ORANGE COUNTY IN BANKRUPTCY : Minors’ Settlement Funds in Pool to Be Reimbursed

Orange County bankruptcy attorney Bruce Bennett said Friday that the county has honored all withdrawal requests from minors who had money from court settlements in the county’s collapsed investment pool, and plans to continue to reimbursing them in full, though others with court-related accounts will probably get only 70 to 75 cents on the dollar.

The county also plans to pay the minors the interest earned on their settlements since the county’s bankruptcy filing Dec. 6. That money would probably be available for withdrawal within two weeks, when the pool’s assets are disbursed under a settlement agreement approved this week by U.S. Bankruptcy Judge John E. Ryan, Bennett added.

“We’ve been giving them 100 cents (on the dollar) since the very beginning of the case,” Bennett said of the estimated 420 children who won court settlements, mostly in personal injury cases, and invested a total of $7 million in the county’s pool. “The practice has been to honor every withdrawal request. And we see no change in that practice going forward. We’ve honored them all.”

Earlier this week, Presiding Orange County Superior Court Judge James L. Smith said county advisers were urging judges to help spread the loss suffered by the $7.4-billion pool among those minors who had invested in the pool by paying them only 70 to 75 cents on the dollar when they request withdrawals.

But Bennett denied that Friday, saying the minors--who have a relatively small share of the court accounts--are being paid in full.

However, “inter-pleader accounts”--in which two parties are fighting over money won in a court settlement--are receiving only 70 to 75 cents on the dollar, Bennett said.

Smith and Superior Court Executive Officer Alan Slater were both out of town Friday and could not be reached for comment.

Like other pool investors, the county will receive about 77% of the money it had in the fund--about $1.8 billion--by May 19. The losses suffered by the pool leave a $350-million deficit in the county-controlled pool accounts, including the court settlements.

Bennett said the county has been unable to establish a formal policy of reimbursing 100% to anyone with money in county-controlled accounts because there is not enough to go around. But because the children have a relatively small amount of money invested, the county can repay them in full, he said.

Withdrawal requests by the minors have been filled using unrestricted county funds, he said.

“In the case of these accounts, the county recognizes informally that there’s different equity,” Bennett said. “The treatment can’t be extended to all county-administered accounts because we simply don’t have the money.”