ORANGE COUNTY IN BANKRUPTCY : $12.1 Million Earmarked for Crisis Fees : Recovery: Report allocating funds for law firms and trouble-shooters gets mixed reaction from supervisors.

Digging out of the largest municipal bankruptcy in U.S. history will cost Orange County an estimated $12.1 million through June in attorney and consultant fees, including $600,000 for a public relations firm, according to a report by the county administrative office.

The money will go to 10 firms hired to manage the financial crisis in wake of a Dec. 6 bankruptcy filing.

Two Los Angeles law firms are expected to receive nearly half of the payments, according to the one-page report. The county predicts it will owe $3 million to Stuttman, Triester & Glatt, which charges up to $435 per hour in handling its Chapter 9 bankruptcy filing. Another $2.5 million will go to Howrey & Simon, which receives up to $395 an hour for litigating matters stemming from the bankruptcy.

Supervisor Jim Silva questioned Saturday whether such a large sum is very prudent at a time when county services are being cut and hundreds of workers are being let go.

“I’m really surprised in the midst of a financial crisis our costs are so high,” Silva said. “I think we have to turn the spigot off.”

But Supervisor Marian Bergeson defended the expenses, reasoning that the enormous scope of the financial mess demands top-notch assistance to clean it up.

“We need the best minds on Wall Street,” said Bergeson, who will, however, push for a cap on the costs. “It requires the greatest minds and greatest experts to dig through a mess like this.”

However, both supervisors said they would review the estimated $600,000 earmarked for the public relations firm Sitrick and Co.--a Los Angeles-based business that has handled publicity for 55 firms that have filed for bankruptcy since 1989.

Of the 10 companies hired by the county, the public relations firm is the only one still requiring board approval to continue its contract through the end of June.

Company head Michael Sitrick said the firm has already saved the county millions of dollars by efficiently managing the informational chaos--and quickly correcting false and potentially damaging reports being circulated--since the bankruptcy.

“I understand people’s sensitivity toward us, but I think people criticizing us as ‘spin doctors’ isn’t justified,” Sitrick said. “We are working to preserve the value of the (county) estate so everyone can get more money.”

The Board of Supervisors will review the firm’s contract at a Jan. 24 meeting, Bergeson said.

Other costs outlined on the spending report included: $2 million to accounting firm Arthur Andersen; $2 million to investment firm Salomon Bros.; $1.4 million to county bond counsel Wilkie, Farr & Gallagher; $500,000 to county bond counsel Squire, Sanders & Dempsey; $100,000 to county bond counsel Bryan Cave; $50,000 to county chief financial adviser Thomas W. Hayes, and $40,000 to acting Treasurer Thomas E. Daxon.

An item not included in the spending report that may further raise the county’s payments are possible legal fees from the creditor’s committee, say officials. There’s a chance the county may have to to absorb some litigation costs for cities, school districts and other investors seeking to recoup their money from the county’s pool officials said.

This week, the Board of Supervisors will consider hiring two brokerages--Goldman Sachs & Co. and A.G. Edwards--to underwrite new debt for the county whenever officials decide to refinance the losses. But no decision had been made as of Saturday, county spokeswoman Sandra Sternberg said.

Orange County’s Bankruptcy

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