MOORLACH UPDATE — Verdict — March 8, 2010

Thursday morning I participated in the Bolsa Chica Warner Avenue Bridge dedication, then off to my annual Brianhead, Utah ski trip with my youngest. 

Boy, were things busy while I was out for a four-day vacation weekend.

New Airport Working Group Board President Tony Khoury printed an “open letter” to me in the Friday edition of the Daily Pilot.  So much for working on communication with this group over the past few years.  It can be seen at  This organization is having a dinner on Wednesday evening and I may have someone present to address Mr. Khoury’s never previously expressed concern.

Also on Friday, FOX Business News featured an article on our state’s dismal fiscal condition that includes my recent quotes.  It can be seen at

The big story was the Federal Bankruptcy Judge’s decision in Treasurer-Tax Collector Chriss Street’s Fruehauf Trailer Corp. trial, an issue that has dogged him since he pulled for papers for his elected position four years ago.  It was the lead article on the front page of Saturday’s OC Register and is the first article provided below.  This story was also picked up by MSNBC at

Sunday’s Los Angeles Daily Breeze had an update on our retroactive pension lawsuit.  It is the second article provided  below.  It also printed in the Long Beach Press-Telegram, the Indiana Gazette, and the Los Angeles Daily News, see

Sunday’s North County Times (and the OC Register, “Who could blame us for cussing?”) printed Steven Greenhut’s weekly column.  It is the third piece below.

There are also a few LOOK BACKS that are provided, one in whole, to show some of the fun one endures in this industry.

It is not fun when someone you’ve enjoyed a long relationship with does not tell you the truth.  Chriss Street withheld information in order to obtain a job that he could not be fired from. 

Never once did he mention that his relationship with Fruehauf resulted from his being terminated from his position.

Never once did he discuss with me the gravity of the issues raised by his successor trustee.

I had to learn it piece-meal from reporters.

When I finally found out the truth, after making excuses for him for far too long, I asked him to resign as Treasurer-Tax Collector.

Why should the voters be dragged through his trial?  Especially when there was every indication from the public record that his actions were difficult to defend?

And why should the citizens of Orange County have to put up with someone that has character flaws, like telling half truths or withholding vital information.

After you read the first article, you will understand why I asked him to resign some two-and-one-half years ago.

He should do it now.

Verdict: Street breached his fiduciary duty


A federal bankruptcy judge has found that Orange County Treasurer-Tax Collector Chriss Street breached his fiduciary duty five years ago when he attempted to build an empire instead of protecting the assets of a trust he was hired to liquidate.

U.S. Bankruptcy Judge Richard M. Neiter on Friday ordered Street to pay more than $7 million in damages to the End of the Road Trust. Orange County Supervisor John Moorlach called for Street’s resignation.

"He’s got to go," said Moorlach, who was Street’s predecessor for Orange County treasurer and endorsed him in 2006. "The taxpayers don’t deserve this nonsense."

Street was the court-appointed trustee for the remains of the bankrupt Fruehauf Trailer Corp. on from 1998 until creditors forced him out in July 2005. Moorlach hired him as the county’s assistant treasurer in 2006. The judge’s decision comes a week before a filing deadline for candidates to challenge Street’s reelection bid in the June election.

During a two-day trial, attorneys for the trust accused Street of wasting money on failed business ventures, delaying payments to creditors, and otherwise breaching his duty "in an effort to serve his own selfish ends."

Neiter agreed in a 29-page ruling in which he questioned Street’s credibility and used words like "absurd" and "inconceivable" to describe Street’s actions and explanations.

"The overwhelming evidence at trial showed that the Defendant willfully engaged in self-dealing to advance his personal interest ahead of that of the Trust’s beneficiaries," Neiter wrote.

Through his attorney, Phillip B. Greer, Street declined to comment. Greer also said he won’t comment on the case, or on Moorlach’s call for Street’s resignation, until he has a chance to further review the ruling.

"And I would hope that everyone else could do the same thing," Greer said. "I think that you have to look at what Mr. Street has done as treasurer … He has provided calm, conservative and competent stewardship of the county’s money and resources."

Street’s successor as trustee at Fruehauf, Los Angeles money manager Dan Harrow, sued him for fraud and breach of fiduciary duty in February 2007.

The case hinged on Street’s decision as trustee to buy two failing truck-trailer manufacturers. He bought the companies, American Trailer Inc. and Dorsey Trailers, in an attempt to build up the trust’s one profitable operation, Mexican manufacturer Fruehauf de Mexico. Both companies ultimately collapsed after the trust poured millions of dollars into them.

Neiter rejected Street’s argument that he should not be held liable for the decision because independent oversight groups – not him – approved the transactions.

The only plausible explanation for the purchases, Neiter wrote, is that Street "was attempting to create an operating company that would do business in the United States and Mexico that would go public and enable Street to earn substantial sums as its CEO and as a major shareholder. It was not to preserve Trust assets while pursuing their liquidation."

The $7,068,765 judgment includes more than $3.3 million for violations of the trust agreement related to his dealings with Dorsey and nearly $3.2 million for the purchase of American Trailer. In addition, it calls for Street to repay $242,544 in excess salary compensation and $203,754 for personal expenses that he charged to the trust.

Court records showed that Street used the trust as his personal piggy bank, charging stays at resort hotels, a $750 dinner at Spago, Botox treatments and a traffic citation for his Ferrari.

The judge rejected a demand by the trustee that Street repay his entire salary.

"We’ve carried this case for a long time, and we endured a difficult trial, and we’re very pleased that justice prevailed in the end," Fruehauf attorney Robert Kugler said.

Street can’t evade paying damages by filing for bankruptcy, Kugler said, because a section in the bankruptcy code prohibits the discharge of debts for fraud, reckless conduct or breach of fiduciary duty.

In addition to being a victory for the trust, Kugler said, it’s of "significant concern" to Orange County voters, he said.

"I think that you’ve got an elected official out there who has been found to have intentionally breached duties of trust – the very same types of duties that he has as the treasurer of Orange County. And that ought to be of significant concern to any voter of Orange County," Kugler said.

So far, two candidates are challenging Street for the county treasurer’s post: Huntington Beach’s elected treasurer, Shari Freidenrich and Pat Desmond, a long-time employee of the county assessor.

"It’s just a sad day in Orange County," Freidenrich said. "Taxpayers and our elected leaders need a treasurer who has an unblemished record of protecting public funds and meeting the position’s fiduciary duty."

Even if Street is reelected in June, Moorlach said he’d ask his fellow supervisors to consider stripping Street of his investment authority. No other county supervisor returned calls for comment.

Street was one of Moorlach’s advisors when he first questioned former Treasurer Robert Citron’s heavily leveraged investment strategy in 1994. Moorlach lost that race but was appointed treasurer after Citron’s bets collapsed and the county fled into bankruptcy court. Moorlach later hired Street as his assistant.

But Moorlach’s endorsement of Street is long gone.

Moorlach said he’s supporting Freidenrich in June’s election and urged voters to do the same: "I don’t think he’s got the right to still be in an elected position."

Costly pensions under fire

By Troy Anderson Staff Writer

As state and local governments fight potential bankruptcy, some officials are taking a new look at scaling back billions of dollars in pension benefits for public employees.

The effort could trigger a massive fight with the state’s powerful public unions, who have managed to quash previous pension reform efforts.

"Pensions … are going to be the next 800-pound gorilla that local governments will be facing along with the state," said Los Angeles County Supervisor Michael Antonovich, who is pushing for the county to rein in pension costs.

Last week, Antonovich directed county Chief Executive Officer Bill Fujioka to prepare a report on how to address rising pension costs. Even as the county faces a massive budget shortfall, its contribution to its pension system is expected to increase from $804 million now to $1.27 billion by 2012-13.

Similarly, Los Angeles city’s contribution to its pension system is expected to double from $653 million now to $1.3 billion in four years. The city makes that contribution from its general fund, which already faces a deficit of almost $700 million over the next 16 months.

"The current system is not sustainable," Los Angeles City Administrative Officer Miguel Santana said. "It’s our pension costs that are in particular contributing to the deficit that we’re facing.

"If our objective is to rein in our deficits, pension reforms have to be part of the long-term plan."

City Councilman Bill Rosendahl, who represents the Westside, said he has tried to push for pension reform at the local level, but hasn’t gained much traction with other city officials.

"I keep asking for us to move ahead on pension reform, to get something on the ballot if we can, but no one else seems to want to deal with it," Rosendahl said last month.

He suggested the city look at reducing pension costs by increasing the amount employees contribute to the pension system and raising the age of retirement.

Such efforts, however, face sharp opposition from the state’s powerful public employee unions, which can muster votes and campaign contributions to fight any politician who promotes reform that will lower benefits.

Terry Brennand, senior government relations advocate for the California State Council of Service Employees International Union, said the union representing 700,000 workers does not support "dramatic and drastic reforms" such as 401(k)-style plans.

But Brennand also said many SEIU locals throughout the state have already agreed to increases in employee contributions and other changes.

"We’re all for anything that shores up the retirement system and makes sure we can guarantee the promises we made to employees," Brennand said.

Another reform effort involves a pending lawsuit filed by Orange County that seeks to overturn a 1999 state law that gave retroactive boosts in pension benefits to public employees.

Senate Bill 400 essentially lowered the retirement age for public employees leading to a formula under which some workers could retire as early as age 50 with a pension of up to 90 percent of their salary.

Orange County claims that pension increases based on that law and approved in 2001 by the then-county Board of Supervisors were an "enormous pension giveaway" that violated the state constitution’s requirements of seeking voter approval to incur new debt.

The county lost its initial Los Angeles Superior Court case, filed against the Association of Orange County Deputy Sheriffs in 2008, but is now appealing to the 2nd Appellate District.

Officials say the case could result in a rollback in retroactive pension benefits statewide, saving taxpayers billions of dollars.

"If we prevail, everything up and down the state on retroactivity for pensions would be re-evaluated," Orange County Supervisor John Moorlach said. "It would be a most interesting cataclysmic event."

But George Urch, spokesman for the 1,800-member AOCDS, said Moorlach is "dreaming."

"The case has been thrown out of court twice," Urch said. "Three different firms told them they could not win the case. They brought in a fourth firm and they told them, `Well, you ought to give it a shot.’ There isn’t an attorney in the state who thinks they have a shot."

The debate comes as governments throughout the state are facing unprecedented budget deficits. Sacramento is trying to close a $20 billion budget gap, while Los Angeles Unified School District may have to lay off thousands of teachers next year to tackle a $640 million shortfall.

Already, California taxpayers are spending $17 billion to $18 billion a year to pay for public employee pensions and retiree health care costs and the Legislative Analyst’s Office says the tab is increasing at a rate of "several billion dollars a year."

A Stanford University study estimates that California taxpayers may ultimately be on the hook for up to half a trillion dollars in combined debt from bonds, unfunded public pensions and retiree health liabilities over the next three decades.

Howard Jarvis Taxpayers Association Executive Director Kris Vosburgh said the state is rapidly running out of time to reverse the momentum toward insolvency.

"Even if we institute reforms today, we’d still be lucky to not find ourselves in a position where public services are cut to the bone and taxes are raised to support these unfunded obligations," Vosburgh said. "We need courageous leadership in Sacramento that basically tells the public employee unions that either they agree to take less or face massive layoffs."

The three major candidates for governor have also called for pension reforms. Republican gubernatorial candidate Meg Whitman proposes to raise the retirement age for most state workers from 55 to 65, require longer vesting periods and require state employees to contribute more to their pensions. She also favors a two-tier pension system in which new workers are given 401(k)-style plans.

"She believes it’s wrong to ask workers in the private sector to pay higher taxes to fund more lavish retirement benefits for state workers," Whitman press secretary Sarah Pompei said.

Republican gubernatorial candidate Steve Poizner has proposed to move new employees to a 401(k)-style plan and increase employee contributions for existing employees.

"Because all but one of the current state worker memoranda of understanding have expired, there is an opportunity to work with current employees to seek a more sustainable retirement system," Poizner press secretary Bettina Inclan said.

Despite opponents’ criticisms that he helped create the current crisis by permitting collective bargaining rights for state workers while governor in the 1970s, Democratic gubernatorial candidate Jerry Brown has also proposed overhauling public pensions.

"I think we have to look at the whole pension system," Brown told the Sacramento Bee last week. "Particularly, the health benefits are of even bigger concern."

He said he supports pension reform, but would not want to move to a privatized system or a 401(k)-style plan.

A recent policy brief by the Stanford Institute for Economic Policy Research conservatively estimated the state’s collective debt, including bonds, pensions and health care for retirees, at $237 billion, but said in the end it could work out to "more than double that amount."

The institute expects to release a final figure soon, said Joe Nation, author of the brief and director of the graduate student practicum in public policy at Stanford University.

"The question is how in the world are we going to find a way to meet these contractual obligations?" Nation said.

GREENHUT: California is in de facto bankruptcy

SACRAMENTO —- California’s union-dominated, Democratic-controlled Legislature is temperamentally incapable of fixing the state’s structural budget deficit, given that such a fix would require a reduction in government spending and the granting of fewer benefits to the state’s class of government workers. As Rome burned, legislators last week debated a "no-cussing" measure, which is meaningless but suggests how out-of-touch these lawmakers remain.

Meanwhile, the bad fiscal news keeps pouring in. From the front page of Wednesday’s Sacramento Bee: "Bruised by heavy losses and wary of the economic road ahead, California’s two big public pension funds are considering reducing their official forecasts of future investment results." Investment income is supposed to pay for the absurdly generous pensions enjoyed by government retirees, but when there’s a downturn, the taxpayers pick up the slack. So the $100 billion pension losses will result in reduced forecasts, which will "put pressure on taxpayers and workers to support the two retirement systems," the article continued.

We’ve got us a big mess in California’s state government, which seems to be designed to chase every last working stiff to Nevada or Arizona. I spoke to the Chamber of Commerce in the northern city of Redding last week, and a large crowd showed up to listen to discussions of pension reform. That tells you something.

Shasta County has been tweaking its system by requiring additional employee contributions and pushing out the retirement age. Orange County and the city of San Diego have likewise passed minor tweaks in their retirement packages, but the entire fiscal problem —- especially at the state level —- is getting beyond the need for tweaking.

Orange County Supervisor John Moorlach recently said that the state is "technically bankrupt."

On Wednesday, I talked to Assemblywoman Diane Harkey, a Republican representing parts of South Orange County and North San Diego County, and she did not shy away from the B-word ("bankruptcy") either. She had just given the Republican caucus a presentation summarizing the sorry state of California’s government.

Echoing a column she had written for Flashreport last month, she first compared the state’s predicament to that of a family that has overspent its two-wage-earner income, lost its bonus (capital gains), lost some of its permanent income (income tax reductions), maxed out home equity (general obligation bonds), maxed out the credit cards (revenue anticipation notes), borrowed from family members (internal accounts) and is now in foreclosure.

I like the analogy. Her conclusion: ""Even if we begin to earn more income and we cut our expenses, we still will not have enough cash … We can file for bankruptcy … Or convince a lender that we can repay if they help us through." She says the state is "facing de facto bankruptcy." States can’t technically go bankrupt, but they can end up in federal receivership.

As I touched on in my column last week, people are hungry for solutions.

Average citizens are showing up to "tea parties" and listening to journalists rant about pension obligations. Californians know that something is wrong, and they also know that their elected officials —- at least operating under the current political dynamic —- can’t even get themselves to stop digging a deeper hole. Few economists believe that the economy is poised to come roaring back, which would paper over the problems.

Hope can come in the initiative process, but the unions dominate that process with their deep pockets. Last week, I discussed the death of a useful pension initiative that would have created a still-generous second-tier level of benefits. The unions and their wholly owned subsidiaries in the Legislature don’t want to touch any level of benefit for public employees or cut any program. Their solution is always the same —- make it easier to raise taxes on Californians!

For an idea of what the unions think, consider this statement by Services Employees International Union California President Bill Lloyd in response to a Legislative Analyst’s Office report from January:

"We need a new approach that lays the groundwork for recovery and that protects Californians, our public investments, our communities and our future. The only way to do that is to make sure that everyone in the state pays their share, including the corporations who keep getting a free pass from the governor and the Legislature."

That sounds more like the old approach —- keep sticking it to businesses and keep "investing" in $100,000 pensions and bigger government bureaucracies.

That approach has led to lingering structural budget deficits, according to Harkey, who points to Treasurer Bill Lockyer’s statement from September pegging that budget gap at an astounding $56 billion during the next three years. She gave me a chart from the state controller predicting that total state borrowing will hit almost 34 percent of the general fund budget by 2010-11. The state’s bond rating has gone from AA to A to BBB, she said, and now almost is not investment-grade.

Harkey showed me a chart pinning the state’s debt-service ratio at 9.69 percent by 2014-15 and that assumes that the state doesn’t issue any more debt, which is like assuming that a drunk won’t find his way to the liquor store on Saturday night. And if interest rates go up, all the state’s debt goes up also.

Scared yet?

California appears headed toward a massive fiscal collapse. Despite the big problems, Harkey believes the state can get back on track if it adopts some simple measures to reduce future debt, cut spending, adopt pension reform and prevent recurrent deficits by adopting a rainy day find. Well, they aren’t that simple, given what we’re dealing with in the state Capitol, but they are sensible and modest.

Harkey calls herself the "banker of the Assembly," referring not only to her deep interest in boring fiscal matters but in her financial and mortgage background. If California were a family, would she give it a home loan, I asked her. "No," she said, but she’d consider it —- if it first followed her simple work-out plan.

STEVEN GREENHUT is director of the Pacific Research Institute’s journalism center. Comment online at or



March 6

Jody Wilgoren of the LA Times had an interesting spin on a recent decision made by the county in “O.C. Rewards Brokerage That Battled Citron.”  You can sense the testiness as Wilgoren, who totally missed the gravity of what was provided to her the year before, in this post-bankruptcy filing article.

The county had to select bond underwriters who were not potential targets for litigation.  One of the two selected was A.G. Edwards & Sons Inc. out of St. Louis.  They stayed away from Citron.  The reactions to the selection in this article were amazing.

Other reactions to the article were also mind-blowing.

I had recently testified before a State Senate panel on the Orange County bankruptcy filing.  Here I met Bay Area Senator Quentin Kopp, now a judge, who gave Citron and company a thorough grilling.  I also met Senator Lucy Killea, out of the Oceanside area, who presented herself as the dimmest light bulb I had met in this adventure. 

After reading this LA Times article, Sen. Killea shot out a letter the same day, on March 6, reminding the Senate Special Committee on Local Government Investments, that she had “asked Mr. Moorlach if he would give the committee the names of these six individuals or firms [that assisted me during my campaign].  Mr. Moorlach refused to supply those names, saying he wanted to protect their ‘privacy.’”  Then she made a statement that showed her depth of intelligence:  “It took a whole new computer program for the Capital Market Risk Assessment firm to analyze the complicated portfolio last October; not something any C.P.A. can do!”  Please. 

Employees of brokerage firms are not to get their names in the press.  The reasons are too long for me to explain now.  I was not going to give names in a public hearing.

In a private breakfast meeting with interim Treasurer-Tax Collector Tom Daxon, however, when he asked for the names and firms, and promised to be guarded with the information, I let him know who helped me.

Mark Robles was one of the “behind the scenes” stars.  He is still a friend to this day and even joined us on our recent Saturday day hike with the Irvine Ranch Conservancy.

I shot out a letter on March 6, too.  It was addressed to Senator  Bill Craven, the other Committee Chair, out of the Carlsbad area, who had a portion of his district in Orange County.

“The irony of Senator Killea’s observations concerning Capital Market Risk Assessment is that I provided the information for free and they are charging [the County of Orange] $300,000.  Perhaps not ‘any C.P.A.’ could do it.  But with an ability to work with volunteers, this C.P.A. did!

“Mr. Robles contacted my campaign.  I have no professional relationship with Mr. Robles.  I have not referred clients to him or vice versa.”

Let me do that now.  Just to show you how funny life’s journey can be, Mark Robles now works for Merrill Lynch as a Senior Financial Advisor out of their Rancho Sante Fe office.  He, and a few other courageous individuals, were wonderful portfolio analysts during my campaign.  Mark comes highly recommended by me.

That Tom Daxon would do something positive for one person who sacrificed so much was a beautiful thing to behold.

Before there was John M.W. Moorlach, there was Mark J. Robles.

Moorlach, who lost in a landslide when he ran against former Orange County Treasurer-Tax Collector Robert L. Citron in last June’s election, is expected to be rewarded, as soon as this week, with an appointment to the post he failed to win via the ballot box.

Robles will receive no such personal crown. But his firm, A.G. Edwards & Sons Inc., will probably reap a profit from the county’s financial collapse by underwriting future county bonds, under a contract secured largely because of Robles’ previous challenges to Citron. "I picked them because of their good citizenship to the county in the past," interim Treasurer Thomas E. Daxon said of Edwards and its co-lead underwriting firm, Goldman Sachs.

Goldman Sachs had refused to sell securities to Citron, and warned in the fall of 1993 that the fund he managed for about 190 public agencies across the state was "excessively risky." After Robles raised questions about the Orange County treasury in 1992, Citron pressured Edwards to fire him, and the firm refused.

"I thought that showed a lot of courage by Mark Robles, and I thought that showed a lot of courage by A.G. Edwards," Daxon said last week. "It showed me that in a pinch, you could count on A.G. Edwards, they did the right thing. It is a very positive statement for the integrity of A.G. Edwards."

But some county officials and industry insiders were surprised at the selection of Edwards, because the firm is not a large player in the municipal finance market, and the criteria for Edwards’ selection were not exactly standard.

According to Securities Data, a private firm in New Jersey that tracks investment activity, St. Louis-based Edwards ranked 25th among underwriters of California municipal bonds last year. Goldman Sachs, the top municipal finance firm nationwide, ranked fifth among firms underwriting California municipal debt, Securities Data showed.

"It’s kind of a joke among people when we discuss it," said Zane B. Mann, publisher of the California Municipal Bond Advisor newsletter.

"The fact that A.G. Edwards and Goldman Sachs were selected because they chose not to do business with Citron seems ridiculous. That’s certainly not a normal reason for selecting underwriting firms," Mann said. "It’s pretty shallow thinking."

Seventeen firms submitted proposals to the county, and four finalists made oral presentations in January to a group of about seven county officials and consultants, with several more advisers listening in from New York via conference call.

After the presentations, when everyone in the room noted their favorites, Daxon was the sole backer of A.G. Edwards, according to sources who attended the meeting but spoke on the condition of anonymity.

The next day, Daxon announced his selection, acknowledging to the county’s financial consultants that Robles’ early warnings about the fund and involvement in Moorlach’s campaign swung the pendulum in Edwards’ favor.

"I think the basis for selection should be quality. It should be totally based on the ability to help the county solve the crisis," said Chris Varelas, a leader of the Salomon Bros. team advising the county. "Any other criteria should not be the No. 1 priority."

Daxon said he believed all four finalists were qualified to be the county’s underwriter, and that Robles’ anti-Citron stance simply sealed the deal.

Robles, a 39-year-old Mission Viejo resident who runs Edwards’ Laguna Hills office, first stumbled upon Citron’s high-flying investment fund in the fall of 1992, when he was soliciting business from the city of Costa Mesa.

After Costa Mesa rejected him–Robles is a retail broker, and lacks the direct access to government securities that the city requires–Robles inquired about the city’s investment portfolio and drafted a list of questions for city officials to send Citron.

"No one seemed to know what was in the pool. They didn’t know what questions to ask," Robles recalled. "I just couldn’t believe how nonchalantly finance directors were approaching their participation in that portfolio. They were doing so on the word of Bob Citron."

Intrigued by Citron’s high rates of return, Robles asked for an inventory of the portfolio’s securities. He said he was shocked, even back in 1992, at what he saw.

"I thought it was a bunch of crap. I had never seen anything like it," Robles said in a recent interview. "They were very illiquid. It’s actually surprising to me that it took as long as it did for this house of cards to come down.

"Originally, we were going to go in and talk to (Costa Mesa and other cities) and compete for their business," said Robles, admitting that he was hoping to profit by criticizing Citron’s investments. "I thought that by educating themselves, they’d naturally pull their business. I just thought it was so self-evident that this was a risky situation, I thought they would look into this and pull their money out."

But Robles was hesitant to sound a public alarm, in part because of Citron’s irate response to his initial inquiries about the fund.

Incensed by Robles’ letter to Costa Mesa officials, Citron fired off an angry missive to the firm’s chairman, Benjamin Edwards, in October, 1992. Citron accused Robles of libel and threatened legal action against the company because Robles’ letter was written on A.G. Edwards’ letterhead.

"This statement by Mr. Robles is very fallacious to the County of Orange and we are very, very concerned about (it)," Citron wrote.

Benjamin Edwards shrugged it off, telling Citron over the telephone that he would not fire the broker. "We thought it was much within the rights of Mark as a citizen," Edwards said in retrospect. "And, furthermore, he asked good questions."

Robles said he kept asking questions about the fund, but kept the answers to himself until last spring, when he read newspaper accounts of Moorlach’s campaign. He then joined about half a dozen behind-the-scenes advisers who helped Moorlach analyze the portfolio.

"It became just a matter of fascination. You know a scandal is happening, a scandal of Biblical proportions. The numbers were just staggering," Robles recalled. "I had to do some soul-searching. People who are whistle-blowers–while they perform a valuable service–nothing good ever happens to them."

Robles never publicly blew the whistle. Now good things are happening, if not directly to him, then to his employer.

After the fund collapsed and Orange County became the largest municipality in U.S. history to file for bankruptcy protection, Daxon told Moorlach he wanted to do