Individual Bondholders Insist on Stronger Voice : Recovery: Some will petition Bankruptcy Court to join creditors committee that represents institutional holders amid O.C. crisis.

ANAHEIM —  Increasingly nervous that they may be forced to take substantial losses on their Orange County bond investments, worried bond owners from throughout California gathered Tuesday to demand a stronger voice in the county’s bankruptcy proceedings.

During a special meeting in Anaheim sponsored by the Bond Investors Assn., a group that represents municipal-bond holders, group President Richard Lehmann said individual bondholders will petition the U.S. Bankruptcy Court for a place on the creditors committee.

Lawyers in attendance said they would file a class-action lawsuit for bondholders next month that would probably name the state of California as well as county officials for failing to provide sufficient oversight of the investment pool run by former county Treasurer-Tax Collector Robert L. Citron.

“You live here in Orange County and you want to have faith,” said Jay Chalson, a retired jeweler from Tustin, who said he owns more than $100,000 worth of bonds sold by his local school and water districts. “But I’ve lost faith in Orange County. They’ve stolen my retirement money.”

Many of the nearly 30 investors at the meeting said they are angry because even two months after the county’s Dec. 6 bankruptcy filing, they still have not received detailed information about their bond investments.

The investors, mostly retirees, expressed frustration, saying that county officials are sending mixed messages about whether they will make good on the county’s debt and have just barely made recent payments of bond interest and principal.

Mary Ellen Du Bois, 73, and her husband, William, a former grain farmer, came to Anaheim from the Sacramento area to determine the fate of their $50,000 in Orange County bond investments. The couple said what they have heard from the county so far sounds awfully familiar--years ago they bought $25,000 worth of bonds sold by the Washington Public Power Supply System, which defaulted on more than $2 billion in bonds. That bond crisis became popularly known as “Whoops!”--a takeoff on the system’s acronym.

“When we bought Orange County bonds, we didn’t think it was going to be another Whoops,” where bondholders received only cents on the dollar, Du Bois said. “Hopefully, they will make good on their promises. The county will have to go back to the markets sometime.”

Individual bondholders want a say in current negotiations between Orange County and large institutional owners of its bonds, such as mutual funds, said Lehmann, president of the investors group based in Miami Lakes, Fla.

“The Orange County bondholders, the people, should receive the attention they deserve,” said Charles Webb, an attorney with Berger Stern & Webb in New York, who sued after the WPPSS default and plans to file suit in the Orange County case. “The bondholders did not make a mistake, but people are saying they should bear some of the burden. Why? They are blameless.” Several class-action suits have already been filed.

Small investors, who typically hold on to their municipal bonds until maturity, have different needs than institutional investors, which frequently trade securities, Webb said. Many individuals depend on their tax-exempt bond interest payments for retirement income.

“There is no one speaking for the interests of the individual investors,” said Mark Schwartz, an investment banker who spoke on a panel at the meeting. “There is a chair missing on the creditors committee and it’s the individual bondholders, who aren’t being represented.”

Robert Moore, a lawyer for the Orange County’s creditors committee, said that any decision to expand the membership of the committee would be made by U.S. Trustee Marcy J.K. Tiffany. He said the interests of all bondholders are being represented in the bankruptcy by both the bond trustees and the institutional investors already on the committee.

Also at the meeting, Richard Roberts, a commissioner with the U.S. Securities and Exchange Commission, which is investigating the Orange County debacle, called on local governments to adopt stricter investment policies, such as limits on leverage-based investing, and advised bondholders to be more aggressive.

While Roberts would not give an opinion on what fiscal recovery plan would be best for Orange County, he said county officials should come up with a plan soon.