"It was in everybody's best interest that we reached this resolution," said a beaming, tie-adjusting Capizzi, who must have been delighted the next morning when the mainstream media applauded the deal. The Los Angeles Times, for example, opined that "Orange County and Merrill Lynch both wound up winners."
In truth, Capizzi let the big boys off.
More limp swing than gut punch, the settlement represents 3.87 days' worth of profit for the multinational corporation, which reported assets of $248 billion in March. Leading up to the largest municipal bankruptcy in history, Merrill Lynch--a key player, to say the least, in Orange County's bizarre, risky and ultimately disastrous financial moves--made an estimated $100 million profit off the county in 1993 and 1994 alone. Capizzi generously let it keep $70 million of those profits, a courtesy he surely never extends to homeless people who steal loaves of bread. (The $100million figure is widely accepted and appears in the county's court documents. At press time, Merrill Lynch officials disputed the figure, claiming their firm earned a paltry $12 million from the deals.)
Capizzi also permitted the company to walk away without publicly admitting wrongdoing. In fact, although the DA described the deal as a "significant penalty," there is additional evidence that the company won't feel any sting. Left unmentioned in local press reports, but a fact the DA should have known is that two weeks before the $30 million deal was reached, Merrill Lynch secured a $28 million tax break from New York City.
The gifts didn't stop there. To further cushion the blow to Merrill Lynch, Capizzi never pushed for criminal indictments--a move that would have more than strengthened his negotiating position to gain a truly decent deal for Orange County taxpayers. If indicted, the company may have faced serious charges of using fraudulent and deceptive business practices. Merrill Lynch also won because more than 5,000 pages of critical grand-jury testimony will apparently never see the light of day. Taxpayers paid $100,000 per month for 30 months for that evidence, information that will be off-limits to the press and the public. Significantly, the testimony will also be kept out of the hands of county attorneys pursuing a separate $2 billion civil claim against the company.
On the heels of such a comfortable arrangement, Merrill Lynch's PR machine was able to issue a statement: "We continue to believe that we acted properly and professionally in all facets of our relationship with Orange County." The public can never fully judge that assertion thanks to capitulations by Capizzi, who admitted at the press conference that he didn't bother to determine the extent of Merrill Lynch's criminal complicity, if any. Securities experts could not recall another case where a prosecutor agreed to drop a criminal probe in return for a civil fine.
Perception, however, is more important than reality. The pseudo-staggering settlement allowed both Capizzi (who is trying to win over Republican businessmen in his ongoing campaign for attorney general) and Merrill Lynch (which anxiously wanted the criminal probe quashed prematurely) to claim victory. "This was an excellent resolution for the people of the state and the taxpayers of Orange County," said Capizzi.
Operation Raging Bull--the DA's code name for his probe--is startling for other reasons as well. Somehow, investigating a company's role in a $1.6 billion loss of public funds doesn't evoke the same zealous tactics by Capizzi that voter-registration and campaign-disclosure violation allegations do. No heavily armed SWAT teams descended on Merrill Lynch to cart off records, as they did with Hermandad Mexicana Nacional, a nonprofit immigrant-aid group in Santa Ana. No grimacing G-men were eager to find Merrill Lynch executives in publicly embarrassing sleeping arrangements, as they were in the case of Republican Assemblyman Scott Baugh. No prosecutor raised the specter of blackmailing a judge to get at Merrill Lynch, as they are accused of doing in the case of GOP gofer Rhonda Carmony, Congressman Dana Rohrabacher's fiancee. (Capizzi doesn't like Rohrabacher or his crowd and sees Hermandad as easy campaign fodder.)
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Unlike the near ruthless efforts to punish high- and low-level county bureaucrats involved in the bankruptcy (some of these guys face long prison sentences, millions of dollars in fines and personal bankruptcies), our prosecutors were thrilled to be in the same room with the New York suits. Whereas the DA's public badmouthing of Baugh, Carmony and Hermandad has been commonplace, Merrill Lynch was treated more guest than suspect in a criminal investigation. Negotiation participants told reporters there were good humor and friendly feelings between the suspect company men and prosecutors.
"I have nothing but the highest respect for the team [Merrill Lynch] sent in here," said an awed Assistant District Attorney Jan Nolan. Gary Schons, another prosecutor who was supposedly representing the public interests said: "These guys [Merrill Lynchmen] were just marvelous. . . . It was a real pleasure to be there."
All that lovey-doveyness must have filled Capizzi's cold prosecutorial heart with nothing but warm goodwill toward Merrill Lynch. He claimed he was at a loss to think of any better deal for the taxpayers. "What could be gained by pursuing [Merrill Lynch] that was in the best interest of the people? Absolutely nothing," he said.
Sadly, in the end, Capizzi's Operation Raging Bull turned out to be just that.