9 Brokerages Agree to Settle O.C. Bonds Suits

Several prominent Wall Street investment firms agreed Friday to pay $4.4 million in damages to holders of Orange County bonds, marking a major settlement in litigation stemming from the county’s bankruptcy.

The firms did not admit to any wrongdoing. The plaintiffs, who had bought Orange County municipal bonds, alleged that they were the victims of a “fraudulent scheme” that resulted in their paying more for the bonds than they were actually worth.

Some of the firms are among the biggest on Wall Street. The nine are Donaldson Lufkin & Jenrette Inc.; PaineWebber Inc.; Smith Barney Inc.; Kidder Peabody & Co. Inc.; Lehman Brothers Inc.; O’Brien Partners Inc.; Stone & Youngberg; Rauscher Pierce Refsnes Inc.; and CGMS Inc.

The settlements were filed late Friday in Superior Court. Attorneys for bondholders said the settlements would still require court approval. The firms each agreed to settle separately.

Several other defendants in the lawsuit were not part of the settlements, including Merrill Lynch & Co. Inc.; KPMG Peat Marwick LLP.; CS First Boston Corp.; Fieldman Rolapp & Associates Inc.; and Leifer Capital Inc.

Attorneys for the bondholders said litigation with those firms would continue. Attorneys for the firms were not immediately available to comment.

The bondholder suits followed the county’s declaration of bankruptcy in December 1994, after the county’s investment fund lost more than $1.6 billion on highly volatile investments.

The bankruptcy left the county unable to meet the payments on its bonds. Attorneys sued the firms on behalf of all investors in debt securities issued between July 1, 1992, and Dec. 6, 1994, by Orange County and by cities, schools and districts that lost money in the county investment pool.