HENNIGAN VS. OLSON : Court Rivals : 2 Lawyers Will Slug It Out in O.C. Bankruptcy Debacle : Ronald L. Olson: Investment Giant Is Latest of His High-Profile Clients
It was perhaps inevitable that Los Angeles lawyers J. Michael Hennigan and Ronald L. Olson would one day face each other in a celebrated matchup.
Hennigan is known for wresting major monetary settlements out of big corporations, while some of Olson’s greatest efforts have gone to staving off corporate payouts.
The two are poised to do battle in one of the most important civil cases of the decade: The County of Orange vs. Merrill Lynch & Co.
Orange County accuses the Wall Street giant of making illegal loans to former County Treasurer-Tax Collector Robert L. Citron, and then getting him to buy inappropriate securities that cost the county nearly $1.7 billion in losses--accusations that the brokerage vigorously denies.
For the lawyers, the $2.4-billion damage suit could mean millions in fees, the chance to make precedent-setting law, and bragging rights to winning the largest municipal bankruptcy case in U. S. history.
At risk for residents of bankrupt Orange County is the wherewithal to repay more than $1 billion due schools that educate their children, cities that afford them police and fire protection, special districts that supply their water, and the agency intended to ease their commuting woes.
The Orange County case also may resolve questions about the obligations of securities brokers to warn customers about investment risks.
“Are brokerage firms financial advisers? Are they there to explain what an investment is?” said Michael Crames, a top New York lawyer. “And are we saying that municipalities do not bear the risk if their investments go bad?”
The lawsuit’s core issue: whether Citron and the county’s supervisors knew, or should have known, the risks they were taking, or whether wily Wall Street brokers manipulated an unsophisticated county treasurer in a drive to run up fees and commissions.
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To hear Ronald L. Olson tell it, Orange County’s former treasurer was simply following his own tried-and-proven investment strategy when he was buying billions of dollars worth of securities from Merrill Lynch.
Even though his wrong-way bets on interest rates cost the county nearly $1.7 billion, it was no game of chance, Olson says. It was more akin to a football game in which Bob Citron called all the plays, and for years was the winningest coach around.
“When Citron kept passing and winning, the supervisors applauded from the sidelines,” says Olson. “When he lost, the supervisors kept mum. In the end, the Orange County team lost, and now they want to change the rules of the game by suing Merrill Lynch.”
County leaders, Olson adds, like to forget that Merrill Lynch warned Citron about his high-risk strategy, and that the former treasurer “took care to explain to his supervisors, and his pool participants, exactly what he has doing with their money.”
“It’s a classic case of public officials not stepping up to their responsibility,” says Olson.
It came as no surprise to many in the legal community that Merrill Lynch turned to Olson to save the brokerage firm or its agents from possible criminal charges, and the $2.4 billion in damages Orange County seeks.
Blue-chip firms have gone to their Rolodexes so often for Olson’s number that he has been dubbed the best rainmaker--or generator of legal business--in the West.
Four years ago, when billionaire Warren Buffett saw his Wall Street investment firm, Salomon Bros., crumbling under the weight of a massive federal investigation into the firm’s violation of U. S. Treasury auction rules, he wasted no time in hiring Olson.
The result: No criminal charges against the firm’s executives, a relatively small $290-million civil fine, and record high profits for the firm the next year.
And when Alyeska Pipeline Services was being sued for its slow response in cleaning up the Exxon Valdez oil spill, the pipeline consortium asked Olson to disentangle them from the mess. Olson walked out of negotiations with a $98-million civil settlement, a mere pittance compared to the $9 billion in fines and damage verdicts against Exxon, which decided--unwisely--to fight the case before an Alaskan jury.
Olson’s has been a storied legal career. With blue eyes and Robert Redford looks, the former star high school athlete from Manila, Iowa (population 1,100), has gone on to become a name partner in one of the most respected law firms in the country.
Along the way, he helped determine what the nation can watch on prime time television and chaired the American Bar Assn. committee that rated Clarence Thomas barely qualified for the U. S. Supreme Court.
He sits on the board of more than a dozen civic and charitable groups, including the defense fund set up to help President Clinton pay his legal bills arising out of the Whitewater controversy and Paula Jones’ sexual harassment lawsuit.
Yet Olson, friends and colleagues say, still manages to spend a great deal of time with his close-knit family.
Olson’s success has made him a legal guru to Hollywood moguls, including MCA executives Sidney Sheinberg and Lew Wasserman, and new Disney President Michael Ovitz.
Almost always, Olson leaves behind a satisfied client. Like Warren Buffett, the second richest man in the world, who now calls Olson “a sensational lawyer and a terrific friend. We would be out of business [at Salomon Bros.] if he was not involved in our case,” Buffett told The Times.
So impressed was Buffett with Olson’s performance that he made this unusual entry in the 1992 annual report of his multibillion-dollar investment conglomerate: “Ron Olson was key to our success in getting through this trouble.
“At least five authorities--the SEC, the Federal Reserve Bank of New York, the U. S. Treasury, the U. S. Attorney for the Southern District of New York, and the Antitrust Division of the Department of Justice--had important concerns about Salomon. We needed a lawyer with exceptional legal, business and human skills. Ron had them all.”
Merrill Lynch is hoping that Olson can replicate this success in the Orange County lawsuit, said George Schieren, the firm’s chief lawyer for litigation and compliance.
Olson moved quickly to shape Merrill Lynch’s defense by going on the attack.
In March, he helped undermine a big part of the county’s bankruptcy filing by challenging the legality of the investment pool declaring bankruptcy along with county government, arguing that the pool hardly fit the definition of a municipality under the bankruptcy statutes.
That same month, Olson and his partners asked the judge to throw out the county’s damage suit altogether, and a hearing on this issue is pending.
And last month, Olson successfully fended off a move by the county’s lawyers to have U. S. Bankruptcy Judge John E. Ryan rule that Merrill Lynch’s loans to Citron violated California’s legal limits--a move that, if successful, would have put Merrill Lynch at a huge disadvantage as the case proceeded.
The telephone rings in Olson’s 35th-floor office in the Wells Fargo building in Los Angeles. A secretary answers it outside, and hands Olson a sheet of paper with “Ovitz” scrawled on it. Olson takes the call. The new Disney president was calling to say that he would soon announce his departure from Creative Artists Agency.
The telephone rings again. This time, it’s his 29-year-old daughter, Kristin, who is planning an April, 1996, wedding to Mark McKissick, a bond trader with Salomon Bros. in Chicago.
Kristin is a Harvard graduate who works for a nonprofit foundation in Chicago that seeks to call attention to violence done with handguns. She’s excited about a wedding dress she has seen in a Santa Monica bridal boutique and wants her dad to see it. Olson agrees to meet her later that afternoon.
Despite a hectic work schedule, Olson prides himself on spending time with his family. After his daily workout at a gym near his Pasadena home, he sits down to breakfast with his wife, Jane, and children, when they are at home.
Amy, 24, is a University of Michigan graduate who works for the Environmental Protection Agency in Washington. Steven, 27, is a University of Michigan law graduate who will begin a clerkship this month with Chief Judge Matthew Byrne of the Central District of California, a close friend of Olson’s.
Jane, Olson’s wife of 31 years, is a founder of the Interfaith Center to Reverse the Arms Race.
The family’s involvement with progressive causes almost always leads to the question how he can have a client list that includes weapons makers, a major cigarette company and environmental polluters.
“The system works best [when both sides have] the best of the lawyers,” responds Olson. “I still fundamentally believe in the system.”
Olson said it was too early to predict the outcome of Orange County’s lawsuit against Merrill Lynch, and he was cautious about disclosing details of his client’s strategy.
But he wonders whether it “was a terrible error in judgment” for the county to file for bankruptcy instead of “playing out its portfolio.”
“My dad used to say to me that a man with a hammer in his hand thinks every problem is a nail,” Olson said. “It’s a pretty tragic situation in Orange County. The place is in disarray. It is not clear to me who is exerting leadership, and they’re spending enormous fees for lawyers and other professionals.”
Lawyers who have argued cases against Olson are familiar with stories about his father, the coaches who guided him to 16 letters for four sports, and about farm life in his small town.
Olson joined Munger, Tolles in 1968, and made partner in two years. His big break came in 1975 when he was picked by the Screen Actors Guild and television producer Norman Lear to challenge the National Assn. of Broadcasters’ “family hour” policy, which banned provocative programming during the 7 to 9 p.m. prime time period.
Charging that the Federal Communications Commission had violated the 1st Amendment by coercing broadcasters into adopting the policy, Olson sued in federal court and won.
The networks dropped the restriction, and Olson’s phone hasn’t stopped ringing since.
The Merrill Lynch call came last February. Supported by two major East Coast firms and Merrill Lynch’s legal department, Olson has become the team’s quarterback.
He scoffs at assertions by former County Chief Executive Officer William J. Popejoy that the two sides once talked about settling the case for $1.2 billion. Popejoy later charged that Supervisor Roger R. Stanton had jeopardized those negotiations by suggesting that the county might accept $500 million in settlement.
“That was half as outrageous as the billion-dollar figure,” he says. “So much public posturing going on is making it difficult to see the truth. It is probably going to take a court to give Orange County a dose of reality.”
Is there the possibility of a compromise between the two parties?
“Conceivably,” Olson replies.
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Profile: Ronald L. Olson
Age: 54
Born: Manila, Iowa
Residence: Pasadena
Family: Wife, Jane Olson; three grown children
Employment: Partner in Munger, Tolles & Olson of Los Angeles
Legal specialty: Complex commercial litigation
Career highlight: Jones v. Mayer , a civil rights case on which he worked while at the U. S. Justice Department; U. S. Supreme Court ultimately outlawed discriminatory covenants of planned community outside St. Louis
Education: B.S., Drake University, Des Moines, Iowa, 1963; J.D., University of Michigan Law School, 1966; Ford Foundation Fellow, Oxford University, 1967
On image of lawyers: “Law was never meant to be a popular profession. It has historically been under attack. But we need people [like lawyers] to stand up to highest government authority and say, ‘You’re wrong.’ We need people to stand up for the underdogs. Legal representation is a central part of [empowering] citizens.”
Source: Ronald Olson
Researched by DAVAN MAHARAJ / Los Angeles Times
