Man Fined in O.C. Crisis Had $50,000 Tollway Pact

A financial advisor forced to abandon a $150,000 toll road contract after it was revealed he had been fined by federal regulators for his role in Orange County’s bankruptcy was already under contract at the time to the toll road agency for a separate $50,000 contract.

Douglas S. Montague’s firm, Montague DeRose & Associates, was hired March 10 to analyze pricing systems for the county’s toll roads by the board’s executive director, William Woollett, according to agency spokesman Paul Glaab.

The agency’s board members--elected officials from the county and local cities--usually must approve contracts of more than $25,000, but the agreement with John Weston of Montague DeRose was handled solely by Woollett because it was considered urgent, Glaab said.

Montague drew fire three weeks ago when board members discovered that he was being considered for a $150,000 contract despite having been found by the Securities and Exchange Commission to have withheld important information from Orange County bond investors before the 1994 bankruptcy.

Montague paid a $35,000 fine without admitting guilt; his former employer, Credit Suisse First Boston, and another employee also paid fines, the only fines to be levied so far in the bankruptcy fallout.

Supervisor Todd Spitzer, who sits on both of the county’s toll road boards, said he was unaware until last week that Montague’s firm already had an agency contract when the controversy erupted over the second pact.

“I’ve informed the chairmen of both boards of my frustration about how these contracts have been handled,” Spitzer said.

Spitzer said he’s doubly unhappy because a draft copy of Montague DeRose’s report on toll road pricing--which he said appeared anonymously on his office fax machine--contradicts the wishes of board members on future toll hikes.

Instead of discussing how to reduce prices during less-busy travel times, the report focuses on raising prices during the hours when the road is most heavily used, he said.

“The direction of board members to staff was clear: Do not raise prices during peak hours and find a way to increase usage,” Spitzer said. “What we now have is a draft document on how to effectively reduce [use] when we’re spending $2 million on a public-relations campaign to get more people on the toll road.”

Montague, who is Montague DeRose’s principal officer, and Weston couldn’t be reached for comment Monday.

Colleen Clark, chief financial officer for the tollways, said the firm was chosen to do research on alternative pricing systems across the country because of its marketing expertise. The findings will be configured with computer models on the toll roads before any recommendations are made to the agency boards, she said. Agency officials hoped to have the work finished by July, but it could take longer, she said.

“I don’t have any problem working with the firm,” Clark said. “We also have very qualified staff people working on this.”

Glaab praised the firm’s work and said Montague has resolved his issues with the SEC by signing the consent decree, in which he promised not to violate securities laws in the future. He said board members were informed in March that Montague DeRose had been hired to do the pricing analysis.

“This is old news,” Glaab said.

Of the county’s three toll roads, two are operating and a third is expected to open soon. The agency already has refinanced the bonds that built the San Joaquin Hills toll road, which is well under its ridership projections. The second tollway agency is considering refinancing bonds for the Eastern and Foothill tollways.