Anaheim Targeted in Investment Inquiry by SEC

Officials at the Securities and Exchange Commission have notified Anaheim officials that they intend to recommend enforcement action against the city for its investments in the ill-fated Orange County investment portfolio, officials said Tuesday.

City Atty. Jack L. White said the city has received a so-called Wells notice from the staff of the SEC. White said the SEC cited in the notice the city’s 1993 and 1994 taxable note issues.

A Wells notice informs its recipient that the SEC staff intends to recommend enforcement action to commissioners and gives the recipient an opportunity to respond.

White said the city would fight the SEC if any action is taken, saying “we’re a victim of the circumstances.”

“It’s strange that the parties that have suffered the losses are being dealt a second blow by being looked at by the commission,” White said. “We’re not a perpetrator, we’re a victim.”

Anaheim, which issued taxable notes in 1993 and 1994 and invested the proceeds in the Orange County pool, is the second city in the bankrupt county to confirm receipt of a Wells notice. The city of Irvine said on Nov. 29 that it received a Wells notice. The notice cited Irvine’s taxable notes.

Both Anaheim and Irvine invested the proceeds from the note issues in the county investment pool to take advantage of its higher rate of return.

The Irvine Unified School District, the Newport-Mesa Unified School District, the North Orange County Community College District and the Orange County Department of Education also said last month that they received Wells notices.

The SEC alleges the school districts and cities failed to disclose how the bond proceeds would be used, sources familiar with the situation said.

In addition to cities and school districts, current and former Orange County supervisors, former Treasurer-Tax Collector Robert L. Citron and former Assistant Treasurer Matthew Raabe as well as several investment firms and law firms involved in the bond deals have received SEC notices.

Orange County filed for bankruptcy protection on Dec. 6, 1994, after sustaining investment losses estimated at $1.69 billion.

Reuters contributed to this report.