Behind the Smoke

Orange County Treasurer John Moorlach has called it "manna from heaven"—the estimated $950 million county government will receive over 25 years as a result of the state's litigation settlement with the tobacco industry.

But the manna has hit the fan: when the county's Board of Supervisors voted early this year to spend the money on debt reduction, health-care industry officials and advocates of the poor rallied with Measure H, a countywide Nov. 7 initiative that proposes spending the bulk of the windfall on health care for the poor.

Measure H has something for almost everybody, including millions of dollars for those who don't really need it. For example, to purchase the political neutrality of Sheriff Mike Carona, Measure H offers the county's cops a $6 million-per-year unrestricted bonus. It also proposes spending $3.6 million per year on anti-tobacco education programs already well-funded by Sacramento.

But Measure H also fills a hole that has yawned since the 1994 county bankruptcy: it provides millions of dollars per year for senior care, community clinics, emergency-room doctors and the hospital emergency rooms treating the county's indigent.

Moorlach says he looked at H and saw an opportunity for a middle way: a countermeasure, Measure G, which would put away $12 million per year for debt reduction and still, he says, pay for indigent care. His measure would retire the bankruptcy debt by 2019—10 years earlier than scheduled—and save the county millions of dollars in interest payments.

Moorlach is modest about his number-crunching. "My allocation is as scientific as theirs . . . which means not at all," Moorlach says. "There is not necessarily any rhyme or reason with any of this. But their numbers are ramped up, and mine are more reasonable—with the added benefit of retiring the taxpayers' debt earlier."

From his premise that Measure H's "numbers are ramped up," Moorlach might have cut H's most obvious pork—its allocations to the Sheriff's Department and anti-tobacco advertising agencies—and generated more than $9 million for deficit reduction. But he did not. Instead, Moorlach—acting, he says, as a "committee of one"—found his savings in programs that serve the county's most vulnerable. He cut H's proposed spending on vital community health clinics from $6 million per year to just $1.8 million. And when it came to compensating the physicians who provide indigent care in emergency rooms, Moorlach slashed H's allocation from $6.9 million to just $1.8 million. He found another $2.1 million in senior care. Total redistribution to debt reduction: $11.4 million per year.

Moorlach doesn't see the problem. "I think Measure G addresses the problem [indigent health care] by allocating funds to the hospitals for their emergency services for the poor," he said. And in retiring the bankruptcy debt a decade early, he insists, he's "fighting for the little guy"—by which he means the county's taxpayers.

In the months after the 1994 bankruptcy, county supervisors slashed millions from public-health programs. They promised that one day they'd find the cash to address dire medical needs. With the tobacco settlement, that day seemed to have arrived. Now, Moorlach is asking the poor—the county's real little guys—once again to wait.

It's just one of many ironies in the contentious fight over tobacco-settlement dollars that Moorlach sees "this election as a little like David vs. Goliath"—with his 6-foot-5 self as the little guy.

There was a time when Moorlach was a little guy. Born in the Netherlands, he arrived in the U.S. with his family on a ship in 1960 and grew up in Buena Park. He became a mild-mannered CPA, but one with a not-so-mild appetite for politics. He once headed the decidedly right-wing Costa Mesa Republican Assembly, where the Bible frequently overshadows the Constitution.

Moorlach made his name as an out-of-nowhere genius in his run for the county treasurer's job, then held by Democrat Robert L. "Bob" Citron. Citron was staking the taxpayers' billions on a risky Wall Street gamble, and had become wildly popular for his ability to generate huge returns on those investments. In the 1994 treasurer's race, Moorlach was David to Citron's Goliath. He predicted that Citron's bets would fail if the market went south. But his predictions were dismissed even by fellow Republicans as mere politics, the jeremiads of a right-wing nut desperately looking for a campaign advantage where there were none. He lost badly. And then the markets quickly went badly for Citron. In December 1994, the county declared bankruptcy in the nation's largest such failure ever. When Citron was sent to jail, Moorlach was crowned treasurer.

Consistently soft-spoken, courteous, and quick with a handshake or hearty laugh, Moorlach is gracious even to those who don't necessarily share his views. It might come as a surprise that the 44-year-old attended the Weekly's 5th Anniversary rock & roll bash at the Galaxy Concert Theatre in September. Don't mistake his congenial manner for wishy-washy convictions, however. Liberal ideas and lifestyles likely produce unpleasant acidic enzymes in his stomach. His political beliefs center on fiscal and social conservatism. He is a plain-spoken, sentimental family man who prominently displays a Ronald Reagan memento in his office, sometimes carries a Bible to public events and once said teenagers under the age of 18 should not have access to condoms.

And though he continues to see himself as an underdog, Moorlach is now quite obviously one of the county's political giants. Having established his credibility in the bankruptcy's aftermath, his endorsement can now help carry political measures such as school-bond initiatives to victory. He taught former county CEO Jan Mittermeier —who displayed despotic tendencies during her tenure as the county's top unelected official—that the elected treasurer was not one of her minions. He startled politically well-connected toll road interests last year when he condemned a proposed insider deal to sell the 91 toll road; the deal went nowhere. Nowadays, more than a few elected officials and bureaucrats around the county consult him before making key decisions about government finance. Usually arrogant Wall Street investment-house giants nervously monitor his pronouncements. Since former Sheriff Brad Gates withdrew from the scene two years ago to manage the millions of dollars in personal assets he collected while a public servant, Moorlach has emerged with Supervisor Todd Spitzer as one of Orange County's top local political heavyweights. One sure sign that his star has risen is that other Republican officials regularly take petty shots at him—almost always off the record.

Despite his unmistakable power, Moorlach continues boldly to paint himself as "little David" in an effort to convince voters that the "Goliath" health-care community's Measure H should be defeated by his more cautious Measure G. But Measure H's backers say they're the defenders of the little guys. They propose that 80 percent of the tobacco settlement go to improve community health care for the indigent, elderly and working poor. H's supporters include the American Association of Retired People, local hospitals, numerous emergency-room physicians, the American Heart Association and AIDS Services Foundation as well as the Orange County Business Council, the South County Chambers of Commerce and U.S. Representatives Loretta Sanchez (D-Garden Grove) and Dana Rohrabacher (R-Huntington Beach). Moorlach says his Measure G addresses medical needs while further paying down the county's massive bankruptcy debt. The Orange County Taxpayers Association, the local Deputy Sheriff's Association and former Assemblyman Curt Pringle support Measure G.

In a key provision, Measure G makes this interesting concession to health-care advocates: after the debt is paid off (in about 2019), Moorlach's plan would give 70 percent of the tobacco money to health care. But there are problems with that strategy: in the next 20 years, a lot of water—and many humans—will flow under the health-care bridge; they will not be helped much by the promise of additional money in 2020. Then there's the county's track record on public health, a record so dismal that it consistently places wealthy Orange County near the bottom of California counties on such spending. Can anyone, even Moorlach, guarantee that a future Board of Supervisors won't act as Orange County supervisors always have and use that 70 percent to fund new and creative public-health programs that have nothing to do with the poor?

There's much at stake in the battle: if neither measure gets 50 percent of the vote, then the Board of Supervisors gets to decide how to spend all the money. That county residents have been treated to the G vs. H debate is because the board is politically tone deaf: in its own deliberations, the board offered everything to debt reduction and nothing to health care.

To varying degrees, both measures spend the funds on services for senior and disabled persons, on hospital and physician reimbursement for emergency-room indigent services, on anti-tobacco campaigns and addiction programs, and on nonprofit community clinics for the poor. For nothing other than political posturing, both measures also throw roughly 20 percent of the money—likely more than a whopping $200 million—to the power-hungry, budget-rich Sheriff's Department. Like other county leaders, Moorlach probably does not want a scuffle with Sheriff Mike Carona. The two men share near identical ideological perspectives within Tom Fuentes' largely monolithic Orange County Republican Party. If there is a villain in Moorlach's eyes, it's the hospitals, doctors and health-care company executives who he says have exaggerated their claims of financial hardship from picking up the government's obligation to medically treat the uninsured poor. He is not impressed that the private local hospitals say they shelled out of their own pockets an estimated $200 million last year for such services. From the middle of one of more than a dozen neatly stacked piles of paper in his Santa Ana office, Moorlach deftly pulled out a newspaper clipping.

"Look at this," he said, pointing to a recent Los Angeles Times business section report on huge profits and wildly generous executive compensation at one of the county's largest health-care companies. "When I get mad, I get motivated. We have to have something that's fair. . . . I'm doing this compromise [Measure G] as a favor to the taxpayers."

Another prop in Moorlach's arsenal is a copy of a blistering open letter a stockholder sent Tenet Healthcare Corporation chairman Jeff Barbakow last month. (Tenet owns numerous medical facilities in Orange County.) The stockholder ridiculed Barbakow for reportedly using company funds to buy two $20 million luxury jets "at the expense of better medical care." But Republicans complain about hefty corporate profits and generous CEO perks about as often as a lunar eclipse falls in a leap year. Seemingly unconcerned that he was charting new GOP waters, Moorlach barreled ahead.

"I'm trying to be calm about this," he said. "Some people have questioned my motives. Maybe it is not politically smart for me to take on the medical association, but I'm concerned about the taxpayers. They deserve something that is fair and equitable."


On the evening of Oct. 25, Todd Spitzer, Orange County's youngest but most skillful supervisor, stood in the den of a doctor's elaborate Cliff Drive estate in Newport Beach. He was flanked on his right by a grand piano and on his left by an oversized fireplace. Behind him, palm trees framed an impressive multicolored ocean sunset. Dozens of people —many holding half-full wine glasses—had formed an arc around him.

It was not quite the setting anyone could have imagined for Spitzer just a few months ago. Then, the fight over El Toro International Airport was raging, and residents of Newport Beach reasonably saw Spitzer as the enemy.

But on this night, the crowd had gathered not to discuss airport issues but to rally for Measure H. Spitzer was safe and his remarks were much anticipated. Two giggly middle-aged women—clearly awed by the supervisor's presence—remarked to each other that it was nice to have the him on their side "this time." When he said, "I am a huge supporter of H," you could sense relief and excitement sweep the room.

"I want to be proud of this county, but our five-member board is not making us proud right now," Spitzer said. Earlier this year, Spitzer's colleagues rejected his proposal to spend 60 percent of the tobacco money on health care and 40 percent on debt retirement. "Our goal should be to represent people who are underrepresented. It is not an accident that the other side is trying to shortchange the underrepresented in this county. [Former state Senator] Marian Bergeson has said that this issue is a no-brainer. Well, on my board . . ."

He paused and grinned. After a moment the rapt, energetic crowd dominated by well-dressed health-care professionals realized Spitzer had made a joke. They burst into laughter.

Not everyone laughs with the second-term supervisor. He is articulate, handsome, intelligent and ambitious. The excitement he sometimes generates could raise a jealous eyebrow among Hollywood celebrities. You can only imagine the bitter anxiety he causes other politicians, such as dim-witted Huntington Beach Supervisor Jim Silva or sniveling former Supervisor Bill Steiner. Since his surprise election to the board in 1996, Spitzer has repeatedly challenged the status quo by doing something other post-bankruptcy supervisors still can't bring themselves to do: routinely ask legitimate questions before voting. In his own way, he's a lot like Moorlach: he has blasted conniving bureaucrats, exposed crime and fought to block backroom deals where special interests hijack county decisions. For all that, he has figuratively taken several body punches from entrenched powers. At one point last year, Spitzer was on the ropes, bruised and reportedly considering adopting a less confrontational style. But by the time the anti-airport Measure F began sailing to victory earlier this year, the 39-year-old supervisor emerged with newfound confidence. Make no mistake: Moorlach may have taught Mittermeier an important civics lesson, but it was Spitzer who toppled Her Majesty from her third floor Hall of Administration throne in August.

In some ways, it's strange that Spitzer and Moorlach are in opposing camps on the tobacco settlement debate. The two are bound by more than their distaste for Mittermeier's political muscle-flexing. Moorlach is more blue collar and Spitzer more glitz, but both are solid fiscal conservatives who demand public accountability in government. They also share a knack—if not an affinity —for frustrating the establishment. Spitzer has mastered the art of burying a devastating premise in a sugar-coated question. The treasurer enjoys razor-sharp instincts when it comes to detecting political or bureaucratic bull.

So it's not surprising that Moorlach says Spitzer is one of the first people he contacted when he decided to challenge the health-care community's Measure H. He was disappointed, he says, to find they did not see eye to eye on the issue; the two men, allies on so many other projects, have drifted apart—perhaps temporarily—as election day nears.

"When I talked to Todd, he was mad that the board hadn't gone with his 60-40 compromise," Moorlach recalled recently. "I understand why he was irritated. I really do. But as a leader, he should have moved past that and looked at what is best overall for the county."

Spitzer insists he isn't the one who is misguided. During an Oct. 23 keynote speech to a bond-buyer conference in San Diego, the supervisor said both sides of the debate are "honorable," but that Measure G "steals health-care dollars."

"John Moorlach was there that day [in San Diego]," Spitzer said. "When I finished speaking, he came running up and asked me, 'Are you calling me an honorable thief?' And I said, 'Yes.' The county already has a debt-retirement plan in place. The tobacco settlement is needed more in health care."

Moorlach called the exchange "all friendly banter."


Orange County freshman state Senator Joe Dunn, who upset incumbent Rob Hurtt in 1998, is one of the most candid, relaxed politicians in California. Though passionate, he seems like the last guy to start pulling his hair out in a crisis. In a county where Democrats are routinely dismissed as irrelevant, Dunn is different. He backs traditional party issues but has shown a willingness to negotiate with Republicans to make legislative strides. A plaintiff's attorney by profession, Dunn helped represent California in its lawsuit against the tobacco companies. He knows the issues intimately. With Spitzer and Bergeson, he is one of the chief proponents of Measure H. Moorlach has sparred with Dunn at various public forums in recent weeks.

Unlike many politicians, Dunn prefers unadulterated honesty to obfuscation. During an interview, a reporter found himself repeatedly asking the senator if he intended his forthright answers to be on the record. Each time, Dunn looked slightly offended by the question. "Well, of course," he said in his trademark midwestern nasal accent.

Take, for example, this question: Why does Measure H send much more money to the hospitals and emergency-room doctors than to community clinics, which some experts say are the frontlines in the battle to treat the truly needy?

Others might have argued around the question—ignored it or tried desperately to show the moral sense in that allocation. Not Dunn, for whom the answer is partly political calculation. "To make sure Measure H wins, we had to consider a balance of politics and policy," he said. "The primary funding for the campaign is coming from the emergency-room doctors and the hospitals. The community clinics aren't able to contribute that much. They get less [of the settlement funds]. It's that simple."

Moorlach has been equally blunt. He acknowledges that his settlement-allocation formula is based at least partially on electoral considerations. Like Measure H, the counterinitiative sends without restrictions valuable funds to the bottomless money pit also known as the Sheriff's Department. It is also not a coincidence that Measure G mirrors Measure H on funds to be sent to the powerful, resource-plenty hospitals as compensation for treating the poor.

Dunn chuckled about Moorlach's savvy.

"John's not a dummy," said Dunn. "He was trying to avoid unleashing a potential giant in the election."

Said Moorlach, "Hey, don't fool yourself: neither of these measures is going to solve the health-care crisis."

Dunn and Spitzer don't argue that the tobacco settlement can fix a complicated, multifaceted issue involving 425,000 county citizens—including more than 90,000 children—who lack sufficient access to doctors and hospitals. They note, however, that even if Measure H isn't perfect, even if it is the product of a cobbled-together coalition characterized by self-interest, it delivers as much as $14 million more to health care each year than Moorlach's Measure G.

"The bottom line is that these are health-care dollars, and they should be used on health care," Dunn said. "The county doesn't take the transportation dollars it gets from Sacramento and use those for the bankruptcy. The county doesn't take the funds for the red ant problem and then use those for the bankruptcy. Why should health-care dollars be treated any differently?"

An official answer to that question may have been supplied recently on OCN by interim CEO Michael Schumacher. The former head of the county's Health Care Agency replaced Mittermeier in July. Without a hint of emotion, he said, "We have other priorities in Orange County."

Apparently, Schumacher and the board majority—Chuck Smith, Cynthia Coad and Silva—don't believe there is a health-care crisis. In the current fiscal year, the first one with settlement funds available, the supervisors used not one additional dollar for medical needs. Instead, they voted to use the bulk of the money for supplemental debt payments to Wall Street (for which taxpayers already pay between $60 million and $90 million per year) and for building new jails. In their counterproposal, health-care advocates went so far as to suggest that 100 percent of the settlement be used for non-health-care expenditures—debt reduction, jail construction, whatever—if interest on the money would be designated for health care. The three Republicans essentially responded with upturned middle fingers. They refused to agree to spend one penny of the settlement on health care, and Measure H was launched.

Dunn remains puzzled. "Three of the five supervisors like to say that health care is a priority in Orange County, but their actions prove otherwise. It's just crazy. I guess that will be one of the mysteries of all this."

Late in the afternoon of Oct. 27, a casually dressed Moorlach was sitting in a pink chair in a drab government office conference room. Both of his enormous hands were flat on the wooden table. Blank sheets of paper and a black pen sat before him. He was not happy. An Oct. 15 Los Angeles Times story on the contest was still fresh on his mind. He considered the article by veteran reporter David Reyes "biased," "juvenile" and full of reputation-scarring innuendo. The story prompted Moorlach to write a detailed, four-page letter of complaint to the Times. In part, he wanted to know why the article carried the subhead "Some call [Moorlach] tool of supervisors." The tag infuriates the treasurer not just because he says it is wrong but also because Reyes did not identify who these "some" are: no one made the assertion on the record.

"I am getting a little tired of the accusations that I am a tool of the supervisors. That story should have never seen the light of day," said Moorlach. "Look, I wouldn't be here today [with Measure G] if the supervisors had done their job. They were wrong not to compromise. I've said that publicly all along. I think that tobacco-settlement money should be used for health care. Sure, some people are upset at me because they thought they were just going to have to fight a 'Yes on H' battle. But I couldn't stand by. The taxpayers needed a compromise that benefits everyone across the board and not just the medical association."

Moorlach finished solemnly: "This really is an issue of principle, not personal political expediency for me."

Spitzer says it's a matter of principle for him, too.

"I like John. I don't think he's carrying anybody's water, and I truly believe he thinks G is better," he said. "But look at how his measure kills the community clinics. He's just dead wrong on this one."


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