ORANGE COUNTY IN BANKRUPTCY : 14 Pool Investors Claim $100 Million : Bankruptcy: County formally notified by Option B participants as prelude to lawsuit.

Fourteen Orange County Investment Pool participants notified the Board of Supervisors Tuesday that they are laying claim to $100 million--money they say the county has wrongly deducted from their pool accounts as the group’s share of the pool’s heavy losses.

The official notification came after the pool participants won permission from U.S. Bankruptcy Judge John E. Ryan to file the claim with the clerk of the board.

Notice was needed to fulfill a technicality in state law that requires someone suing a governmental body to alert its officials directly, as well as file the complaint in court, said attorney G. Larry Engel, who represented the participants at the hearing.

County bankruptcy attorney Jim Johnston said the county did not believe that a bankruptcy court hearing to obtain Ryan’s permission was necessary, but otherwise did not oppose the group’s motion seeking Ryan’s approval.

The pool participants who are poised to sue the county include six out-of-county cities and two out-of-county redevelopment agencies, as well as the Santiago and Yorba Linda Water District, and the cities of Buena Park and Yorba Linda and their redevelopment agencies.

They were the only agencies among the more than 200 pool participants that chose so-called Option B under last month’s settlement agreement between pool participants and the county.

That option required the county to pay them 77% of the amount technically in their accounts before the investment pool’s collapse, and allowed them to sue in bankruptcy court for the remainder. The 14 participants had about $400 million in the pool when the county recognized $1.69 billion in losses and filed for bankruptcy last December.

In late April, the Buena Park Redevelopment Agency filed suit against the county for the remaining 23% of its money, plus damages. The other option B participants are expected to join that suit by the end of this month, said Nanette Sanders, another attorney for the participants.

Sanders said the participants will sue for at least $100 million that the county deducted as their portion of the pool’s losses when it made the 77% distributions last month.

The participants are alleging that the county and its employees, especially former Treasurer Tax-Collector Robert L. Citron and former Assistant Treasurer Matthew Raabe “engaged in frequent, continuous or repeated wrongful acts or omissions” that caused the losses, said the motion.

They also maintain that the county held their funds in trust, not as an investment, and so should repay the money in full.

The Orange County Employee Retirement System, which had $132 million in the pool, also joined in asking for permission to serve notice on the Board of Supervisors.

OCERS attorney Benjamin Seigel acknowledged that unlike the others who filed Tuesday’s motion, the organization chose option A, which generally prohibits lawsuits against the county for unpaid balances. Those taking Option A were given 77% of their money as well, plus two or more types of county IOUs for the rest of their balances.

Seigel said that if the county fails to come up with the money needed to make the highest grade of IOU “as good as gold” by mid-June at it promised, OCERS is likely to switch to Option B. The county, by earlier agreement with pool participants, is allowing them to switch between June 13 and June 16, he said.