Unity Is Best in Bankruptcy Suit

The county in recent days has appeared on the verge of a breakthrough in the continuing effort to recover money lost during the bankruptcy. A dispute over whether all the players suing a county bond counsel will remain in the fold has threatened to derail a settlement.

Negotiations throughout the post-bankruptcy period always have been delicate, and it behooves all sides to temper rhetoric and threats and work toward common ground.

The proposition that bond counsel LeBoeuf, Lamb, Greene & MacRae had close knowledge of the risky investment strategies of former Treasurer-Tax Collector Robert L. Citron and didn’t properly alert county leaders is at the heart of a lawsuit that now appears close to resolution. A proposed $50-million settlement would allow cities, schools and special districts to recover a portion of what they lost when the county’s investment pool collapsed.

Conceivably, every individual government entity that felt duped during the bankruptcy could bring its own litigation against parties believed to have been derelict. However, there is a strong argument for everybody staying in the same boat if timely resolution of disputes is important. It is, and there is still other litigation pending.

The North Orange County Community College District has been a party to the county’s lawsuit, but it has filed a separate $11-million suit against LeBoeuf on the grounds that the firm did not warn college administrators about Citron’s investments when the firm helped the district borrow $72 million to invest in the pool.

The district’s unwillingness to join in the settlement because it is pressing its own case has resulted in considerable tension between it and the county. Earlier this month, Board of Supervisors Chairman William G. Steiner went so far as to order the county to consider whether it could halt $252,671 funding to the district. The funds are used mainly for job training.

This threat stuck in the craw of the district, which understandably feels aggrieved. It has criticized the county’s plan as a sweetheart deal that does not go sufficiently far.

It would be a shame if things deteriorated to the point where funds being counted on were withheld. The county would not look very good doing that given its role in the bankruptcy.

The problem with holding out is that the entire settlement could come unraveled for others involved in the lawsuit if everyone does not remain on board. Local schools could receive $24.6 million. As difficult as it may be, team play for all parties, including the district, is probably the best way to go.

The proposed settlement already would be one of the largest ever by a law firm, one reportedly covered by the firm’s malpractice insurance for any payment up to $50 million.