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Ex-allies now foes in O.C. dispute

Supervisor John Moorlach, Treasurer Chriss Street's former mentor, seeks to freeze his investment powers.

September 11, 2007|Christian Berthelsen | Times Staff Writer

Over a dinner of lemon chicken at Chriss Street's house in November 2005, John Moorlach asked Street if he had any skeletons in his closet that might complicate his campaign for county treasurer.

The pair had been friends for more than a decade, dating to the gloomy days of Orange County's bankruptcy, which both had predicted. Now Moorlach, who would soon be elected to the county Board of Supervisors, was going to help Street get elected as his successor in the county treasurer's office.

Street assured Moorlach there were no problems. "Everything was copacetic and fine," Moorlach recalled in an interview. "I took him at his word."

Before long, Street was accused of misusing the assets of a bankrupt trucking firm for his own gain. But Moorlach held firm in his support and Street was elected, taking office in December.

Yet in the months since, Street has drawn scrutiny for a host of issues, ranging from a pricey office renovation to questions about whether he meddled with a county contract. He is involved in two ongoing legal cases stemming from the trucking bankruptcy, and he is under investigation by multiple state and federal agencies.

Now, Moorlach has lost faith in his onetime political protege and today -- at Moorlach's urging -- supervisors will vote on whether to strip Street of his power to run the county's $5.9-billion investment portfolio.

In recent days, Street and his aides have been scrambling to broker a last-minute compromise, meeting with supervisors and asking them to delay a decision for 30 days.

Street says he was honest with Moorlach when he said there were no troubles looming, and dismissed the concern that he couldn't effectively manage the office.

"There are no distractions," he said in an interview Monday, noting that the office's tax collections are up, its investment pools are rated highly, and it is operating more efficiently. "The results speak for themselves."

Withdrawing Street's investment authority would require "yes" votes by four of five supervisors. It was not clear how the vote would go. Moorlach, the board's vice chairman, is a powerful figure among the five supervisors -- particularly on financial matters, because of his early warning about the county's risky investments that presaged the 1994 bankruptcy, and his stewardship of the treasury afterward that put the county back on track.

Under Street's administration, the investment pool has continued to generate returns above 5% -- roughly the same level they were at the end of Moorlach's tenure -- and the county auditor last week gave the treasurer's office a clean bill of health. But the forceful reaction to Street's troubles reflects Orange County's jittery confidence about its finances, even after more than a decade has passed since its bankruptcy filing.

"There's no sense in having a rush to judgment here," said Keith Rodenhuis, a spokesman for Street. "There's no emergency."

Moorlach and Street, a former bond trader and specialist in restructuring distressed companies, were nearly opponents for the treasurer's job in 1994. Instead, they became allies.

When they first met, both were concerned about how the county's money was being invested, and both were planning to run for the office. But Street withdrew and became a vocal supporter of Moorlach.

Moorlach lost the race, but six months later their concerns proved correct and the county filed for a $1.7-billion bankruptcy. Moorlach was appointed to fill the vacancy left by disgraced treasurer Robert Citroen.

Moorlach and Street stayed in touch, catching up over occasional breakfasts. When Edison International flirted with bankruptcy during the energy crisis in 2001 and imperiled $40 million in Edison notes held by the county, Street became an advisor to Moorlach's creditors committee. The county eventually recovered its investment, with interest.

In 2005, when Moorlach began openly considering a run for county supervisor, Street told him he wanted to succeed him as county treasurer. Moorlach initially had another candidate in mind but agreed to support Street after the other backed out.

Moorlach hired Street to work as his assistant treasurer in January 2006. He said it was intended purely to give his chosen candidate some experience if he was going to run the department, but it had another benefit for Street: It allowed him to state his treasury job as his profession on the ballot statement that goes out to voters. Both won election to their desired posts in June and took office in December.

But already, troubles were brewing. The trustee who succeeded Street overseeing the assets of the Fruehauf Trailer Corp. filed a stunning report in the case, accusing Street of mismanagement and self-dealing, including paying himself $2 million and using the trust to pay for travel to Hawaii, Antarctica, and resorts in Brazil, Chile, Argentina and Mexico, as well as a payment to a plastic surgeon.

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