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Company Settles Charges in O.C. Bankruptcy Case

Securities: Credit Suisse, two employees agree to pay $870,000 for failing to disclose risk of investing in county bonds.


Ending the only federal case against a brokerage linked to Orange County's bankruptcy, a Wall Street firm and two employees agreed Thursday to pay $870,000 to settle charges they failed to disclose the risks of investing in county bonds.

The Securities and Exchange Commission had accused C.S. First Boston Corp. of intentional fraud and reckless conduct in helping the county sell $110 million in pension bonds just before it declared bankruptcy in December 1994.

In settling the case Thursday, the accusations were downgraded to an administrative charge of negligence. Parent company Credit Suisse First Boston, which had a 1996 pretax profit of more than $1.5 billion, paid $800,000, and two former municipal bond experts for the firm paid $35,000 each. None admitted guilt in the case.

There are no other criminal or regulatory charges pending in the bankruptcy, which became the largest financial collapse ever by a local government. The SEC previously settled similar charges against Orange County and several of its officials, including former Treasurer Robert L. Citron, whose losing bets on low interest rates caused a $1.6-billion loss.

In addition, the county settled a criminal investigation of Merrill Lynch & Co., Citron's chief investment firm, by accepting a $30-million payment.

However, the main financial battle has yet to be fought. The county government and various agencies still have civil lawsuits pending against 28 defendant groups--including Merrill Lynch--seeking billions of dollars.

Elaine Cacheris, the SEC's regional director in Los Angeles, said Thursday that additional charges may yet be brought against others.

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