Two More Firms Will Pay to Settle Bankruptcy Suits
Two more Wall Street firms accused of contributing to Orange County’s bankruptcy have settled the county’s lawsuits for a total of nearly $8 million, officials announced Wednesday.
SBC Capital Markets Inc. will pay $6.5 million and Paribas Corp. $1.42 million, said Thomas W. Hayes, the former state treasurer overseeing the county lawsuits.
Settlements in the case now total $781.1 million--nearly half the $1.64 billion lost when interest-rate hikes devastated the county’s investments.
SBC Capital was a Swiss Bank Corp. subsidiary in 1994, when the county’s huge portfolio of rate-sensitive derivative securities was hammered. Swiss Bank merged in June with Union Bank of Switzerland, creating the world’s second-largest bank.
SBC, which had sold the county four derivative securities, was accused of supplying unsuitably risky investments. SBC lawyers couldn’t be reached for comment, but county attorneys said the firm admitted no wrongdoing in settling the case.
Paribas, a subsidiary of France’s Banque Paribas, had provided financing in November 1994 that enabled then-county Treasurer Robert L. Citron to buy more securities with borrowed funds.
Paribas lawyer Robert A. Meyer said his client was an insignificant player in the debacle and always maintained it did nothing wrong. The settlement, agreed upon several weeks ago but finalized only this week, was for a fraction of what a legal defense would have cost, Meyer said.
Michael Swartz, one of the lawyers representing the county, said additional settlements are expected.
Merrill Lynch & Co., Citron’s chief investment house, reached the largest settlement, agreeing to pay $400 million to the county and $17 million to a water district that filed a related suit. Merrill Lynch also denied wrongdoing.
The remaining defendants include Standard & Poor’s, a credit-rating service that gave high marks to the county’s municipal bonds in 1993 and 1994, and Dain Rauscher Inc., which advised the county on issuing those bonds.
