State Senate Reopening Its Investigation of Bankruptcy

SACRAMENTO — The state Senate agreed Wednesday to reopen its investigation of the financial collapse of Orange County to find out whether witnesses perjured themselves in testimony last year.

Sen. Quentin Kopp (I-San Francisco), a member of the special committee that investigated the bankruptcy and recommended remedial legislation, told the Senate he feared that Orange County officials and others “misled and deceived” the committee at its hearings.

Kopp said his preliminary comparison of recent testimony before the Orange County Grand Jury investigating the bankruptcy and statements given early in 1995 to the Senate committee showed “inconsistencies.”

Last month, the grand jury filed civil charges accusing County Supervisors Roger R. Stanton and William G. Steiner and Auditor-Controller Steve E. Lewis of willful misconduct in office in connection with the financial scandal that cost the county $1.64 billion. Former County Budget Director Ronald S. Rubino was indicted on felony counts of helping misappropriate public money.

Kopp did not detail any inconsistencies, but he said public officials and other witnesses who appeared before the special Local Government Investments Committee appeared to have given unreliable testimony.

Stressing that the Legislature must make decisions based on accurate testimony, Kopp told his colleagues that “the integrity of the state Senate is at stake . . . to be able to rely upon testimony presented to any committee.”

Technically, the committee went out of business Sunday night. But Kopp successfully appealed Wednesday to the Senate Rules Committee to reactivate the panel for a special investigation into potentially false testimony.

Announcing the decision later on the Senate floor, President Pro Tem Bill Lockyer (D-Hayward) said the committee would vigorously pursue the issue.

Kopp said he intends to call as witnesses leading figures in the Orange County bankruptcy case, including Stanton; Jean M. Costanza, an outside bond attorney for the county; Michael Stamenson, a salesman for Merrill Lynch; Jeff Leifer, a securities dealer; former County Administrative Officer Ernie Schneider; and Terry C. Andrus, former county counsel. Costanza, Leifer and Stamenson were never called before the grand jury but the others testified before both the grand jury and the special Senate panel.

No date was set for the committee to start hearings, but Co-Chairman Sen. William A. Craven (R-Oceanside) indicated the panel would move quickly because the Senate wants to learn whether “somebody took advantage of us.”

However, Senate Republican Leader Rob Hurtt of Garden Grove, a member of the special committee, raised a caution flag against reopening a wide-ranging investigation at a time when local and federal authorities are pressing their own probes.

“Are you sure you want to go through this whole drill again?” he asked Kopp. “I just question it.”

In response, Kopp insisted the committee would examine only whether witnesses had testified truthfully before the Senate panel. Kopp said he expected the hearings to begin in late January and last only one day.

In Orange County, Schneider, the former chief administrator, voiced anger at the suggestion he might have misled the committee last year.

“I told the grand jury the same thing I told the senators: I told the truth,” said Schneider, who was fired following the bankruptcy. “I’ve paid enough of a price for this whole thing. I’m not interested in going back to Sacramento.”

He noted he faces no criminal or civil charges. “Why don’t they concentrate on those people who have been accused of something?” said Schneider, who now works a local engineering firm.

“I’ve got another career now. I’m done with the past.”

Scott B. Johnson, chief counsel to the special Senate committee, said he spoke Wednesday to Orange County Assistant Dist. Atty. Wallace J. Wade about obtaining the grand jury transcripts, which will be made public Monday.

“The senators believe that the credibility of the Senate committee is at stake,” Johnson said. “I have a feeling that the witnesses will be treated less gently then they were last time.”

Stanton’s attorney, Wylie A. Aitken, has said Kopp is “grandstanding to advance his own political career” and has not decided whether Stanton will testify.

Lawyers for Costanza and Leifer did not return telephone calls and Andrus declined to comment.

A Merrill Lynch spokesman said the investment firm would be glad to discuss any requests from the committee but added that Stamenson’s statements before the Senate panel do not conflict with any grand jury testimony.

Ingram reported from Sacramento and Platte from Orange County.