Panel Agrees on Dividing O.C. Funds : Bankruptcy: Board decides how to disburse $5.7 billion in investment pool. Judge, supervisors, agencies must OK plan.

The committee representing those in Orange County’s collapsed investment pool reached a consensus Saturday for disbursing the $5.7 billion that remains, but the deal penalizes those agencies whose money was used by the county’s former treasurer in higher-risk investments.

The agreement calls for a return of 76 cents on the dollar to those investors in a risky commingled pool of funds while those in the lower-risk bond pool will receive nearly 84 cents. Because no entity had all of its money in the bond pool, however, the highest average amount any agency will receive is about 81 cents.

Until last week, some participants in the pool were under the impression that they would all be getting a guaranteed return of 77 cents on the dollar no matter where their money had been placed. But a financial adviser to the committee said the revised distribution was spelled out in a document given to investors in early February.

Under the agreement signed Saturday, schools will get an additional amount in recovery notes that will allow them to recoup 90% of their investment and all others will get a similar guarantee so that 80% of their money can be returned.

The county has promised to make the $237 million in notes “good as gold” with the guarantee that they can be cashed by June 5. In the event that the notes can’t be converted into cash, any of the nearly 200 public agencies that invested will have the right to sue to recover their money.

The settlement becomes official if it is approved by the elected officials of 80% of the agencies holding 90% of the money in the pool. The Orange County Board of Supervisors and U.S. Bankruptcy Judge John E. Ryan also must approve it.

Each investor has a choice of repayment plans. Under Option A, investors give up the right to sue for their remaining money unless the county does not make good on its guarantee that its notes can be cashed by June 5.

Under Option B, investors take just what they are entitled to under the formula and reserve the right to file a lawsuit. Some investors have indicated that they will reject both offers, accept no money and sue the county for their entire investments.

The money has been tied up since Orange County filed for bankruptcy Dec. 6, after the county’s investment pool plunged $1.7 billion in value as interest rates rose.

Most of the investors--including the school districts, cities, water districts and even the county--had their money tied up in the commingled pool, where it had been highly leveraged to make large gains over the years.

Others, such as the Transportation Corridor Agencies, which are building the county’s first toll roads, and the Orange County Transportation Authority, which runs the bus system and manages freeway construction, kept much of their money in the low-risk, low-yield bond pool.

Stan Oftelie, chairman of the seven-member pool committee, said committee members settled on the revised formula after considering disclosures early this year that the treasurer’s office shifted at least $140 million in losses to pool participants and skimmed about $85 million in interest that should have gone to other investors.

Committee members concluded that because those in the low-risk bond pool had gotten lower returns over the years than those in the commingled pool, it was unfair to evenly distribute the remaining funds.

“In the bond fund, the investments were indentured by contract and type of investment,” Oftelie said. “These were safer investments.”

He said there may be other funds, such as those collected before the bankruptcy, that might allow everyone to receive at least 77% of the money they invested in the pools.

“When the math is all worked out, I believe everyone will get their 77 cents,” Oftelie said.

Not everyone was happy with the new arrangement.

“We were told in the beginning that there would be no distinguishing between the two pools,” said Bernard Schneider, an attorney representing Anaheim. “We were only told about a week ago that there was going to be a distinction” in terms of disbursing the money.

Schneider said he has been concerned for some time about the lack of information from the pool committee--which represents the cities, schools, special districts, two transportation agencies and those entities outside the county that invested with resigned Treasurer Robert L. Citron.

“If the committee or the county wants us to make a decision, they are going to have to provide all the information,” Schneider said. “The time for trusting is over.”

Peer Swan, the chairman of the Irvine Ranch Water District, which had $118 million in the commingled pool, said that although his agency will lose substantial money under the new formula, the distribution is fair.

Times staff writer Michael G. Wagner contributed to this story.