Bankruptcy Civil Lawsuit Sent to Ventura

A $400-million civil lawsuit stemming from the Orange County bankruptcy has been transferred to Ventura County, after a judge ruled that a neutral venue was needed to try the case.

But Ventura County officials said Thursday that they are uncertain whether the case belongs in this jurisdiction, and they may try to bounce it back to Orange County if the proper procedures have not been followed.

“We have received the order of the Orange County judge,” said Ventura County Superior Court Judge William Peck, who supervises the civil caseload.

Change-of-venue requests are typically handled by the Judicial Council of California in San Francisco, Peck said. He was unsure whether the Orange County case was referred through that agency.

A judicial council spokeswoman said Wednesday that her office has received no such request.

The lawsuit, filed by the city of Orange and two public agencies that lost millions in the county’s risky investment pool, blames former outside county auditor KPMG Peat Marwick for failing to warn them of the impending financial crisis.

The Orange County Water District, the county Transportation Authority and Orange filed separate lawsuits against KPMG in September and November 1996.

The three cases were consolidated into a single legal action and transferred to Ventura County Superior Court last month. An initial hearing is set for Feb. 6.

The legal action was among a slew of multimillion-dollar lawsuits filed against several Wall Street brokerages and other professional firms in the wake of Orange County’s bankruptcy.

The suits against KPMG are among several the Big Six accounting firm has had to contend with during the last year.

Earlier this week, KPMG’s attorneys agreed to pay $10 million to settle a lawsuit stemming from the 1994 collapse of Teachers Management & Investment Corp. The settlement was reached just before a jury was to be selected.

The suit was brought by California teachers who lost $100 million in TMI’s collapse. They blamed the auditing firm and other professionals for allegedly propping the company up so that they could collect lucrative fees.

Orange County’s separate $3-billion damage suit against KPMG remains before U.S. District Judge Gary L. Taylor in Santa Ana. The parties are still exchanging documents as part of the discovery process. No trial date has yet been set.

Orange County filed the nation’s largest-ever municipal bankruptcy case in December 1994, when its $7.6-billion investment pool faced nearly $2 billion in losses.