Merrill Lynch & Co. has agreed to pay Orange County $400 million to settle the main lawsuit resulting from the county's 1994 bankruptcy, the largest of its kind in U.S. history.
The county's $2 billion lawsuit accused the Wall Street firm of giving it bad investment advice, and a trial was scheduled to begin Sept. 15. Instead, the settlement was announced Tuesday after three weeks mediation before U.S. District Judge John Davies in Los Angeles.Merrill Lynch acknowledged no wrongdoing. Each side said the settlement was the best compromise given the uncertainties and expense of a jury trial.
Schools, cities, sewer operations, water districts and other public investors lost an estimated $1.64 billion after major investments made by the county went sour.
With the settlement, the county has recovered $621.5 million from its former advisers and brokers. The money is being parceled out to the institutional investors under a bankruptcy court plan.
County Treasurer Thomas Hayes, head of the county's litigation strategy, called the settlement "very favorable."
"This has been a long and difficult period for the people of Orange County," he said. "We are very pleased that in a spirit of mutual cooperation we were able to negotiate an end to this lengthy and contentious litigation."
While Merrill Lynch had been accused of fraud, breach of fiduciary duty and other offenses, spokesman Timothy Gilles said the company still believes it "acted properly."