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ORANGE COUNTY IN BANKRUPTCY : County Looks Into Recouping Millions It Lent

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TIMES STAFF WRITER

It could be a potential windfall of as much as $106 million for bankrupt Orange County. Or, it could just be another empty account.

Orange County Interim Chief Executive Officer Jan Mittermeier said Wednesday that she has directed staff to study the books to determine whether up to $106 million used to cover a variety of shortfalls in county agencies because of the county bankruptcy can, or will, be repaid.

“I’ve asked the auditor-controller to go through [the county financial records] carefully,” Mittermeier said. “The money is not actually there. I don’t know how real that figure is, or whether we will ever see that money.”

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Shortly before the bankruptcy, the county had roughly $163 million in an account representing money borrowed against anticipated tax revenues. That account lost more than $50 million when the county declared bankruptcy Dec. 6, county spokeswoman Lynne Fishel said.

The remaining money in the account was borrowed by different county agencies to help make payroll and pay bills.

“These county agencies [that were lent the money] owe that money back, but they are caught up in the bankruptcy too,” Fishel said. “It’s a big accounting mess. Is it realistic to assume they are going to pay it back?”

Paul Sachs, the county’s chief accountant, said that, at most, the county will recover about $10 million. The rest, he said, was swallowed up by the financial crisis.

“You can almost look at those funds as the county’s contingency funds,” Sachs said. “The county certainly doesn’t have $106 million sitting around.”

The bankruptcy was triggered by a risky investment strategy that ultimately caused a county-run investment pool to plunge $1.7 billion in worth. Orange County cities, schools, special districts and other government entities that invested in the county pool are still owed millions, along with vendors who provided county services, bondholders and other creditors.

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Attorney Patrick C. Shea, who represents the pool participants, said he wants a promise that any substantial funds will go to those who lost the money and not county operations.

“If it’s a significant amount of money, I hope they would do the right thing with it,” Shea said.

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