A Cleanup Batter Takes A WalkNanette Byrnes
Last February, he seemed the perfect choice. A seasoned business executive who had overseen troubled situations before, William J. Popejoy was an Orange County resident, well known on Wall Street, and, best of all, he was willing to work for free. Who better to take on the newly minted role of chief executive officer of the bankrupt California county? Beating out the well-known turnaround artist Sanford C. Sigoloff, Popejoy was approved as the county's first chief executive officer by county supervisors on Feb. 10. Just five months later, on July 12, "with considerable personal regret," Popejoy submitted his resignation.
"TO THE LIMIT." Popejoy, 56, had wasted no time charting his strategy for the county's recovery--to the chagrin of his sponsors. Within weeks, he had fired two county executives linked to its financial collapse, identified $111 million in assets to be sold, and named 25 government activities that might be privatized. And most controversial, he backed a politically unpopular one-half-percent sales-tax increase, opposed by two of the five county supervisors and then defeated at the polls on July 27. "The board of supervisors gave him a lot of independence, and he pushed that to the limit," says Tom Kenny, a former member of the county's creditors' committee who oversees the municipal bond department at mutual-fund company Franklin Resources Inc.
Now, Popejoy has paid the price for his free rein. The seeds of his departure were sown at a closed-door meeting two days after the sales tax vote, when county supervisors agreed to replace him by midsummer with a permanent CEO, according to attendees at the meeting. Executive search firm Heidrick & Struggles Inc. was given the job of finding a successor.
In his statement of resignation, which is effective July 31,
Popejoy specifically cited the board's attempt "to reinvolve themselves in details of the county's administration and management." And county supervisors clearly felt that their CEO was too independent. Popejoy "sometimes went off on his own," complains Supervisor Jim Silva.
But Orange County officials deny that their decision to seek a new chief executive was politically motivated. Supervisor Gaddi H. Vasquez says it "would be inappropriate speculation and conclusion" to blame Popejoy's departure on his public skirmishes with the board. The supervisors had delayed their search for a permanent CEO, Vasquez says, because of the early retirement of the head of human resources.
Popejoy's early exit is not likely to play well in Sacramento, where the governor has the power to appoint a trustee for the county. "He was the best thing Orange County had going for them," says State Senator Lucy L. Killea, chair of the Special Committee on Local Government Investments set up to investigate the Orange County debacle. She saw attempts to oust Popejoy as politically driven.
The state clearly is losing patience with the politics of Orange County's crisis. On July 12, state lawmakers proposed their own recovery plan for the county. They want the county to pay back the $900 million it owes suppliers and bondholders over 20 years.
The money could come from a current county transportation tax and other reserves. The state also wants the county to stop trying to collect $300 million that it lost as an investor in the troubled fund that sent it into bankruptcy. As a result of the resignation, a spokesman in Governor Pete Wilson's office says, the Governor may consider creating a trusteeship, among other options.
Bondholders and creditors, who say they appreciated Popejoy's accessibility and authoritative answers, aren't likely to be happy with his departure either. "The supervisors showed no leadership, but Popejoy moved the ball ahead," says John Schotz, the financial adviser to the 244 entities that lost money in the investment pool.
STRAIGHT SHOOTER. A 1960 graduate of California State University in Sacramento, Popejoy, until his Orange County involvement, was best known for his ill-fated efforts in the mid-1980s to save ailing Irvine (Calif.) American Savings & Loan from the clutches of federal banking regulators. A tennis buff, he now lives in tony Newport Beach with his wife, Nancy.
It is Popejoy's straight-shooting style that probably sealed his fate with the county. He may have laid the groundwork for his undoing by calling for the resignation of County Supervisor Roger R. Stanton on June 16 in a beef over settlement talks in the county's lawsuit against Merrill Lynch & Co. Stanton had suggested the county could get by with a $500 million deal, while Popejoy was trying to cajole $1.2 billion from the investment firm. Stanton did not resign, and the talks are now off, but Popejoy may ieep a role in the Merrill negotiations even after his departure as CEO, according to Supervisor Silva.
Finding someone to fill Popejoy's shoes won't be easy. "I don't know anyone in the world of turnarounds who sees this as a doable task," says one well-known crisis manager. After all, experienced CEOs willing to work for free don't grow on orange trees.