Suit Asks for More than $2 Billion in Damages
County Charges Deliberate Disregard of County, Residents Rights in
`Multi-billion Dollar High-Stakes Gamble with Taxpayer Dollars'
SANTA ANA, Calif., January 12, 1995 -- Saying that Merrill Lynch & Co.,
Inc. "abused the trust and confidence" of County residents by "permitting and
encouraging (County Treasurer Robert L.) Citron to invest public funds in
volatile financial instruments that were not authorized by law nor suitable
for the investment of taxpayers' dollars," Orange County today filed suit in
U.S. Bankruptcy Court against one of the world's largest providers of
investment and financial services.
The key points of the County complaint are that Merrill Lynch:
The suit claims that California law specifically requires that the Treasurer
at all times safely invest public funds and specifically limits municipal
officials from (1) borrowing through the use of reverse repurchase agreements
to make long-term investments at floating interest rates; and (2) investing
public funds in speculative securities. It further claims that, as an expert
in municipal finance, Merrill Lynch knew of these statutory debt and
investment limitations and that it had a legal duty to ensure that the
transactions in which the County engaged were safe and sound investments for
public monies. The firm's failure to comply with the law, the suit claims,
resulted in the loss of $2 billion to the County investment pool.
"While County government engaged in the pain-staking annual exercise of
adapting a balanced budget, Merrill Lynch -- working through the former
Treasurer -- was quietly incurring debt obligations equal to four times the
County budget," said County Counsel Terry Andrus.
According to James W. Mercer of the law firm of Howrey & Simon, attorneys
for the County, "California law is clear on this issue. California's
government codes provide no authority for either the massive use of leverage
by municipalities, nor do they allow for the use of inverse floaters and other
exotic instruments in connection with a leveraged investment program.
"Merrill Lynch knew that the highly-leveraged and speculative nature of the
investments were not permitted under California law and knew that the
investment plan they devised and implemented could result in massive losses to
the people of Orange County. Yet, over the course of the past three years,
Merrill Lynch knowingly, willfully and deliberately encouraged and enabled the
County to invest in volatile financial instruments not suitable for the
investment of taxpayer dollars," Mr. Mercer said.
According to the complaint, "Merrill Lynch knew that the investment scheme
which it permitted and encouraged" was inappropriate and unsuitable.
"The investment program developed by Merrill Lynch did not conform to the
County's need for liquidity as clearly spelled out in its investment policy,
and the leveraged transactions it advocated exposed the people of Orange
County to unacceptable levels of risk and jeopardized principal," said Bruce
Bennett, a member of the firm of Stutman, Treister & Glatt, reorganization
counsel for the County.
"The County -- and here I am talking about the Treasurer, the Supervisors
and the CAO -- have neither the knowledge nor the sophisticated, proprietary
software necessary to monitor and track these kinds of complex investments,
and Merrill Lynch knew it."
"By encouraging the County to take on massive amounts of debt to further its
speculative investment strategy, Merrill Lynch operated outside of the
budgetary and appropriation process that are central to California state law,"
said J. Michael Hennigan a partner with Howrey & Simon.
"California law clearly restricts the kind of debt that a municipality may
incur. It's part of a Constitutional and statutory fabric developed over 100
years designed to limit the powers of government and protect taxpayers from
unwise and extravagant decisions by elected and appointed officials."
According to the complaint, the County is asking "in excess of" $2 billion
/CONTACT: Sandra Sternberg or Michael Kolbenschlag of Sitrick and Company,
714-834-4720 or 310-788-2850/
WARREN, Michigan -- January 12, 1995 -- F & M Distributors, Inc. (Nasdaq:
FMDDQ) today announced it received bankruptcy court approval for its full $50
million debtor-in-possession financing facility. The financing is being
provided by the Company's bank group, led by the National Bank of Detroit.
Dale Ward, President and Chief Executive Officer, commented, "We are
with the court's decision as to the availability of this financing. This
facility, along with our available cash balances of $48 million, provides
assurance to our supplier community as to our postpetition credit worthiness
and should allow for continued merchandise flow to our stores."
F & M Distributors currently operates 119 F & M deep discount super
drugstores, offering a wide selection of branded health and beauty aids,
cosmetics and fragrances and household supplies at every day low prices. In
addition, the Company operates six PartiGiant deep discount party supply
superstores in Michigan and Illinois.
/CONTACT: Laura Kendall, SVP & Chief Financial Officer of F & M,
810-758-1400, Ext. 251; or Naomi Rosenfeld, Eileen Howard or Stacy Berns
(media contact) of Morgen-Walke Associates, 212-850-5600/
NEW YORK--January 12, 1995--Sandler O'Neill & Partners today
announced the release of their first municipal research publication.
The report comments on the credit outlook for Orange County, Calif. and
several of the largest participants in the county investment pool.
The report, authored by Sandler Municipal research director Michael
Johnston, offered several credit conclusions:
For copies of the full report or additional comments, please contact Michael
Johnston, associate director, Sandler O'Neill & Partners, 212-466-7994.
Founded in 1988, Sandler O'Neill is an investment banking firm dedicated to
providing comprehensive advisory services to its clients. Sandler O'Neill
specializes in strategic business planning, investment portfolio and interest
rate risk management, fixed-income securities transactions, mergers and
acquisitions, analysis of capital raising alternatives, and mortgage finance
CONTACT: Sandler O'Neill & Partners, L.P.,
Michael Johnston, 212/466-7994,
Morgen-Walke Associates Inc.,
Paul Steidler, Michelle Manoff, 212/850-5600
LOS ANGELES/NEW YORK, Jan. 12, 1995 -- The official Creditors'
Committee of Orange County has selected Chanin and Company and Sutro and
Company as its financial advisors to assist with its deliberations with
respect to the County's bankruptcy proceedings.
Jeffrey Chanin, Senior Managing Director of Chanin and Company, said,
very proud and pleased that Chanin and Sutro were selected to represent the
Committee. Both firms are experts in their respective fields with valuable
professional experience within the State of California. The Chanin/Sutro team
is anxious to get started and is looking forward to working with the County,
the committees and the various professionals previously engaged."
/CONTACT: Jeffrey Chanin of Chanin and Company, 203-256-3777/
LOWELL, Mass. -- January 12, 1995 -- Wang (NASDAQ: WANG)
announced today that it is seeking authority from the U.S. Bankruptcy Court to
distribute 6.1 million shares of common stock to unsecured creditors and from
the U.S. District Court to distribute warrants to purchase 7.5 million shares
to former shareholders and to certain other claimants.
Common Stock Distribution
In December 1993, the company issued 30 million shares of new common stock
to satisfy the claims of its unsecured creditors, including holders of the
company's debentures. Of those 30 million shares, approximately 20.5 million
shares have already been distributed on a pro-rata basis to creditors with
allowed claims. The remaining approximately 9.5 million shares have been held
in reserve for distribution after the resolution of disputed claims. It is
from this reserve that the second distribution of approximately 6.1 million
shares will be made. Consequently, this action will result in no increase in
the number of shares outstanding.
Wang noted that its recently filed motion to make the distribution must be
approved by the Court and that no assurance can be provided that approval will
be obtained or, if obtained, that the approval will be for the full number of
shares. Additionally, Wang noted that it continues to challenge vigorously
the remaining disputed claims, whose resolution could take several years.
Separately, Wang noted that at a hearing currently scheduled for February 9,
1995, the U.S. District Court will review a stipulation that will clear the
way for the distribution of warrants related to 7.5 million shares of new Wang
common stock. Under Wang's reorganization plan, the old Wang Class B and
Class C common shares were cancelled and the warrants were issued for
distribution to former holders of the Class B and the Class C shares as of the
September 28, 1993 record date. The Plan specified that this distribution be
reduced by the number of warrants allocated to satisfy certain specified
The stipulation that will be reviewed by the Court has been agreed to by all
active parties to the litigation. Its approval would enable Wang to
distribute warrants to purchase approximately 7.132 million shares to holders
of the old Class B and Class C shares and warrants to purchase approximately
368,000 shares to satisfy the disputed claims and other small claims as
provided in the Plan. If the stipulation is approved in February, Wang
anticipates distributing the warrants shortly thereafter. One warrant would
be issued for each 24.782 shares which former holders of record of the old
Wang Class B and Class C common shares tender for exchange. The warrants are
exercisable to July 2, 2001 at an exercise price of $21.45.
Frank Ryan (508) 967-7038 /
Ed Pignone (508) 967-4912