County treasurer candidate defends bankruptcy role

As one of two candidates for county treasurer, Chriss Street is finding he has to defend himself on charges related to his management of a corporate bankruptcy.

Street is now the assistant treasurer and the chosen successor of Orange County Treasurer John Moorlach. But as Street was beginning his campaign, the current head of truck trailer manufacturer Fruehauf Trailer Corp. charged him with mismanagement of that company between 1998 and 2005.

Among those raising questions about Street’s legal entanglements is Patrick Desmond, 59, an auditor and appraiser in the county assessor’s office who is running against Street, 55, a longtime Newport Beach resident, in the June 6 election.

Orange County Dist. Atty. Tony Rackaucus is reportedly investigating Street, but the office does not comment on ongoing investigations, and it’s unclear what the nature of an investigation might be.

Rackaucus and county supervisors Chris Norby and Bill Campbell withdrew their endorsements of Street after the Fruehauf allegations came out in March.

“There’s a cloud of uncertainty surrounding his candidacy right now and I think it’s better to sit on the sidelines,” Campbell said.

Street took control of Fruehauf when the company filed for bankruptcy. He said his management enabled the company to substantially reduce the financial claims against it and to pay pension benefits to former employees.

He quit in 2005 after what he now describes as a disagreement with investment banker Daniel Harrow, who Street said wanted to sell a branch of the company without protecting it against future financial claims.

Harrow later took over management of the company, and in March 2006 he filed a report in a Delaware federal bankruptcy court accusing Street of “mismanagement, conflicts of interest, and greed,” according to the report. Harrow alleged that Street paid himself and his wife a salary of more than $2 million, and that he squandered at least $11.7 million of the trust’s money on overhead costs and expenses.

Street and his political consultant, Brett Barbre, said Harrow made the allegations once he got into trouble as head of the Fruehauf trust. Street said he has filed a defamation suit against Harrow.

“It’s the classic [reaction] in business ? if something goes awry, what’s the best thing to do? Blame your predecessor,” Barbre said.

Street has worked in corporate finance for years, but he also has been involved in Orange County finances for more than a decade.

Before Moorlach named him assistant treasurer in January, he was a bond trader and worked on restructuring organizations in financial trouble, he said. He has testified in court as a forensic accountant, and he began investigating former Orange County Treasurer Bob Citron before the county’s 1994 bankruptcy, which was caused by Citron’s risky investments.

Street had planned to run for treasurer in 1994, but he dropped out to back Moorlach, who lost to Citron but was appointed to replace him the following year.

From 1996 to 1999 Street helped extricate the Orange County employees’ pension system from a series of bad investments, helping to turn a $300 million deficit into a $600 million surplus, he said.

“This is clearly a campaign where I represent the taxpayer in John Moorlach’s tradition,” he said.

Moorlach said despite the legal issues he’s still comfortable with Street as his potential successor. He appointed Street after five other people who considered running for treasurer dropped out and the field was otherwise clear, he said. Desmond filed candidacy papers just before the deadline.

“I am much more comfortable with the capabilities and skill set of Chriss Street than I am with Patrick Desmond,” Moorlach said.

Desmond said he decided to run because he “was asked by the rank and file” of the treasurer’s office. He worked there briefly in 2002 before joining the county assessor’s office later that year. He now represents that office in taxpayer appeals.

“I kind of always had it in the back of my mind that I could get into politics, and it kind of accelerated when I got into appeals,” Desmond said.

Moorlach has done a good job setting up internal controls in the office, so Desmond doesn’t expect to make big changes there, he said.

“I don’t see that it’s broken right now,” he said. “I’m not going in there to put out a fire.”

Desmond sought and was given endorsements by the Orange County Employees Assn. and the Orange County Deputy Sheriffs Assn., he said, but he hasn’t promised them anything if he wins.

“If there were no unions in this picture, I still would be talking about my concern about Chriss Street. There are many concerns and if he’s elected treasurer-tax collector, what’s Wall Street going to think? He’s got so many legal problems,” Desmond said. “Is everyone really comfortable with that?”