Ex-Bond Counsel May Face Legal Action

The Securities and Exchange Commission has informed lawyer Jean M. Costanza that she faces possible legal action in connection with her work on bond deals for Orange County before its 1994 bankruptcy filing.

The SEC has sent a so-called “Wells notice” to Costanza, a partner in the Los Angeles office of law firm LeBoeuf, Lamb Greene & MacRae. The firm has not received one, her lawyer said.

“I’m not in a position to comment any further, except to say she received one and we’ve responded,” said Costanza’s lawyer, Gary M. Cohen of San Francisco. “Now we wait to hear back from the commission.”

A Wells notice warns the recipient that the SEC intends to file civil charges against them for violating securities laws and gives the recipient an opportunity to argue why they should not be charged.

Cohen said the SEC’s allegations stemmed from work Costanza did for the county as bond counsel in 1993 and 1994, when she helped the county sell nearly $1 billion in both taxable and tax-exempt debt.

As bond counsel, Costanza would advise the county about the legality of the county’s bond offerings and the adequacy of disclosure information in the official documents submitted to potential bond buyers.

The most likely charges, sources said, would be violations of an SEC rule about misleading investors, or omitting “material facts” from bond documents.

Some of the other firms that did bond business with Orange County, such as C.S. First Boston Corp. and Rauscher Pierce Refsnes Inc. of Dallas, have also received Wells notices.

The SEC would neither confirm nor deny that Costanza had been sent a Wells notice.

Costanza is already a defendant in a pending civil suit brought by the county alleging that she and LeBoeuf Lamb didn’t disclose the risks of the county’s investments.

Costanza has denied all wrongdoing.