Money Pot Gets Sweeter for the ‘Killer Bs’
A $32.5-million settlement announced Monday will allow the small group of investors known as the “Killer Bs” to recoup just about all the funds they invested in Orange County.
The payout agreed to by Merrill Lynch means the group of 14 California cities and agencies--dubbed the Bs because they favored Option B of the county’s bankruptcy recovery plan--did better than any other group caught up in the Orange County investment scheme that caused $1.64 billion in losses and led to the biggest municipal or county bankruptcy in American history.
“We were seen as kind of crazy,” said Michael Martello, city attorney for Mountain View, a Northern California investor. “People said we were going to lose our shirt. We were going to be embarrassed.”
Instead nearly all the Bs, which collectively lost more than $44 million in their failed investments, were effectively made whole by the settlement reached last week. The Bs had previously recovered more than $25 million in cash and notes from Orange County and other parties.
The grand total of more than $57 million recovered by the Bs should give most, if not all, a 100% return, according to the group’s representatives. That’s better than the 97% recovery for schools and 93% recovery for other agencies and cities that made up the far larger group of investors that took the $420-million Merrill Lynch settlement reached in 1998. The county itself recouped only 35 cents on every dollar lost.
Although the most recent settlement is less than the $320 million sought by the Bs from Merrill Lynch, representatives of the Bs said they believe it is fair.
The group’s lawyer, Michael Kahn of the San Francisco firm of Folger, Levin and Kahn, said the settlement still must be approved by each member of the group before being made final. Representatives of each agency already have given the go-ahead for the settlement, he said.
Besides Yorba Linda, Buena Park and Mountain View, the Killer Bs are Atascadero, Milpitas, Claremont, Montebello and Santa Barbara, as well as the Santiago and Yorba Linda water districts and the redevelopment agencies in Buena Park, Yorba Linda, Santa Barbara and Montebello.
Merrill Lynch did not admit any wrongdoing in the settlement. Bill Halldin, a Merrill Lynch spokesman, referred to a press release issued by the investment firm.
“After weighing the substantial costs and distraction of continuing to litigate, we determined it would be in the best interests of all parties to bring this matter to a close,” the written statement said.
Times staff writer David Reyes contributed to this report.
