The Westsider. Weekly columnist John Underwood provided his first impressions of the new Second District Supervisor in “Tall in the saddle – Supervisor-Elect John Moorlach seems genuine in word and deed.” There are is a correction I should make. Robert Citron was the incumbent county treasurer in 1994, not the CEO.
I was thinking about the importance of first impressions as I stood in the lobby of Los Alamitos cable TV studios earlier this month awaiting the arrival of my scheduled guest: County Supervisor-Elect John Moorlach.
He had just clinched his first victory in the June 6 open election for the second district seat and this would be his first formal on-air appearance in front of the voters who elected him and a chance for me to form a few up-close impressions of my own.
He had won, in fact by a landslide, but along the way took some pretty low blows from an opposition backed by the public employee unions depicting him in their mailers as everything from chicken little to the devil himself for blowing the whistle on the county’s overextended and underfunded pension obligations, which Moorlach says are threatening to break the back of the county all over again.
It isn’t the first time Moorlach cried foul to the powers that be in the county, and not the first time he was told to shut up about it. Back in ’94 he tried to call attention to the shaky investment strategies he believed were leading the county off a financial cliff. He was dismissed as a hysterical doomsayer by, among others, then county CEO Robert Citron. Shortly thereafter the county ran off that cliff and into bankruptcy. Moorlach, on the other hand, looking like the man on the white horse, was rewarded for his valiant warnings with a position as county treasurer he has executed for the past 11 years.
Now he’s back, busting the county’s chops again with another doomsday scenario. Given his track record it’s hard not to at least hear him out. But this time he’ll be on the inside with a voice and a vote. How he would use those formidable tools would be the subject of our discussion. Would he build on his Sir Galahad image to break the unions’ lock on the county pension drain? Would he go after those who tarnished his reputation during the campaign, as Sheriff Corona is now doing? Would he sharpen his ax on press guys like me who were at times during the campaign sometimes unsympathetic in print? (I never quite bought into the “Sir Galahad” imagery).
From the moment he stepped in the door alone (and without any of the usual handlers and flaks that attend high profile officials), if he harbored any reservations toward me he never showed it. Nor did he bat an eye when I produced several of the mailers that attacked him as a “bad apple” and a tax cheat. He did say he resented being called a “career politician” since as a matter of record the only truly elected office he’s held is the one he is about to enter, and took a pay cut to do it.
He did talk at length about his wife and three kids, two of them still in college, his concern for the toll a contentious campaign takes on such noncombatants and how it was important for him to sit down with them and fully explain why running for this office was still an important thing to do. He reminded me that he actually grew up next door in Cypress when it was mostly dairy farms. In fact, he said, he lived on one across the street from what is presently City Hall, and followed up with a couple of charming childhood anecdotes about vacant lots and dirt clod fights.
But reporters are not easily charmed. What I was after was the heart of the man’s politics. I peppered him with a few preshow background questions but it wasn’t until I offered to provide him with a list of talking points (standard procedure) that the guy won me over by saying, “That’s OK, just surprise me. I’ll just take ‘em as they come.” Highly risky behavior for a “career politician” about to assume the mantle of power.
Through the course of the interview Moorlach responded to most of my questions point by point and eye to eye. When he wasn’t sure he said so, and seemed truly engaged in what I thought Westsiders are thinking, which brings me to my last first impression of him.
He’s the first public official in a long time I’ve heard refer to us at this end of the county as “West Orange Countians,” distinct from the demographic mass of Central OC, or as some lesser suburb of North County. Indeed West Orange County has issues of its own, from annexations to transportation. Moorlach at least seems willing to see them in that light. And that does impress me.
It still doesn’t make him Sir Galahad yet in my book. But it does set him a little taller in the saddle.
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