Option B Group and Orange County Considering Proposed Settlement

Business Wire, April 16, 1996

LONG BEACH, Calif.--(BUSINESS WIRE)--April 16, 1996--City attorneys and city managers representing the 14 Option B cities and agencies are recommending to their elected officials a proposed settlement of the group's bankruptcy claims against Orange County.

Members of the group which chose Option B in the Orange County bankruptcy are all expected to vote on the proposed settlement by 10 a.m. Friday. The county Board of Supervisors is scheduled to consider the settlement Wednesday.

The City of Buena Park is considering the proposed settlement at tonight's (April 15) City Council meeting.

"We have never supported using taxpayer money to fight other public agencies," said Michael Martello, city attorney for the City of Mountain View. "Hopefully, this proposed settlement will allow the county to make peace with all the cities and agencies involved in the bankruptcy."

In exchange for a settlement from the county, the Option B group would drop their lawsuit against the county and vote for the county's Plan of Adjustment. The Option B group also would retain all its claims against Merrill Lynch and other third parties, from which the group plans to recover the remainder of its losses and damages. Terms of the proposed settlement cannot be released pending review by both the county and the 14 Option B cities and agencies.

"We always said our goal was to recover 100 percent of taxpayer funds. This proposed settlement and our right to seek recovery from Merrill Lynch and others does just that," Martello said.

When Orange County declared bankruptcy on Dec. 6, 1994, the Option B cities had $187 million deposited in the Orange County Investment Pool, about 2.5 percent of the total. In the subsequent bankruptcy settlement, which was approved by the federal bankruptcy judge and the Orange County Board of Supervisors, all depositors ultimately were offered Option A or Option B. The cities and agencies which chose B were paid less but were allowed to pursue independent recovery efforts against the county and third parties. The B participants received an average of 77 percent of their money but have been working to recover the rest--at least $44 million.

"We cut the best deal we could," Martello said. "The As got a reasonable deal that accomplished their goals. Our proposed settlement is structured a little differently but it will do the same thing."

CONTACT: Adler Public Affairs, Long Beach, Calif.

Cheryl Downey, 310/433-3176