Judge Resolves Settlement Cash Issue

In approving Orange County’s bankruptcy settlement Wednesday, a federal bankruptcy judge also endorsed a compromise plan for splitting an additional $17.8 million in government funds mixed up in the financial collapse.

The money will be split evenly between the county and more than 200 government agencies that lost money in the bankruptcy.

The surplus evolved from one fund worth more than $10 million in interest earnings that had been mixed into pre-bankruptcy and post-bankruptcy accounts, said Tom Beckett, public finance manager for the county.

When the county cleaned up its accounts in the wake of the bankruptcy, the interest “wound up in the wrong fund,” Beckett said.

In addition to the $10 million, the plan approved Wednesday deals with another $1 million the county incorrectly posted when it closed out a Fannie Mae escrow and another $3 million in misdirected funds, Beckett said.

County finance officials said the errors were first noticed in December 1997. But pool participants who lost heavily in the $1.6-billion financial collapse brought in their own auditors in to investigate, as did the county.

“We did know about this, and we notified the pool,” said Gary Burton, the county’s chief financial officer. “We’re the ones [who] brought this forward. We wanted to resolve this.”

It was not the first time a surplus was discovered. Twice in nearly 2 1/2 years county supervisors have pondered behind closed doors what to do with nearly $30 million, including the $17 million, discovered in county accounts related to its historic 1994 bankruptcy.

“The whole issue of found money proves the point that no one prior to the bankruptcy was minding the money store,” Supervisor Todd Spitzer said. “As a post-bankruptcy supervisor, the kind of practices in place at the time obviously were without appropriate checks and balances.”