O.C. Transit Agency Settles Over Losses

Orange County’s transit agency has agreed to accept $4.75 million from Goldman Sachs & Co. to settle a lawsuit alleging that the New York financial giant failed to warn of an impending $225-million loss before the 1994 county bankruptcy.

Details of the settlement were not released pending court approval.

The suit was filed in December 1996 by the Orange County Transportation Authority over its losses in the county’s investment pool. OCTA stated that Goldman Sachs should have notified the agency about risky investments by former county Treasurer-Tax Collector Robert L. Citron.

Citron’s wrong-way bets on interest rates led to $1.64 billion in losses for the pool, a savings bank for schools, cities and special districts. The county sought federal bankruptcy protection in December 1994.

“The case was settled because the board wanted to move forward as quickly as possible and settle the case,” OCTA spokesman John Standiford said. Two months ago, OCTA lost a court decision on the suit and was in the process of filing an appeal.

The agreement came two months after board members of the county’s Foothill-Eastern toll road agency, an OCTA affiliate, hired Goldman Sachs as the secondary underwriter to help refinance $1.5 billion in bonds.

The settlement is one of several involving the county, local agencies and former financial advisors.

Earlier this year Merrill Lynch & Co., without acknowledging wrongdoing, paid the county $437.1 million to end a lawsuit accusing the firm of giving bad advice.