Settlement in Bankruptcy Issue Expected : Negotiations: Supervisors decline to identify party or discuss likely agreement, but matter is characterized as relatively minor case aspect.
SANTA ANA — The Board of Supervisors announced Tuesday that the county is on the verge of reaching an out-of-court settlement with an unnamed party to the county’s bankruptcy case and will not pursue litigation against it.
The supervisors declined to discuss the potential settlement agreement or to identify the party involved. One called the continuing negotiations “very delicate.â€
County bankruptcy attorney Bruce Bennett characterized the matter as a relatively small issue in the county’s effort to recover from its unprecedented municipal bankruptcy. Bennett said that terms of the likely settlement will be made public as soon as the two sides reach a final agreement, which he said he expects within days.
“This is nothing earth-shattering,†the attorney said. “It doesn’t relate to the central issues of the case.â€
The announcement by board Chairman Roger R. Stanton followed a closed-door session with supervisors and attorneys. In a brief statement, Stanton said the board had chosen to pursue a settlement with the unnamed party rather than initiate litigation.
The county’s legal advisers are said to be on the brink of filing lawsuits against a wide variety of firms the county blames for precipitating its plunge into bankruptcy last December. The county declared bankruptcy after risky investment strategies led to the loss of nearly $1.7 billion from its investment pool.
The lawsuits, which are likely to target the county’s former outside auditors and several prominent Wall Street firms, would come in addition to a $2-billion suit the county has filed against Merrill Lynch & Co. The giant brokerage house sold the county many of its riskiest securities. It has consistently denied any wrongdoing.
The county last week refiled the suit against Merrill Lynch after it was dismissed for a second time on technical grounds. And on Tuesday, Bennett expressed impatience with the slow pace of the litigation.
“It’s time for the county, the court and Merrill Lynch to get on with the substantive matters of the lawsuit and put these other matters behind them,†he said.
Other likely litigation targets for the county are said to include KPMG Peat Marwick, whose audits county officials have criticized for failing to warn them of the looming financial crisis. Others are CS First Boston Corp. and Nomura Securities International, which sold the county securities that officials believe helped precipitate the collapse, and LeBoeuf, Lamb, Green & MacRae, a former county bond counsel.
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