Chief administrative officer of O.C. when it declared bankruptcy dies

Ernie Schneider, the chief administrative officer of Orange County when it declared bankruptcy in 1994 because of its disastrous investment practices, died Saturday at his home in San Juan Capistrano. He was 66.

His death, related to liver and kidney problems, was confirmed by former wife and current Laguna Beach City Councilwoman Elizabeth Pearson.

A longtime public servant, Schneider was the top appointed officer when Treasurer Robert L. Citron was discovered to have lost $1.64 billion in the value of the county’s investment portfolio. Schneider was fired in the tumultuous time after the bankruptcy for not urging the Board of Supervisors to look into warnings about Citron and his convoluted investment strategies.

The dismissal haunted Schneider for the rest of his life.

“Ernie never really recovered from the bankruptcy,” said Pat Sudds, his 81-year-old former secretary. “He felt he was a scapegoat for things that others did. He spent the rest of his life trying to serve the people again. Unfortunately, that didn’t happen.”

Schneider was born in Bad-Kissingen, West Germany, on Christmas Day 1946. His father served in North Africa during World War II under the leadership of Field Marshal Erwin Rommel.

Schneider lived in Vienna until 1952, when his family moved to the United States. Known to be a fitness fanatic with a penchant for surfing, he attended Cal State Fullerton and earned a bachelor’s in political science and a master’s in public administration.

He first worked as a systems analyst in Orange County’s Flood Control District and eventually became executive assistant to the department head, H. George Osborne. He was later named chief executive assistant for then-county Supervisor Bruce Nestande, concentrating on land-use issues.

At 39, Schneider leapfrogged over four older rivals to become head of the Environmental Management Agency, one of the most powerful bureaucracies because it brought flood control, harbors, beaches and parks, roads and housing, and community development under the control of a single agency.

Daniel T. Miller, a former colleague who is now a senior vice president at the Irvine Co., remembers Schneider’s tireless work ethic.

“This was not a guy who screwed around,” he said of Schneider, who often began his day at 7 a.m. “The public sector was his life and he was always driving for the top position.”

Schneider got his wish in 1989 when the Board of Supervisors named him the county’s administrative officer. At more than $140,000 a year, he had one of the highest-paid government positions in the state.

In the position, he sat on the county’s investment oversight committee and received a study in 1993 that would lead to his undoing in public office.

An internal audit by Auditor-Controller Steven E. Lewis concluded that county Treasurer Citron was making risky financial deals and refusing to consult Schneider’s committee to maximize returns from his investments.

The audit also was distributed to the district attorney and Board of Supervisors, but nothing happened.

Citron borrowed money to place big bets on speculative high-yield securities that depended on interest rates remaining low. But they didn’t stay low, and the $1.64 billion evaporated.

Citron lost his job and went to jail after pleading guilty to felony fraud charges. The county, which later recovered hundreds of millions of dollars by suing its Wall Street advisors, filed for bankruptcy.

In the ensuing years, Schneider repeatedly said that neither his office nor the Board of Supervisors could be held responsible for what another public official elected countywide has done. He said he had no power to force Citron to do anything.

“Responsibility for managing the pool lies with a separately elected official, and that was Bob Citron,” Schneider told the Los Angeles Times in 1994. He later testified against Orange County officials who were accused of fraud.

Schneider was never accused of a crime, but he was blamed for failing to properly oversee Citron’s actions.

The Board of Supervisors asked him for his resignation in December 1994. He told the supervisors that if they wanted him to leave, they would have to fire him. On Jan. 23, 1995, Schneider was officially removed as chief administrative officer.

“He loved working in a public position and giving back to people,” said Pearson, his former wife. “He had a heart as big as Orange County.”

Schneider spent years applying to open public leadership positions, but he couldn’t shake the reputation that came out of the bankruptcy scandal. He instead worked on the periphery of government, most recently at the civil engineering firm Hunsaker & Associates.

Schneider had been released recently from Saddleback Memorial Medical Center and was being cared for by his first wife, Sally Schneider, and his only son, Nicholas, when he died. He is also survived by his mother.

This story was reported by Los Angeles Times Staff Writer W.J. Hennigan.