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Supervisor Sees Past in Merrill’s New Offer

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There are those who would dump on Supervisor Jim Silva for turning a cold shoulder to Merrill Lynch & Co., but I won’t be among them. I wouldn’t blame Silva if hearing the name “Merrill Lynch” sent him screaming from the room and off into the hills, never to be seen again.

Silva’s logic may be flawed. His thoughts may be springing from his gut and not his head. He may be forgetting that as an Orange County supervisor he’s supposed to make financial decisions in the public’s best interests.

Merrill Lynch, the 800-pound grizzly bear from Wall Street, has stuck its meaty paw back into the Orange County kitchen, looking for food. That’s what bears do, even when disguised as bulls. This time, Merrill wants to help the county restructure its debt -- for a healthy fee, of course -- and accelerate its complete recovery from the historic bankruptcy of 1994.

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The chief villain of the bankruptcy was then-Treasurer Robert Citron, who got his investing cues from none other than Merrill Lynch. That the brokerage firm took advantage of our decent-but-overmatched treasurer is the generally accepted version of how the county fell so far so fast.

Maybe you had to be there to recoil at the mention of Merrill Lynch.

Silva was a freshman supervisor who took office the month after the county declared the largest municipal bankruptcy in U.S. history. Suddenly, complicated and difficult decisions piled up on the five supervisors, who tossed and tumbled over them like loose socks in a dryer.

Who could blame Silva for never wanting to hear the name Merrill Lynch again?

Not to bore you with details, but the firm eventually paid more than $420 million to settle civil suits with local agencies and cities that got hosed. And Merrill avoided possible prosecution by paying the district attorney’s office $30 million.

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Silva told a Times reporter recently he doesn’t trust Merrill Lynch. He connected the mistrust to the bankruptcy, but for those who say that’s ancient history, Silva could have updated the portfolio.

Last November, four former Merrill executives were convicted in a case stemming from the Enron investigations. The four have yet to be sentenced. In 2003, Merrill Lynch agreed to pay $80 million to settle a federal investigation into the matter.

In 2002, the firm agreed to a $100-million payment to settle a case brought by the New York state attorney general, who alleged that Merrill had misled investors. The firm agreed to revamp certain practices but was not required to admit any guilt.

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Even if Silva had purged the bankruptcy from his mind, he’d be justified in being jumpy. So far, Supervisor Tom Wilson -- who wasn’t on the board when bankruptcy was declared -- is the only colleague to join him in outright rejection of Merrill’s overtures.

Other responsible Orange County officials are willing to listen to the bear -- I mean, the bull. Three other supervisors are leaving the door open.

Perhaps most significant, Treasurer John Moorlach, who tried to blow the whistle on Citron’s investing in 1994, says he’ll work with the firm if the right deal is struck.

I’m nowhere near expert enough to know whether Merrill Lynch must be put back in play in Orange County. In a 1995 column, I cited a financial expert who predicted that Merrill Lynch would settle its Orange County problems for hundreds of millions of dollars. Not even that much money, he said, would severely damage the company.

Three years later in 1998, when the $420-million terms were announced, the expert proved a prophet.

Such a deal, when someone can break everything in your house and then ask if he can help you remodel.

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Silva clearly has a case of post-traumatic stress syndrome because of Merrill Lynch.

Moorlach, on the other hand, has put it behind him.

He must have a better therapist.

Dana Parsons’ column appears Wednesdays, Fridays and Sundays. He can be reached at (714) 966-7821 or at dana.parsons@latimes.com. An archive of his recent columns is at www.latimes.com/parsons.

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