IRVINE : Report on Officials’ Conduct Set for Review

The City Council will hold a public review today of a 594-page report on the actions of top city officials in connection with the collapsed Orange County investment pool.

The meeting is scheduled to begin at 4:30 p.m., but council members said it may be delayed because they expect to be in closed session until about 5:30 p.m. The review is scheduled for the end of the meeting.

The report was compiled by the West Los Angeles law firm of Mitchell, Silberberg & Knupp with data from national accounting firm Price Waterhouse. The law firm was hired to represent the city in matters related to the county’s Dec. 6 bankruptcy filing.

Most council members said the report appears to clear city officials of any wrongdoing. Councilwoman Christina L. Shea said she has serious concerns, however, about the reporting of a change in the cost of an interest-rate cap.

When three out of five council members voted in July to invest an additional $62 million in the county pool, they were told by city finance officials that an interest-rate cap would be necessary to protect investment profits. Council members were told that the cap would cost $180,000, Shea said.

In reviewing the report, Shea said, she found documentation that city finance officials invested in the pool on July 27 and sent a memo to council members on July 28 stating that an error had been made. The cost of the interest-rate cap would be $499,000, according to the memo.

Since the lowest estimate of profit from the investment was about $300,000, Shea said, the $319,000 increase in the interest-rate cap should have been reported. Council members might have rescinded approval of the investment, she said, if the higher cost had been known.

“I don’t see that as just an error,” Shea said. “In my mind, that looks very calculated.”