District cautiously optimistic about funds

Danette Goulet

NEWPORT-MESA -- With no choice but to wait and see, school board

members are crossing their fingers that the district doesn’t lose its

$1.3 million invested by the county treasurer in the parent company of

floundering Southern California Edison.

Like every other school district in Orange County, Newport-Mesa

Unified School District is required by law to leave its excess funds in a

countywide educational investment pool controlled by John M.W. Moorlach,

the county’s treasurer and tax collector.

Moorlach, who ran for treasurer before the county’s historic

bankruptcy of 1994 on the platform that former Treasurer Robert Citron

was “gambling” public money with risky investments, has sunk two,

$20-million investments into Edison International.

Despite the utility company’s visible struggle, the first investment

was made Sept. 28 and the second Dec. 7.

Now with Southern California Edison teetering on the verge of

bankruptcy, the education investment pool money is in jeopardy.

While school board members admit that hindsight is 20/20, some doubted

the wisdom of those investments.

“I respect John’s abilities and, for the longest time, the safe bet

was utilities stock. But for the last six months, or even longer than

that, you had to suspect something,” said trustee Jim Ferryman of the

Edison investment.

Ferryman said that while he is concerned about the money the district

has tied up in Edison, at least it’s nowhere near the scale of the

bankruptcy.

When Orange County lost $1.5 billion on a risky investment in 1994,

the school district was out $82 million it had invested -- $47 million of

which it borrowed specifically to put in that pool of money.

When his dire warnings, previously unheeded, came true that year,

Moorlach was heralded as a financial guru, even as he called for the

resignations of public figures who hadn’t listened to him.

His on-target predictions of six years ago have many standing by his

current decisions, even while recognizing the irony of the situation.

“It’s definitely ironic that he would end up making a mistake like

this, if it turns out to be a loss,” said school board member Wendy

Leece, who stressed she has faith in Moorlach.

Moorlach assured, again, that the money is not about to disappear.

“Right now, we’re still not in default,” he said, adding that he

expects a return of the $40-million principal and interest.

Trustee Martha Fluor said she, too, will simply await the outcome --

because that is all they can do.

“I was in Sacramento yesterday, and if you don’t buy it -- that it’s

going to be OK -- what recourse do we have?” Flour asked.

“We are required by statute to place our money there,” she said. “Am I

concerned that John purchased as late as December? Yes. But at the same

time, I trust him that he did exercise due diligence, that it was a

prudent and wise investment. I’m hoping he’s on top of the situation.”