SACRAMENTO, CALIF. ? Burned from losing billions of dollars in scandals and bankruptcies, a growing number of state treasurers have scrapped their low profiles to wage a campaign to clean up Wall Street and America’s corporate suites.

The treasurers and comptrollers are sounding out from often-obscure capital backwaters, places like Albany, N.Y., and Sacramento, to more actively wield the clout of more than $1.5 trillion in public investment funds.

In California, New York, Connecticut, North Carolina and elsewhere, they are pushing reforms, demanding less extravagant executives salaries, for instance. They are yanking their investments from companies that move their headquarters abroad for tax purposes or from mutual funds accused of mishandling money.

They’re trying to run more independent candidates for corporate boards to curb what many call the worst wave of corporate fraud, deception and scandal since the stock market crash of 1929.

The most recent example came last month, when California’s top finance officials filed an unprecedented lawsuit against the New York Stock Exchange, seeking millions of dollars for investment losses due to alleged “illegal trading practices.”

North Carolina Treasurer Richard Moore, who helped start the crusade last year with New York Atty. Gen. Eliot Spitzer and California Treasurer Phil Angelides, said the stream of improprieties on Wall Street pushed him into action.

“Somewhere between Enron and WorldCom I just got mad as hell,” Moore said.

Spitzer said the states were getting involved because “federal authorities that theoretically should have been on the front lines were not as attentive as they should have been.”

“There’s been an enforcement void filled by attorneys general, treasurers and comptrollers,” he said.

Last year, Spitzer’s investigations forced a $1.4 billion settlement with investment banks for improperly recommending stock to investors — and have now targeted the mutual fund industry.

Attorneys general often have used their powerful positions as platforms for their political ambitions. Treasurers are typically quieter, but say they could not stand by as the business scandals kept growing.

“We understood for the first time that corporate officials could be looting their companies,” said Nevada Treasurer Brian Krolicki, president of the National Association of State Treasurers. “Investors are used to market risk, but they’re not used to integrity risk.”

States have now tightened standards for investment banks that seek their business, and written scathing “report cards” alleging lax market oversight by the U.S. Securities and Exchange Commission.

They’ve demanded reforms to longtime Wall Street trading practices and played major roles in the recent resignation of former New York Stock Exchange Chairman Richard Grasso over his $187 million pay package. North Carolina’s Moore has been named to a group that advises the exchange.

Treasurers and comptrollers say they are simply protecting retirement assets of nearly 14 million public employees from corporate lapses that already cost them billions of dollars.

“We were genuinely damaged by what happened in the marketplace,” said Angelides, who presides over a trio of investment funds worth more than $300 billion.

Last year’s crash of WorldCom cost California’s two biggest funds $850 million, he noted. “For the country’s economic progress and our portfolio, we’ve decided to put our voices together,” he said.

Firms fear outcome

Their efforts have met with resistance from business executives, some of whom believe public officials are pushing too far too fast with populist reform agendas.

They are worried by an 11-state campaign to more easily run independent candidates for corporate board of director seats. Treasurers say it will eliminate lax directors who snooze while companies make bad choices for their investors. Business leaders fear it will become a new tool for labor unions, environmentalists and diversity champions to disrupt corporations.

“We’re concerned the proposal will lead to divisive boards, and allow opportunities for shareholders who have small agendas that are not related to corporate governance,” said John Castellani, president of the Washington, D.C.-based Business Roundtable.

“Corporations were never meant to be democracies in this instance, and they’re not supposed to be a New England town meeting,” Castellani said.

For six decades, the SEC has agreed. It most recently rejected the idea in 1992. Angelides said times have changed.

“They’re on the wrong side of history,” he said. “We’re the owners of these companies.”

The treasurers have lost previous battles. A year-old request to remove 10 offshore companies from the Standard and Poors 500 list is languishing. And Unocal Corp. still has operations in Myanmar despite a recent personal visit from Angelides and New York Comptroller Alan Hevesi asking them to leave over human rights concerns and falling earnings.

But they have no plans to go away. In fact some say they’re just starting, hinting at new campaigns to favor environmentally conscious corporations and push more investment funding toward inner cities.

“It may be annoying, and some may be wishing for a day when pension funds were silent and apathetic and sitting on the sidelines,” Angelides said. “I don’t think that day’s ever going to return.”