Bill Aims to Punish College District

A state lawmaker introduced a measure Tuesday that would punish the North Orange County Community College District if it presses ahead with a legal battle against a New York law firm instead of joining a $50-million bankruptcy settlement hammered out by the county.

An attorney for the college district called the bill by state Sen. Ross Johnson (R-Irvine) an attempt at extortion and vowed to press forward with its fight against LeBoeuf, Lamb, Greene & MacRae.

The law firm’s malpractice insurer has agreed to settle the county’s case, but only if the college district drops its separate damage suit against LeBoeuf.

Johnson’s bill would require that the state withhold funding equal to whatever the district receives from its own lawsuit against the law firm, one of the key players entangled in Orange County’s 1994 bankruptcy.

The legislation is just the latest effort by cities, schools and other agencies with a stake in the lawsuit to pressure the college district to join with the county and settle the legal battle with LeBoeuf.

District trustees have also received letters urging a settlement from Marian Bergeson, Gov. Pete Wilson’s secretary for child development and education, and Sheriff Brad Gates. The county, meanwhile, has studied whether it could freeze more than $250,000 in job training funding it gives the district.

College officials say the county’s settlement agreement isn’t enough for them to avoid a huge loss, arguing that LeBoeuf should dip into its own profits to pay more. Although the college district would get $6.7 million under the county settlement, administrators are seeking nearly double that in a separate lawsuit, slated for trial Feb. 27.

“This latest intimidation tactic should be clearly seen for what it is: a gross abuse of political power,” said Ed Connor, an Irvine attorney for the district. “It is not only mean-spirited, but is also illegal and unconstitutional.”

Connor said that Johnson is using the legislative process “to unlawfully interfere with a public agency’s right to pursue its legitimate claims” in a court of law.

“As far as the district is concerned, when its opponents have to resort to such desperate tactics, which border on political extortion, it only confirms that the district is on the right path,” Connor said.

He added that district officials are “surprised and disappointed” that Johnson did not contact them before pressing ahead with his bill. “He has made no effort to talk to the district,” Connor said, “but instead has been persuaded to adopt a policy of intimidation rather than negotiation.”

Johnson said he wasn’t about to get into “a name-calling contest with this attorney.” He said the legislation he introduced is “very simple and the morally correct thing to do.” The college district, he said, “should realize we’re all in this together,” drop its lawsuit and join with other agencies willing to settle.

He noted that Orange County schools stand to gain $25 million of the settlement money, which is needed to carry out facility repairs, and suggested that the college district may be getting bad advice from its attorneys.

“My fear is their position is being driven by the attorneys, and every day this is delayed, clearly more money is being eaten up by fees,” Johnson said. “For every dollar eaten up, that’s another dollar not going to school kids.”

Johnson said he had not been asked by anyone to push the bill, but rather had developed the idea on his own after reading press accounts of the college district’s reluctance to settle.

County Supervisor William G. Steiner said Johnson’s action “should get [the district’s] attention. It’s unfortunate it has to go to this length, but it’s pretty frustrating to have a settlement of that magnitude and then watch the ice cube melt as that insurance money continues to go to the lawyers.”

The college district, which operates Fullerton and Cypress community colleges, argues in its lawsuit that LeBoeuf failed to warn administrators of the risky nature of Orange County’s investment pool when the firm helped them borrow $72 million to invest just months before the fiscal meltdown. The investment pool crashed in December 1994, costing local agencies $1.64 billion and triggering the nation’s largest municipal bankruptcy.