Merrill Lynch Spends a Lot to Lobby State

Brokerage giant Merrill Lynch & Co. spent more than $1 million last year to influence California government on legislation related to the Orange County bankruptcy, according to a state report issued Tuesday.

“We spent this money to inform the Legislature of the truth about the bankruptcy, that the blame for Orange County’s financial problems rest squarely at the feet of county officials,” said Merrill Lynch spokesman Andrew Sieg.

The report by the secretary of state said Merrill Lynch spent $1.06 million in 1995 to influence legislative and administrative decisions, making the firm one of the state’s biggest lobbyists.

By contrast, Merrill Lynch spent only $15,457 in 1994, the report said.

Tuesday’s report also shows that Orange County spent $426,912 on lobbying in 1995, down from $610,433 the year before.

State officials said Merrill Lynch lobbied against more than 18 bills, many of which were introduced to reform state investment rules in the wake of the Orange County bankruptcy.

The firm lobbied against one bill, for instance, that would have forced local governments in California to stop dealing with firms under investigation for securities violations.

Last year, Orange County filed a $2-billion lawsuit against Merrill Lynch, alleging that the firm duped former Treasurer-Tax Collector Robert L. Citron into buying risky securities in violation of state law, leading to investment losses of more than $1.6 billion.

The lawsuit further contended that Citron’s transactions with Merrill Lynch, especially so-called reverse repurchase agreements, forced the county to exceed the debt it could legally incur under the state Constitution.

Merrill Lynch has denied any wrongdoing and vows to defend itself vigorously in court.

A federal judge is expected to decide soon if the county’s multibillion dollar lawsuit against Merrill Lynch--and its suit against the county’s former outside auditor, KPMG Peat Marwick--will be removed from U.S. Bankruptcy Court.