Advertisement
YOU ARE HERE: LAT HomeCollections

Legal-Financial Team Tours County Detailing Pool Settlement Workings

March 28, 1995|MARK PLATTE and SHELBY GRAD | SPECIAL TO THE TIMES

A team of lawyers and financial experts made a whirlwind tour of Orange County on Monday, telling cities, schools, special districts and other agencies for the first time how much they could get of the remaining $5.7 billion in the county's collapsed investment pool.

Armed with spreadsheets, graphs and an overhead projector, the attorneys and financial consultants for a seven-member committee representing 194 investors laid out the details of a settlement plan that attempts to get those in the pool the full amount of their investments.

In Fountain Valley, nearly 100 city officials got the official word that they would not be getting as much as investors who had more money in a "bond pool," or lower-risk securities, even though they had been informed a month before that it didn't matter where their funds were invested.

"We were told we'd all be treated equally, and now we find we're on the bottom rung after the schools and the transportation agencies," Dana Point Councilwoman Toni Gallagher said.

Dana Point had nearly $16 million in the riskier commingled pool.

Because former Treasurer-Tax Collector Robert L. Citron kept three separate accounts--a bond pool, a commingled pool and a fund for specific investments, all of which earned different rates of interest--committee members decided that those with money in the riskiest funds should receive less money.

Those with money in the bond pool will get 83.94 cents on the dollar and those with money in the riskier commingled pool, mostly the schools, will get 76.26 cents on the dollar. The Orange County Transportation Authority, which had its money split between the two pools, will get nearly 82 cents up front. The Transportation Corridor Agencies, the public agency building the county's first toll roads, had most of its money in the bond pool and will get 84 cents on the dollar immediately.

Under the agreement, schools are to get another 14 cents and all others four cents in so-called "recovery notes" that the county has pledged to guarantee by June 5. The committee has pledged to get schools at least 90% of their investment and other investors at least 80% by that date.

Orange Mayor Joanne Coontz said she is still concerned that the county has no specific guarantee to make the recovery notes "good as gold," as officials have suggested.

"We're not real happy about it," she said. "We still want every penny back, but it looks like it will take a while."

All investors are supposed to get an additional three cents on the dollar--two cents representing interest that officials said Citron skimmed from investors and another penny representing interest that was earned in the six months before the county's bankruptcy.

The rest of the money is supposed to come from the settlement of secured claims the county has against brokerages such as Merrill Lynch & Co. and in "repayment claims" the county hopes to make good on in years to come.

The pool committee approved the plan by a 6 to 1 vote Saturday night. Robert Locke, the lone dissenter, who represents the cities outside Orange County that invested in the pool, said Monday that he has a number of problems with the plan and voted against it when other members said there wasn't enough time to circulate it among the investors he represents.

Locke, director of finance for the city of Mountain View, said he does not like provisions of the plan that keep county officials from being sued because of the financial disaster and forbids those who sign the agreement to speak about it.

"We've got an extensive set of releases against anyone who is part of this thing, known and unknown, who have committed acts, known and unknown, which indicates there are lots of red flags that something inappropriate happened," Locke said.

Some city officials questioned how they can oppose a proposed sales tax hike to get Orange County out of bankruptcy when it is almost certain that getting all of their money will depend on whether voters approve such a tax.

"The sales tax issue and the repayment to the cities and creditors are tied together," said Laguna Niguel Mayor Mark Goodman. "Personally, I don't support a sales tax because the citizens of Laguna Niguel should not have to pay for the bad decisions of other agencies, particularly those who borrowed to make a profit and shore up their budgets."

Investors have until April 17 to decide whether to take one of three settlement options. Under Option A, they get a set amount of cash and give up their right to sue for the remaining money unless the county cannot make good on its recovery notes. Under Option B, they get the same set amount of cash but reserve their rights to sue for the rest. Under Option C, they take no money and attempt to sue for the entire amount.

Advertisement
Los Angeles Times Articles
|
|
|