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O.C. Weighs Investment Forgiveness

The treasurer says it's time to do business again with Merrill Lynch, which played a key role in the county's 1994 bankruptcy.

May 09, 2003|Stuart Pfeifer | Times Staff Writer

Orange County's treasurer wants to renew business ties with Merrill Lynch & Co., the Wall Street giant many blamed for the staggering investment losses that drove the county into bankruptcy in 1994.

Treasurer-Tax Collector John M.W. Moorlach's suggestion comes nine months after the county Board of Supervisors, still stinging from the bankruptcy, voted to prohibit any financial relationship with Merrill Lynch without full board approval.

Former Orange County Treasurer Robert L. Citron was working with Merrill Lynch in the early 1990s when he engaged in a series of leveraged investments that backfired, forcing the county into bankruptcy. In 1998, Merrill Lynch paid $437 million to resolve lawsuits with the county and other investors.

Now, Moorlach said he wants the opportunity to buy investment products from Merrill Lynch -- short-term bonds, for example -- when they're priced better than other competing Wall Street firms. The ability to buy products at opportune moments from the investment house could bring in as much as $1 million a year to the county, Moorlach said.

"For us, it's not emotional. It's what's the best [investment] out there," Moorlach said. "I'm a businessperson. I can't in clear conscience allow a grudge to cost the county money. I don't care who's selling it to me; just give me the best deal."

The treasurer has not made a formal proposal, but his idea has the support of two new county supervisors who say that in tough financial times it's important to put emotion aside and think about what's best for the county's financial health.

"If we can do it in a conservative way and earn more money for the county, we ought to do it," Supervisor Bill Campbell said. "One million dollars is quite a bit of money. It could mean additional services in child care. It could mean taking care of some streets in unincorporated areas. It could mean a park ranger opening a park a little earlier in the spring. It's the extras that can make a difference in the qualities of life."

Supervisor Chris Norby said he has tremendous faith in Moorlach's investment strategies. Before the county declared bankruptcy, Moorlach ran an unsuccessful campaign against Citron, telling a largely unreceptive audience that Citron's investment strategies were far too risky. After the fiscal collapse, Citron -- who ultimately spent nine months in a work furlough program -- quit and supervisors appointed Moorlach to the job.

"The bankruptcy was nearly nine years ago. Certainly, Merrill Lynch does not deserve a death penalty from the county in terms of being permanently prohibited from doing business with the county," Norby said.

Norby said that although Merrill Lynch played a decisive role in the bankruptcy, much of the blame pointed to a treasurer in over his head and supervisors who weren't paying attention.

Merrill Lynch spokesman Bill Halldin said the firm deserves Orange County's business.

"We would be open to the opportunity to provide services to the county at the point in time when the county wants to take advantage of the competitive and extensive products we offer," he said.

"I'm here to do a job," Moorlach said, "not carry expensive grudges."

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