O.C. Officials Celebrate End of Bankruptcy

Only 18 months after going bust, Orange County officials Wednesday stood outside one of the few public landmarks that is not mortgaged to announce that the county has made good on its debts and is no longer bankrupt.

“It’s as if you were informed by your physician, after a protracted illness [and] taking all your medicine like a good patient, you were cured,” Board of Supervisors Chairman Roger R. Stanton told well-wishers and reporters as he stood on the steps of the county’s century-old courthouse in Santa Ana.

“The physician would say you still have to take a number of steps to get back on your feet entirely,” he said. “I think that’s where we are today. The disease is cured. We’re out of bankruptcy.”

The county officially emerged from Bankruptcy Court protection at 9:50 a.m. Wednesday, when the holders of its overdue 1994 “casino bonds” were paid off with proceeds from last week’s $880-million bond offering.

Although now solvent, the county will need 30 years to repay the most recently issued bonds and fully recover from its $1.64-billion investment losses.

The bankruptcy stemmed from massive losses suffered by the county-run investment pool, which held money from more than 200 cities, school districts and other government agencies. The losses were blamed on the risky investment practices of former Treasurer Robert L. Citron, who made incorrect bets on the direction interest rates would take in 1994.

Stanton and Supervisor William G. Steiner face misconduct charges handed down by the Orange County Grand Jury for their roles in the bankruptcy. They are the only two supervisors, among the five on the board at the time of the bankruptcy, who remain in office. Both have denied any wrongdoing.

During the brief afternoon ceremony, county leaders congratulated themselves, posed for pictures and cited their more efficient and streamlined government. Then they adjourned inside the historic building and munched on ham and turkey sandwiches as the theme song of “Mission: Impossible” played on a loudspeaker.

But to many residents, Wall Street financiers, laid-off county employees and academicians, the milestone was a footnote to Dec. 6, 1994--the day that Orange County was publicly shamed by the nation’s largest municipal bankruptcy.

“Orange County crossed a line that day that no one thought a county in California would ever cross,” said Stephen Ward, chief investment officer at the brokerage firm of Charles Schwab & Co., which owned $41.5 million of Orange County bonds that should have been redeemed a year ago but were “rolled over” for another 12 months when the county couldn’t pay.

“Everyone in the municipal bond market continues to pay for the actions of Orange County. And the county itself will keep paying for its mistakes every time it borrows money,” he added, referring to the higher-than-average interest rate the county had to offer investors in last week’s bond sale.

One of the county’s high-priced advisors squirmed uncomfortably at the fanfare and picture posing. “I felt like I was graduating from bankruptcy school,” the advisor said.

Undeterred, county officials sought to put the best spin on things. They praised the remarkable speed in which they developed a court-approved bankruptcy plan. They said the bankruptcy helped reveal flaws in government that will make Orange County stronger.

“Today is a milestone. . . . All of the crazy things we’ve had to put up with over the last 18 months will now start calming down,” said Robert A. Griffith, the General Services Agency director. “I’m certainly happy to have this behind us.”

Stanton lashed out at the “nit-pickers,” “second-guessers” and “armchair analysts” who criticized the recovery efforts. He recalled a Hindu proverb that says when an elephant is down, even a frog will kick him. “Well, we’ve been kicked by just about every frog in Orange County, and from coast to coast,” Stanton said.

While he hailed the county’s recovery Wednesday, Stanton also deflected responsibility for the crisis away from the board. He blamed legal advisors and securities brokers, which the county is suing for billions of dollars.

“The supervisors are certainly not blameless,” said Seal Beach resident Renee Biltstein, who ran across the ceremony at the courthouse. “There is enough blame to go around.”