Mystery Money Is the Root of Public Quarrel

Deciding who gets $12 million that inexplicably appeared in a county account has set Orange County supervisors, the county’s executive officer and local government officials at loggerheads.

Twice in the last 18 months, county supervisors have pondered behind closed doors what to do with nearly $30 million discovered in county accounts related to its historic 1994 bankruptcy.

Money from two of the accounts, totaling $17.5 million, eventually was traced to the county, its departments and the county-run flood control district. The county kept that money.

But both sides are at an impasse over the remaining $12 million. Top county officials want it all, but a bankruptcy agreement calls for the county to share any future unclaimed money with cities and public agencies that invested in the county’s two investment pools.

An audit for the county by Price Waterhouse LLP accounting firm failed to identify the source of the $12 million.

In recent weeks, several investor-agencies put pressure on supervisors who sit on their boards to declare their position publicly. The agencies want supervisors to give half the money to investors.

Supervisors, who had turned negotiations with investors over to Executive Officer Jan Mittermeier, are expected to meet once again in private session Tuesday to try to come up with a final decision.

“It’s time to end this,” Supervisor Tom Wilson said. “It has really escalated.”

It may not seem like a lot of money, considering the $1.64 billion that was originally lost in the bankruptcy, but the county’s investment partners said splitting the funds is a fight worth waging on principle alone.

At issue is the county’s pledge to split future unclaimed money 50-50 with cities and agencies that participated in two investment pools. The pledge was a major part of the settlement of claims that allowed the county to emerge from bankruptcy in June 1996.

“Unless it can be proven clearly that this is money from after the bankruptcy, then it should be split,” said Donald F. McIntyre, general manager of the Orange County Sanitation District.

Earlier this month, Mittermeier sent a letter to investors declaring the newfound money to be the county’s. She said bankruptcy-related funds “have long since been accounted for.”

County Finance Officer Gary Burton admitted that the county “can only guess” where the money came from, but he believes it is interest earned in 1995 and 1996.

Frustrated with Mittermeier’s position, several agencies scheduled closed sessions of their own in recent weeks. Two of them, the sanitation district and the Orange County Transportation Authority, have supervisors on their boards.

Wilson, who chairs the transportation panel, said he listened to the arguments of pool attorneys that the money should be split, as well as to the county’s bankruptcy attorneys saying it shouldn’t.

“This could all turn out to be a matter not of law but of fairness,” Wilson said in a telephone interview this week from Washington, where he is on OCTA business.

“We can go back to the bankruptcy court and say, ‘What do you want us to do with this?’ Or we can have the Board of Supervisors vote to split it,” he said. “The county has been trying to rebuild the trust factor between cities and the county, and this isn’t helping.”

Supervisor Todd Spitzer said he has advocated splitting the money since it was first discovered.

So far, Burton said, schools have received refunds on about 96% of their investment losses; other investors have recovered about 92%. The county has recouped less than 50% of its investment losses. School districts are not part of the agreement to share unclaimed money.

Board Chairman Charles V. Smith said he supports sending the matter to the bankruptcy judge and letting the court decide where the money should go.

Supervisors Cynthia Coad and Jim Silva were traveling and couldn’t be reached for comment.

Irvine City Manager Paul Brady, who chaired a committee of pool investors after the bankruptcy, said the county simply is not living up to its agreement. Cities and special districts want assurances that any more mystery money that appears will be split.

“In the big picture of things, with the $800 million that we already got from settlements, this amount of money is a small pittance,” Brady said. “But our opinion is we shouldn’t be haggling over something this small. We believe we’re entitled to it.”