The Orange County Board of Supervisors on Tuesday will consider special rules the county would be required to follow to do business again with Merrill Lynch, the brokerage firm blamed for helping cause the county's 1994 financial collapse.
Supervisor Todd Spitzer's proposal would require the board to sign off on each job Merrill Lynch handles for the county--a level of oversight not required of any other Wall Street firm.
This is not punishment but a form of protection for county funds, Spitzer said. Merrill Lynch in recent months has been pursuing renewed business with the county and other local agencies. If it wants county business, Spitzer said, the firm must do it publicly at a hearing.
The supervisor noted that Merrill Lynch, the nation's biggest brokerage firm, has been accused of misleading investors in the Enron scandal. In May, the firm agreed to pay $100 million and change some of its research policies to settle charges by the New York attorney general that Merrill Lynch analysts gave investors bad advice. Merrill Lynch denies any wrongdoing in the Enron case.
The county's investment policy--developed after the bankruptcy--is silent on whether county departments can use Merrill Lynch's services. Merrill Lynch officials have said they are eager to renew ties with the county and have held talks with county Chief Financial Officer Gary Burton and Treasurer-Tax Collector John M.W. Moorlach.
"We would be interested in doing business at some point with the county," said Bill Halldin, a Merrill Lynch spokesman. "We do think that we could add competition for the county's business, and our being in that competitive mix would benefit the county in terms of the bids it would be able to get."
Some county sources suggested that the proposal involved an issue of control between Moorlach, who warned about financial problems before the bankruptcy, and Spitzer.
Moorlach said, through spokesman Brett Barbre, "We're not interested in contributing to supervisor Spitzer's media quota for the day."
Orange County lost $1.7 billion in its financial collapse. In 1998, Merrill Lynch agreed to pay the county $420 million to settle a lawsuit alleging that the company encouraged former county Treasurer Robert L. Citron to make risky investments that violated state law.
The firm also paid a $30-million fine levied by the Orange County district attorney's office to resolve a potential criminal case.