Broker Will Get No O.C. Business

A brokerage house that was blamed in part for Orange County’s 1994 bankruptcy can’t be hired to refinance the county’s $800-million debt because it is not on an approved underwriters list, officials say.

Merrill Lynch & Co. will not be among the 13 firms invited to bid on restructuring the remaining bankruptcy debt, losing out on an estimated $2 million in fees, according to a memo from the county’s top executive that was given to supervisors.

The list of approved brokerages, which is updated every four years, was not due to be renewed until October. But the county was facing a deadline on paying some notes in June and wanted to lock in a good interest rate, officials said.

In interviews Tuesday, county supervisors noted that Merrill had paid more than $437 million to settle lawsuits with the county and other investors who lost money in the county’s investment pool.

“Merrill paid millions to the county for past misdeeds, and to put them on the list would almost look like we’re giving them some money back like a reward,” Supervisor Tom Wilson said.

Added Supervisor Jim Silva: “I can’t see anyone allowing the county to pay Merrill for something that they created.”

A spokesman for Merrill Lynch could not be reached for comment.

In the early 1990s, Merrill helped the county broker transactions in which then-Treasurer-Tax Collector Robert L. Citron borrowed about $13 billion and placed it in risky investments tied to low interest rates.

When rates rose, the county lost $1.6 billion and declared the nation’s largest municipal bankruptcy.

Supervisors have been split on whether to allow the brokerage house to be added to its list, with Supervisors Lou Correa and Chris Norby saying that doing so would increase competition for the county’s business.

But Treasurer-Tax Collector John M.W. Moorlach said enough companies were on the list -- approved by the county’s Public Financing Advisory Committee, an oversight group set up after the bankruptcy -- to ensure competitive bidding.

“Interest rates are at historic lows,” he said. “We don’t want to waste time.”