ORANGE COUNTY IN BANKRUPTCY : County Pays $4 Million for Some Advice : Bankruptcy: Critics call bills of accountants, lawyers and brokers exorbitant, but county officials say they saved millions more. Fees were from December alone.

On the same day they voted to lay off more than 1,000 county workers, members of the Board of Supervisors agreed Tuesday to pay $4 million to lawyers, accountants and Wall Street brokers who advised the county on its bankruptcy during December.

County labor leaders and an anti-tax group criticized the payments as excessive.

“These prices do seem exorbitant,” said Linda Pierpoint, staff manager for the Orange County Employees Assn., which represents about 12,000 county workers. “In the view of layoffs, it’s kind of an amazing juxtaposition. They are spending so much for outside counsel and punishing employees for something they had nothing to do with.”

But county officials defended the payments, saying the consultants provided the county with crucial financial and legal advice that saved countless millions of dollars.

“If we hadn’t had this professional consulting help, we would have lost more money and the cuts today would have been worse,” said Supervisor William G. Steiner. “It was money well spent.”

The December payments represent just a portion of the $12 million that supervisors have estimated they will spend on outside consultants through June 30. Salomon Bros., which helped liquidate the county’s collapsed investment pool, has received payments totaling more than $2.8 million for December, the month the county filed for bankruptcy.

About $2.1 million of that amount was part of a $7.6-million commission the firm received for the liquidation, according to county documents. Salomon Bros. received $5.5 million of its commission in the form of assets taken directly from the county pool in December.

Supervisors also approved an additional $650,000 payment for Salomon Bros.’ work as a financial adviser for the county. The payment includes a one-time retainer fee of $500,000, plus a monthly fee of $150,000 for December.

Steiner praised the firm for helping turn the troubled investment pool “into real liquid assets we could use.”

The other December payments approved Tuesday were:

* $400,651 to the law firm of Howrey & Simon, for pursuing litigation against Merrill Lynch & Co., the Wall Street brokerage that sold the county many of its interest-sensitive securities that lost value as interest rates climbed.

* $374,940 to Arthur Andersen & Co. for “services rendered as an accounting consultant for bankruptcy issues and litigation issues,” according to a county report.

* $314,058 to the law firm of Stuttman, Triester, Glatt, which served as the county’s bankruptcy counsel.

* $152,835 to the law firm of Wilkie Farr & Gallagher for “advice with respect to the municipal finance aspects” of the bankruptcy filing as well as “inventory and legal analysis of all outstanding debt,” according to a county report.

Supervisors, however, withheld payment to the public relations firm Sitrick & Co., which billed the county about $250,000 for three weeks’ work in December. County Chief Executive Officer William J. Popejoy plans to negotiate with the company to see if the bill can be reduced.

The county hired Sitrick to handle media inquiries during the financial crisis. The firm’s bill has been the subject of criticism by both city leaders and the Committees of Correspondence, an anti-tax group, who questioned the need for the PR firm that charged rates of up to $350 an hour.

Steiner and other county officials said the December bills were rigorously examined by county officials to weed out any overcharges or questionable items.

Steiner also noted that some of the December payments went toward litigation against Merrill Lynch--an effort that could bring a substantial award if the county is victorious in court.

In a related development Tuesday, Merrill Lynch formally challenged the county’s bankruptcy declaration, calling it a “sham” that was “not filed in good faith.”

Attorneys for the brokerage firm filed a motion in U.S. Bankruptcy Court claiming that the bankruptcy petition was improperly filed in such a way to “manipulate” the law and unfair benefit the county at the expense of pool investors.

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Professional Payments

The Orange County Board of Supervisors approved payments for professional services related to the bankruptcy. Payments are only for services in December, 1994:

Firm Service Approved Payment Salomon Brothers Liquidate investment pool $2,176,493.13 Salomon Brothers Financial adviser 650,000.00 Stuttman, Triester & Glatt Bankruptcy counsel 314,058.05 Arthur Andersen & Co. Accounting consultation 374,940.45 Howrey & Simon Litigation against third 400,651.03 parties to recover losses Wilkie Farr & Gallagher Special bond counsel 152,835.80

TOTAL: $4,068,978.46

Source: Orange County Administrative Office