Firms Settling in O.C. Bankruptcy Ask Immunity

Financial, legal and accounting firms that have agreed to settle lawsuits stemming from the county’s bankruptcy urged a judge Monday to block other defendants from suing them.

The county, which lost $1.64 billion in December 1994 on speculative investments, has reached settlements totaling $773.2 million with companies accused of contributing to the debacle. But the settlements won’t become final until the companies are guaranteed they have no more liability.

U.S. District Judge Gary L. Taylor listened to arguments from both sides Monday before taking the matter under consideration. He is expected to issue a written ruling within two weeks.

More than a dozen remaining defendants want to retain the option to sue those who already have settled. They also want Taylor to limit further damage claims by taking into account the large settlements already negotiated.

“If they come after my client, Kidder Peabody, and say, ‘You’re responsible for all the county’s losses,’ I want to be able to offset that amount with what they’ve recovered already,” attorney Michael Diamond told Taylor.

Defendants that have settled include the county’s former bond counsel, Leboeuf, Lamb, Greene & MacRae; its former auditor, KPMG Peat Marwick LLP; and several investment firms, notably Merrill Lynch and Co., the chief investment house of former county Treasurer Robert L. Citron.

Remaining defendants include Standard & Poor’s Credit Rating Services, which rated the county’s bonds highly in 1993 and 1994; Dain Rauscher, an investment firm that advised the county on issuing bonds; and Fuji Securities, which helped finance Citron’s investments.

Fuji recently won a major victory in the case, successfully challenging the county’s assertion that Citron had no authority to make his risky investments. Under the county’s legal theory, all of the defendants were liable for the entire loss.

The county is appealing Taylor’s ruling that Citron had legal authority to make the investments.