I had one typo in yesterday’s e-mail.
Why am I doing the Look Backs? For my kids. They were busy growing up while Dad was experiencing a very visible new career. This provides me an opportunity to show them what was happening while they were focusing on school. It also gives me a way of catching up my son-in-law, who did not grow up in the OC, about what his wife (his daughter) experienced during her formative years.
Strike (his daughter) and insert (my daughter).
A thank you to Costa Mesa Mayor Pro Tem Wendy Leece for the catch.
Fifteen years ago today, at a now infamous press conference, Robert L. “Bob” Citron said something like “what I did was not wrong in any shape, manner or form.” Right.
FIVE-YEAR LOOK BACKS
It was a telephone interview that I will never forget. David Evans of Bloomberg News was one of the first to call. Fifteen years later, we still stay in touch. He’s still one of the finest business reporters in the country.
His piece was titled “Orange County, Calif., Investments Lose $1.4 Billion.”
A few months prior the County of Cuyahoga and its County Treasurer suffered a similar fate, but at a much smaller scale.
The County held a press conference on this day to explain its situation. It would be the first day of an incredible new journey in my life.
At that moment in time I had estimated that the value of the portfolio was down some $3 billion, due to some pricing we had done on the derivatives. Thankfully, I was off by nearly double.
Here are portions of what went over the wire that afternoon:
Orange County said the value of its investment fund, which includes money from more than 100 other California municipalities, dropped to an estimated $18.6 billion from $20 billion since January.
“Management believes that, with the cooperation of all its participants and others in its restructuring plan, the fund will not have to sell any securities prematurely at a loss,” said County Administrative Officer Ernie Schneider.
Orange County’s losses were predicted by John Moorlach, a certified public accountant in Costa Mesa, Calif., who lost a bid to unseat County Treasurer Robert Citron in June.
Moorlach estimated Orange County’s portfolio was down $1.2 billion in May. “This will probably be the biggest financial fiasco in the nation. We’re not talking Cuyahoga County (Ohio), $114 million. We’re talking billions.”
The Cal-Tax Digest had a Guest Commentary by Congressman Chris Cox, titled “Internet Tax Freedom Act proves a Successful Start-Up,” marking the first anniversary of this legislation that he co-authored with Senator Ron Wyden (D-Oregon). Chris was kind enough to include me in the list of those that endorsed this Act.
Locally, Orange County’s tax collector, John M. W. Moorlach, told Congress that it should pass the Internet Tax Freedom Act because “our county’s future tax base will depend increasingly on job creation and productivity gains from technology.”
The OC Register included a kind Letter to the Editor by Phil Yarbrough, who now serves on the Rancho Santiago Community College District Board of Trustees. Thanks, Phil!
County tax collector John Moorlach deserves praise from all who desire integrity, diligence and altruism from their public-elected officials.
Moorlach restored Orange Countians’ confidence in the treasurer-tax collector’s position and the confidence of the investment community and of state auditors in our county government. He was the lone voice crying in the wilderness of our impending bankruptcy and he served as deliverer and redeemer in Orange County’s financial apocalypse. Since then he has transformed his office into a consumer-oriented agency that serves the public.
Frank Mickadeit of the OC Register did a piece on Ernie Schneider, titled “Fall Guy in O.C. Bankruptcy is Now All Instinct.” Ernie graciously participated in the conference I hosted at the Nixon Library on the 10th anniversary of the bankruptcy. Here are selected clips:
Schneider has no real control of Citron’s dealings, but he was one of the several public officials who didn’t insist as vociferously as he might have that the Board of Supervisors look into warnings by Citizen Moorlach that Citron had the fiscal sense of Bart Simpson. When the scapegoating ensued, Schneider’s head was one of the first to be whacked.
I called Schneider the other day to review and catch up.
Chief lesson learned from the bankruptcy?
“Follow your instincts,” Schneider told me.
You see, he said, he was on the verge of making a big public deal out of Moorlach’s pre-bankruptcy warnings by requesting a public audit, but he let Citron talk him out of it. Citron, he said, convinced him that Moorlach was just angling for Citron’s job (which he was, although that didn’t make Moorlach wrong) and that Citron had an unblemished track record (which he did). At least one county supervisor was also talked out of an audit by Citron.
“We should have gone with our instincts,” he repeated.