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ORANGE COUNTY IN BANKRUPTCY : Minors Need Only Ask to Get Settlement Funds : Pool: Class-action suit demands return of millions but court officials say guardians have successfully petitioned to have four youngsters' money transferred to private banks.

January 21, 1995|H.G. REZA and RENE LYNCH | TIMES STAFF WRITERS

SANTA ANA — A class-action lawsuit demands Orange County return millions placed in the county's investment pool on behalf of children who won settlements in court cases. But court officials said this week there's an easier way to get that money: Just ask for it.

Since the county filed for bankruptcy protection Dec. 6, guardians have successfully petitioned to move the principal amounts from four youngsters' settlements to accounts at private banks, Orange County Superior Court Executive Director Alan Slater said Friday.

The county also has paid out settlements from accident cases to 11 teen-agers who turned 18 recently, Slater said.

Officials said they did not know the exact amounts returned. Beyond the principal sums already returned, county officials said they hope to pay some or all of the accrued interest within 30 days.

When Orange County sought bankruptcy protection, there was $7 million deposited in the county investment pool on behalf of 435 minors. Many guardians said they had placed the settlements from injury accidents with the county at the urging of Superior Court judges.

"Thankfully, that money is being paid out," said presiding Orange County Superior Court Judge James L. Smith.

Slater said the payments are coming from the $1 billion released to the county by the U.S. Bankruptcy Court.

"The county made the determination that this is one of things that need to be paid," Slater said. "My understanding in conversations with the county counsel is that we are in sync when it comes to the minors' funds. Our (court) order to pay on these funds is being honored by the auditor-controller."

However, Irvine attorney Frank Nunes, who filed a class-action lawsuit in December on behalf of minors with settlement money in the county pool, said he had received different information from the auditor-controller's office.

"I was told the only money that's being automatically released is to kids who turn 18," Nunes said.

Nunes said he was told that requests from parents or guardians to transfer a minor's account to a private bank must be screened by the county's bankruptcy attorney.

"The bankruptcy attorney has to personally approve all transfers greater than $50,000," Nunes said. "The auditor's office told me that the attorney refused to approve one transfer that was bigger than $50,000."

Bruce Bennett, the county's bankruptcy attorney, said Friday that he was not personally involved in the minors' accounts and did not know the procedure being followed.

County Auditor-Controller Steve E. Lewis could not be reached for comment Friday night.

Anthony Thompson, a Superior Court employee assisting in the county's handling of the minors' settlements, said parents or guardians who want a child's money transferred to a private bank need only to ask. A simple, preprinted form is available for pool investors who want to transfer their funds, which are required to be placed in a secure trust account until the minor turns 18, Thompson said.

"That's great news," said attorney Darren Aitken, who represents Laura Small, the 13-year-old Lake Forest girl who was awarded $2 million from the county after being mauled by a mountain lion at Caspers Regional Park in 1986. Since the bankruptcy, her parents filed a lawsuit seeking the return of $90,000 of her settlement that is trapped in the investment pool.

Aitken said he would file a petition to get the money moved to a bank account. "Who needs a lawsuit?" said Aitken, who is representing the Smalls with his father, attorney Wylie A. Aitken.

But the attorney said he was puzzled about why county officials did not simply announce that all parents and guardians have to do is ask for the money.

"They certainly never said anything to us," Aitken said.

Nunes, who initiated the class-action lawsuit, reacted cautiously when told about Slater's and Thompson's comments.

"If the county is releasing funds my plan now is to ask the Probate Court to order all minors' accounts transferred to private financial institutions where the funds will draw interest," Nunes said.

"It's just an attempt to make sure the funds are safe," he said. "Obviously, the funds aren't earning any interest during the bankruptcy and there is still a need to get it out of the county's hands so the creditors can't touch the kids' money."

The minors had deposited the settlements in the county investment pool through a 2-year-old state law sponsored by the Orange County Board of Supervisors and Superior Court. Until the county filed for bankruptcy, some local judges routinely recommended that minors place the funds in the pool.

Typically, the funds stay in the pool until the minor turns 18. Ten days after turning 18, the minor is paid the principal followed by the interest 30 days later.

"If we need to, we'll hassle over the interest later," Nunes said. "Hopefully, the court will be able to tell us how much interest each (minor's) fund has earned."

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