O.C. Millionaire Takes Chance as Lottery Director

SACRAMENTO — In matters of government and commerce, he’s becoming California’s go-to guy in times of trouble.

During the dismal days of the nation’s savings and loan crisis, federal regulators brought in William J. Popejoy to run the country’s most troubled thrift. A decade later, Orange County called on Popejoy to right the teetering county after it declared bankruptcy in 1994.

Now, the courtly Newport Beach millionaire, who unabashedly admits his wealth is such that he never has to work another day in his life if he doesn’t want to, has set aside his beloved tennis and put off the power vacations. Instead, he’s focusing on one of state government’s most balky enterprises--the California Lottery.

In his first six months as executive director, Popejoy has operated in typical whirlwind style, making both friends and foes.

He’s begun a campaign to reduce the lottery’s operations budget and slash the work force by nearly a third, ticked off union bosses who hope to get him dumped during confirmation hearings early next year, bumped up prize money to woo more customers, schmoozed state lawmakers by the armful and generally had a fine time of it all.

Popejoy is also talking pointedly of fundamental changes, such as going back to the voters for permission to take the one-third of lottery revenue that now goes to schools--about $750 million this year alone--and to use it instead to finance college scholarships for every California student who maintains a B average or better in high school.

He’s done all that while essentially living out of a suitcase.

Indeed, these days, Popejoy can mark success by the hour he leaves Sacramento each Friday to return home to Newport Beach, to his roomy home in the Belcourt gated community, his wife of 40 years, his bright, blond-haired grandson, friends at the Balboa Bay Club, the reading, the tinkering on cars. The good life.

When he first took over the lottery operations in May, he inevitably was delayed by business until the 8:55 p.m. flight to John Wayne Airport. With the job better mastered, Popejoy now is typically on the 3 p.m. flight, and he hopes that he’ll work it down to the 1 p.m. sometime next year.

But why, with wealth to rival most Super Lotto winners, do it at all?

“I think,” Popejoy, 59, observed one recent day, “I’m attracted to the flame of something that people say can’t be done.”

In the case of the much-maligned lottery, that’s a pretty bright flame.

Since it was sold to voters in 1984 as a way to help finance schools, the lottery has been plagued by a series of troubles, from frequently tepid sales to the appearance of favoritism in rewarding key computer contracts to one of its games declared unconstitutional by the courts. It employs twice the work force of the New York lottery but racks up less than half the sales.

California’s lottery operation has also seen a revolving-door succession of directors, from bureaucrats to marketing mavens, table thumpers to Capitol courtiers. Not one has come away with a scent of success.

“Right out of the gate, his attitude is completely different than previous lottery directors,” said Assemblywoman Debra Bowen (D-Marina del Rey), a longtime lottery critic. “He’s the first to take his head out of the sand, take a hard look at the lottery and say, ‘Yes, we can do better.’ ”

The lottery’s performance has been a particular irritant for Gov. Pete Wilson, whose administration has seen most of the controversy. In Popejoy, the governor hopes he has a leader who will embrace the ideal of privatizing government wherever possible and produce a lottery that’s efficient and scandal-free and gains in sales.

“He’s brought a business sense and air of competitiveness to the lottery,” Sean Walsh, Wilson’s spokesman, said. “He is right-sizing the lottery and making it more efficient.”

And he has irked the state employees union. Labor leaders are worried not only about the 250 lottery employees who are expected to lose their jobs but also about the increased pressures on the smaller work force that will remain.

“He’s a very pleasant fellow, but we don’t like a lot of these policies,” said Rosmaire Duffy, a senior labor relations specialist at the California State Employees Assn. “He told us that years ago he was a union shop steward. All we can say is thank you very much, but it’s what you’re doing today that troubles us.”

Popejoy promises that all workers who lose their jobs when the cuts begin early next year will be assured a position somewhere in state government. With characteristic optimism, Popejoy says the lottery was operating “pretty darn well” when he arrived, but that the job cuts will combine with other streamlining efforts to produce a leaner and more efficient operation.

He likens his efforts at the lottery to those he undertook in corporate life, where his track record included head-spinning successes and dramatic failures.

Popejoy cut his teeth in the world of finance as the first president of the Federal Home Loan Mortgage Corp., the quasi-governmental agency known as Freddie Mac that spurs the home finance market by buying mortgages from thrifts.

He later served half a dozen years as president of American Savings & Loan under the legendary Marc Taper, developing what Popejoy describes as nearly a “father-son relationship.” But there was a dysfunctional element to that bond. Taper, he said, invariably tinkered in operations under Popejoy’s control, causing friction.

After leaving American, Popejoy made a name for himself as a turnaround specialist for ailing corporations during a short stint at Financial Federation Inc., a holding company for 11 savings and loan firms. The conglomerate’s stock skyrocketed from $6 a share when he took over to $41 when he left.

Federal regulators brought him in to run American Savings in 1984 when the firm, which Taper had sold a few years earlier, began to run aground in the stormy S&L; crisis. It was a difficult tenure. Buffeted by continual crisis, his nerves frayed, Popejoy was known to blow up at times.

He lasted four years, but it wasn’t enough. The thrift failed, costing taxpayers an estimated $5.4 billion. “Talk about failures,” Popejoy laments today. “I couldn’t save American Savings. The shareholders were wiped out.”

Popejoy worked for the next couple years for billionaire Robert Bass. But when Popejoy’s youngest of three sons was killed in an off-road accident in 1991, he quit the corporate world and went into what he describes as a three-year funk.

The bankruptcy of Orange County, though cataclysmic to the region, came as good therapy for Popejoy.

Popejoy plunged into his job as the county’s chief executive but quickly clashed with supervisors, who bristled over his strong-willed management style. He resigned five months after taking the job. His biggest defeat was failing to win passage of a half-cent sales tax designed to put the county on sound fiscal footing. But even his toughest foes say Popejoy played an important role.

“He brought a degree of stability to the county when it needed it,” said Assemblyman Curt Pringle, the Garden Grove Republican who battled Popejoy over the tax hike. “I feel he’s done the same thing at the lottery. I’m impressed by some of the aggressive things he’s doing to clean up that operation.”

Popejoy caught the eye of Wilson during frequent forays to the Capitol for the county in 1995.

Now, as lottery director, he’s putting to use some of the contacts he made. Assemblyman Tony Cardenas (D-Sylmar) recalls how Popejoy lobbied several senators a few months ago to block his bill that would have required that some lottery revenue go to pay for school books.

“I had at least four senators who said they knew Popejoy, felt he could be trusted and wanted to give him an opportunity to exercise his ideas,” Cardenas said. “If it were a different personality other than Popejoy, I think I would have gotten the votes.”

Always ready to charm, Popejoy now hopes to work with Cardenas this year. He also is eager to push his scholarship idea. He believes it can pump up the lottery’s appeal to customers and boost sales by making it more obvious where profits go. As it stands now, the lottery revenue that goes to education accounts for less than 3% of the state budget for K-12 schools.

“People can’t see where the lottery is making a difference,” he said. “But with this, they’ll see a gold ring for every kid in the state.”