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When Government FailsThe Orange County Bankruptcy$

Mark Baldassare

Print publication date: 1998

Print ISBN-13: 9780520214859

Published to California Scholarship Online: March 2012

DOI: 10.1525/california/9780520214859.001.0001

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(p.265) Appendix A Time Lines

(p.265) Appendix A Time Lines

Source:
When Government Fails
Publisher:
University of California Press

One of the research tasks involved in writing this book was establishing the dates for the major occurrences during the Orange County financial crisis. These include the events leading up to the bankruptcy, the response to the fiscal emergency, the road to bankruptcy recovery, and local government reforms after the bankruptcy.

These dates were determined largely by reviewing the daily newspaper stories and consulting the chronological tables that were published in the local newspapers. The newspaper sources that were used for the tables in this appendix include the Los Angeles Times Orange County edition (1995a, 1996a, 1996c, 1997a, 1997d) and the Orange County Register (1995b, 1996b). Internal documents provided by the county government (County of Orange, 1996a, 1996b), the local government investors in the county pool (Orange County Investment Pool, 1995a, 1995b, 1995c, 1995d), and the Orange County Division of the League of California Cities (Huston, 1995) also contained information on the timing of key events during the financial crisis.

The dates for important events during the Orange County bankruptcy are discussed in the text. To provide a more detailed picture, I have summarized the time lines in chronological order in the tables in this appendix. (p.266)

Table A–1 Events of 1994 Leading Up to the Bankruptcy

February 4

Federal Reserve Board raises interest rates for the first of six times in 1994

April 13

City of Tustin withdraws all funds from the investment pool

May 31

John Moorlach warns Board of Supervisors about investment pool

June 7

Bob Citron defeats John Moorlach and is reelected treasurer

June 14

Supervisors vote for $600 million in bonds to invest in pool

October 24

CAO informed of problems with pool by treasurer’s office

October 31

Treasurer assures largest investors of adequate cash in the pool

November 3

Consultant retained by county government to review pool

November 15

Irvine Ranch Water District requests withdrawal of millions from pool

November 16

Consultant report indicates $1.5 billion loss in pool

November 29

Treasurer urges ten largest pool investors not to withdraw funds

November 30

Investment firms asked to extend loans and to seek no collateral

December 2

Orange County publicly announces $1.5 billion paper loss

December 3

Attempt to obtain financial help from investment firms fails; county officials decide to liquidate investment pool

December 4

Supervisors briefed by CAO on worsening financial crisis; CAO asks for and receives Treasurer Bob Citron’s resignation

December 6

CS First Boston seizes over $2 billion in county collateral for loans due; Orange County files for Chapter 9 bankruptcy

(p.267)

Table A–2 Measures Toward Damage Control and Limiting Losses after the Bankruptcy

December 7, 1994

Orange County credit rating falls to “junk” status after bankruptcy filing

December 8

County defaults on $110 million pension bond Wall Street investment firms sell off securities held as collateral

Tom Hayes named by supervisors to manage investment pool

December 12

County management team begins to meet with department heads

December 13

Tom Hayes decides on strategy of a speedy sale of all risky holdings; Salomon Brothers to sell the pool’s assets

December 14

U.S. trustee appoints two creditor committees Pool Participants Committee begins meeting daily

December 19

U.S. bankruptcy judge authorizes emergency release of $152.6 million from investment pool funds for local government agencies to meet payrolls; $115 million goes to school district payrolls

December 22

U.S. bankruptcy judge approves agreement between the county and the Pool Participants Committee to allow the release of up to $1 billion from investment pool on a hardship basis if approved by Pool Participants Committee

December 26

$60.5 million in hardship approvals granted by Pool Participants Committee

December 30

Pool Participants Committee begins to meet on regular basis to review, discuss, and approve hardship distributions

January 2, 1995

Supervisors Jim Silva and Marian Bergeson join the board

January 12

County files a $2 billion lawsuit against Merrill Lynch

January 20

All risky securities in the county pool are sold; loss is $1.64 billion

(p.268)

Table A–3 Investment Pool Settlement, Budget Cuts, and House Cleaning

January 20, 1995

Orange County Business Council names task force to assist in negotiating investment pool settlement

January 23

Supervisors reassign CAO Ernie Schneider

February 7

Orange County Business Council proposes pool settlement plan

February 10

Supervisors appoint Chief Executive Officer William Popejoy

February 17

Governor calls legislature into special session on Orange County

February 25

CEO fires former CAO and assistant treasurer, asks for resignation of county counsel and elected auditor-controller

March 7

CEO proposes 1,040 layoffs and 563 job eliminations in county

March 15

CEO proposes half-cent sales tax for bankruptcy recovery

March 17

Orange County Business Council supports tax increase

March 21

John Moorlach chosen by supervisors as acting treasurer

March 26

County and pool participants reach agreement

March 29

Supervisors approve sales tax measure for June 27 election

April 27

Former treasurer Bob Citron pleads guilty to six felony charges

May 2

Judge approves agreement reached by county and pool members

May 15

Governor signs legislation to allow debt refinance for pool IOUs

May 16

Former assistant treasurer is indicted by grand jury

May 23

Cities, schools, and others withdraw nearly $2.3 billion from pool

(p.269)

Table A–4 The Road to Bankruptcy Recovery

June 2, 1995

County says it will roll over $800 million in short-term notes and pay extra interest; investors describe this offer as a default on bonds

June 13

County sells $279 million in recovery notes for investment pool IOUs

June 27

Voters reject Measure R sales tax increase

June 29

Board of Supervisors tells CEO Pope joy that they will set policy

July 7

Investors agree to roll over $800 million in short-term notes for one year

July 13

CEO William Popejoy announces resignation as of July 31

July 14

Supervisors appoint Jan Mittermeier as interim CEO

August 2

Governor Wilson vetoes bus tax diversion plan to cover bankruptcy debts

August 7

Supervisor Vasquez, chair of board, announces September 22 resignation

August 21

Supervisors approve county consensus plan to divert tax funds from other county agencies to general fund in order to pay bondholders and vendors; local governments agree to wait for lawsuit proceeds to pay IOUs

October 9

Governor signs legislation allowing the diversion of tax funds

December 20

County files $3 billion lawsuit against auditor KPMG Peat Marwick

December 21

Bankruptcy escape plan is filed in bankruptcy court

June 5, 1996

County sells $880 million in bonds

June 11

County files lawsuits against other investment banking firms

June 12

County pays investors $800 million in overdue notes; Orange County officially ends the bankruptcy

(p.270)

Table A–5 Legal Actions Against County Officials

April 27, 1995

Robert Citron, former Orange County treasurer Pleaded guilty to six felonies, including skimming interest earnings from schools, cities, and agencies to put into a county account; sentenced to one year in jail and $100,000 fine; served eight months time in a work release program in the county jail during the day

May 16

Matthew Raabe, former Orange County assistant treasurer Grand jury criminal indictment on same charges as Citron, including skimming interest earnings

December 13

Ron Rubino, former Orange County budget director Grand jury criminal indictment in the interest diversion scheme

Roger Stanton and William Steiner, Orange County supervisors

Orange County grand jury files civil accusations to remove them from office for “official misconduct” Steven Lewis, Orange County auditor-controller Orange County grand jury files civil accusations to remove him from office for “official misconduct”

September 13, 1996

Hung jury in Ron Rubino trial; Rubino enters guilty plea to a misdemeanor charge of falsifying public records; sentenced to two years of probation and 100 hours of community service

November 26

State appeals court dismisses all charges against supervisors Roger Stanton and William Steiner

May 2, 1997

Matthew Raabe found guilty on five felony counts; three-year prison sentence currently under appeal

December 6

Attorney general’s office recommends dropping the pending case against Steven Lewis

Table A–6 Reforming Local Government

October 12, 1995

Governor signs legislation on county treasurer reforms

October 26

Council of governments proposal reviewed by Orange

County Division of League of California Cities

November 28

Supervisors vote to place charter proposal on March ballot

December 12

Bankruptcy recovery plan filed in court

January 1, 1996

County treasurer reforms become state law

March 26

Charter proposal for county government reform defeated

April 9

Supervisors ask CEO for county government restructuring plan

June 3

Council of governments formed

June 12

Orange County officially ends the bankruptcy

June 20

CEO’s plan for county government restructuring approved

November 5

Term limits measure for supervisors passes; term limits established in seven cities

November 19

CEO’s plans for budget cuts and reorganization approved

May 16, 1997

CEO announces elimination of 220 county positions