Steiner Presses College District

Stepping up pressure in its effort to settle a bankruptcy-related lawsuit, the Board of Supervisors chairman Friday asked for an analysis of freezing more than $250,000 in funding to a community college district that is refusing to join in the settlement.

“This is something I’d prefer not to do,” Board Chairman William G. Steiner said. “But by the same token, the district’s stance has frayed relationships with the county. It might be nicer to do business with a college district that is a team player.”

At issue is a proposed $50-million settlement with bond counsel LeBoeuf, Lamb, Greene & MacRae that would allow cities, schools and special districts to recover a portion of the hundreds of millions of dollars they lost when a county-run investment pool collapsed in 1994.

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Officials say the settlement is being held up by the North Orange County Community College District, which is a party to the county’s lawsuit and has a separate legal dispute with the law firm. County officials have been pressuring the district for weeks to drop its suit, which the LeBoeuf firm is demanding before it approves the deal.

Steiner sent a memo to County Chief Executive Officer Jan Mittermeier Friday, asking that she examine the ramification of halting $252,671 in funding to the district, which goes mainly to job-training programs.

In addition, Steiner asked Mittermeier to examine reallocating the money to neighboring community college districts.

The memo marks an escalation in attempts by pool investors to secure the settlement, which would mark the first civil settlement in Orange County’s 1994 bankruptcy and be one of the largest ever paid out by a law firm. But it met with an angry reaction from college district officials.

“It would be unconscionable and very inappropriate,” said Chancellor Thomas K. Harris Jr. “We provide services to people. It sounds like they want to prevent us from doing that because we won’t drop this litigation.”

Attorney Edmond M. Connor, who represents the district, questioned whether the county could legally freeze its funding.

“It’s tragic that after victimizing the district in 1994 by losing millions of dollars of its money, the county is attempting to victimize the district again by punishing it for not . . . settling a lawsuit on terms dictated by the county.”

The county alleged in its lawsuit that the firm failed to alert county leaders to the high-flying investment strategies of former Treasurer-Tax Collector Robert L. Citron, even though LeBoeuf’s partners had intimate knowledge of his activities.

The community college district filed a separate $11-million lawsuit against LeBoeuf last year, also accusing the firm of not warning college administrators about Citron’s risky investments when the law firm helped the district borrow $72 million to pour into the investment pool in 1994.

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Supporters of the settlement described it as a major milestone in repaying agencies that lost money in the bankruptcy and could result in additional civil settlements with other financial and legal firms the county is suing.

They also faulted the college district for seeking more compensation than other investors.

“They are holding up resolution of this for themselves as well as so many other agencies,” said Margie Wakeham, a trustee with the Irvine Unified School District. “I suppose there is a strategy that says holding out will get you more. But I think you have to look not just at your own district but all the others that lost money.”

But Connor said the college district is only exercising its rights allowed under the bankruptcy recovery plan. He also criticized the settlement as a “sweetheart deal” that would not require the law firm’s partners to make any financial restitution.

“As a public institution, we feel we have been wronged, and we filed a lawsuit,” Harris added. “What I can’t understand is other public institutions trying to stop us from prevailing. It’s unbelievable.”