School District Sues Over Bankruptcy Loss
Newport-Mesa Unified School District has filed a lawsuit seeking $5.4 million from a former financial advisor it alleges is partly responsible for district losses in the county’s 1994 bankruptcy.
In the suit filed last week in U.S. District Court, the district alleges Rauscher, Pierce, Refsnes Inc. had conflicts of interest because it was working for Newport-Mesa and Orange County in the months leading up to the bankruptcy.
The firm served as a financial advisor and underwriter to the district on an offering of $47 million in taxable notes invested in the county pool in 1993 and 1994.
A spokeswoman for Rauscher denied the allegations, saying the firm’s role as a price consultant for the county had no conflict with its job with Newport-Mesa.
Rauscher also denied district allegations that company officials knew of trouble in the county’s pool before the bankruptcy and failed to warn school officials.
The district had $80 million invested the county’s investment pool at the time of the bankruptcy, and has since recovered all but $8 million.
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