ORANGE COUNTY IN BANKRUPTCY : Consultant Fees Will Top $24 Million

County officials estimated in January that its squadron of pricey lawyers and accountants handling the bankruptcy would cost taxpayers $12 million by June 30.

On Tuesday, figures disclosed by state Auditor Kurt Sjoberg showed the county’s first estimate was 100% wrong.

The new price tag for all that professional talent will top $24 million. And that doesn’t include the expenses of at least two prominent investment banking firms the county has agreed to hire.

“The county has not yet estimated the cost beyond June 30, 1995,” Sjoberg reported, adding, “it is unknown how long some of these contracts will continue.”

County officials did not return calls for comment.

But privately, one official said the $12-million estimate by the county’s administrative office was just a good “guess.” Before the massive cuts and layoffs, the county put a freeze on $12 million it said it needed to pay its lawyers and consultants, pinching money from employee sick-leave accounts and canceling studies and previously awarded contracts.

The biggest fees, of course, will go to the lawyers, billing the county at rates that range from $110 to $435 an hour. By June, the auditor estimates, the county will owe its attorneys more than $10 million.

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The biggest legal bills the county faces: $3.5 million for Stutman, Treister & Glatt, the county’s bankruptcy lawyers, and $4 million for Howrey & Simon, the firm retained to sue Merrill Lynch and others suspected of having a hand in the collapse of the county’s investment pool.

Another $1.68 million is anticipated in legal fees for Willkie, Farr & Gallagher, the county’s counsel on debt issues, and $500,000 for the firms of Squire, Sanders & Dempsey and Hawkins, Delafield & Wood for legal advice on debt administration.

Accountants will also cash in--more than double the original estimates.

Arthur Andersen LLP, the county’s accountants since the bankruptcy, are expected to bill $4.4 million. County officials have asked the firm to handle a number of new projects since its services were engaged, a spokesman said, and the new county estimates Sjoberg disclosed simply “reflect a better basis” for calculating the bankruptcy expenses.

Besides, the spokesman said, county officials have been privately revising their estimate upward for weeks.

Like lawyers and accountants, investment bankers don’t come cheap. Salomon Bros. will collect more than three times as much as the county first thought.

By June 30, the auditor estimated, the advice and investment banking services of Salomon Bros. Inc. will total more than $9 million. A portion of the Salomon expenses, yet to be determined, will be shared with other participants in the county’s investment pool.

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Then there are the legal fees of the current and former county officials under investigation by state and federal agencies.

More than half a million dollars has been earmarked to pay attorneys for former Treasurer-Tax Collector Robert L. Citron ($100,000), Assistant Treasurer Matthew Raabe ($100,000), former Finance Director Eileen Walsh ($100,000), Auditor-Controller Steve E. Lewis ($85,000) and former County Administrative Officer Ernie Schneider ($60,000). The county stopped paying Citron’s and Raabe’s legal fees last month.

Another $100,000 in legal bills is expected for attorneys representing the Board of Supervisors in the investigation by the U.S. Securities and Exchange Commission.

Finally, the controversial $450,776 invoice from the public relations firm of Sitrick & Co. Inc., hired to answer bankruptcy inquiries, is still unpaid.

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Fees File

Orange County is expected to pay nearly $24 million for bankruptcy and financial management services rendered from December, 1994, through June 30. A look at the bill:

Estimated Services cost Law firms Stutman, Treister & Glatt Fedl. bkrtcy. filing $3,500,000 Howrey & Simon Bankruptcy litig. 4,000,000 Willkie, Farr & Gallagher Counsel on debt issues 1,675,000 Squire, Sanders & Dempsey* Counsel on debt admin. 500,000 and Hawkins, Delafield & Wood* Financial advisers Thomas W. Hayes* Restructure treasurer 50,000 portfolio Arthur Andersen LLP Accounting, fin. consulting 4,400,000 Salomon Brothers Inc. Finl. advice, 9,092,820 investment banking Peacock, Hislop, Securities sales from pool 20,000 Staley & Given* Other consultant Sitrick and Co. Inc.* Public rels. svcs. 450,776 Total $23,688,596

* Work has been completed

Source: California state auditor

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Employee Representation

It will cost more than half a million dollars to provide current and former employees legal services related to the bonds crisis. A look at the expected tab for representation from December, 1994, through June:

Estimated Law firm Client cost Bryan Cave Supervisors in SEC $100,000 investigation David Wiechert Treasurer-Tax Collector 100,000 Robert L. Citron* Bird, Marella, Boxer, Asst. treas. 100,000 Wolpert & Matz Matthew Raabe* Squire, Sanders & Dempsey Fin. Dir. Eileen Walsh* 50,000 and Michaelson & Levine 50,000 Donahue, Mesereau & Wells Cty. Admin. Ofcr. 60,000 Ernie Schneider* Greenberg, Glusker, Auditor-Controller 50,000 Fields, Claman Steve E. Lewis & Machtinger Barton, Klugman & Auditor-controller, 35,000 Oetting treasurer employees in SEC investigation Total $545,000

* Former employee

Source: California state auditor