County Hires Firm to Handle Tobacco Funds

Orange County supervisors agreed on Tuesday to hire Orrick, Herrington & Sutcliffe as bond counsel on the county’s $900-million tobacco settlement, despite earlier concerns about the firm’s role in the failed sale of the 91 Express Lanes.

Last month, supervisors blocked the appointment of the San Francisco-based firm after it did legal work for all three parties involved in the sale: the prospective buyers, the toll-road operators who wanted to sell the 10 miles of toll lanes along the median of the Riverside Freeway, and state officials who planned to issue up to $274 million in bonds to finance the deal.

On Tuesday, Supervisor Todd Spitzer said Orrick senior partner Roger Davis had made sufficient assurances that the firm understands it would be representing Orange County, not any other party.

“I didn’t want them to ever say that they weren’t representing the county,” Spitzer said. “I hope that we’ve sent a message throughout the entire bond-counsel industry that they need to be very clear on who their client is, who they represent.”

Much of the furor has died down since it was revealed in December that Orrick helped form a nonprofit group of businessmen which planned to use tax-free bonds to buy the money-losing toll lanes from the California Private Transportation Co. The private company built, and still operates, the toll lanes that run from the Costa Mesa Freeway to the Riverside County/Orange County border. The deal collapsed amid questions by key state officials.

On Feb. 15, supervisors voted to send the proposal back to an advisory committee to review--for a second time--whether Orrick breached its ethical duties by advising different parties during the ill-fated deal. Since January, Davis and several state lawmakers have urged supervisors not to ditch Orrick.

Last week, the advisory committee voted unanimously--for a second time--that Orrick did nothing unethical or illegal.

On Tuesday, supervisors agreed to let the team handle the $900 million in tobacco settlement money, Orange County’s portion of a settlement with tobacco companies to compensate for the public health costs of treating sick smokers. The team will be headed by Wall Street investment banking firm Salomon Smith Barney, which was not involved in the toll-lanes deal.

In addition, supervisors agreed to hire Sperry Capital, a tiny Bay Area company, to provide financial advice. Sperry, which does work for the Orange County Transportation Authority, also submitted reports on behalf of the nonprofit group involved in the aborted toll-lanes deal.

Orrick’s Davis said supervisors simply needed time to digest the facts.

“Everyone has had an opportunity to look at it, understand the deal and see that there was nothing wrong with it,” Davis said. “It was a matter of having enough time to work through the confusion generated by the politically charged atmosphere.”