SANTA ANA, Calif.—The Southern California county that filed the largest municipal bankruptcy case in U.S. history in 1994 made another string of risky investments in recent years, a grand jury report concluded.
The report released Tuesday is only a recommendation to Orange County supervisors, but it scolds the county treasurer for investing as much as $800 million in complex investments normally favored by international banks. It said the funds placed with unregulated investment banks promised higher returns but put taxpayer dollars at risk.
"Having already experienced the largest municipal bankruptcy ever, the citizens of Orange County expect their leaders to stick with simple, conservative investments," the report concluded.
"As was the case 15 years ago, the lure of higher yields from riskier investments is compelling. The lessons of the past have been forgotten," the grand jury added.
The county lost at least $6 million when selling off one of those investments, according to the report.
About 10 years ago Orange County began placing money in so-called structured investment vehicles, which repackage and sell mortgages, student loans and other complex financial instruments. By December 2007 the county had more than $800 million invested in those ventures—about 14 percent of the county's portfolio. They were cut back to $250 million by the end of last year.
Keith Rodenhuis, a spokesman for Treasurer Chriss Street, said five of the six investments made money but he could not provide a figure for those earnings.
As of Wednesday, the county no longer has any of those holdings.
Orange County, known as the home of Disneyland and for its miles of beaches, sought bankruptcy protection in 1994 after a series of bad investments saddled the government with over $1.64 billion in debt.
The grand jury recommended stricter oversight of the county treasurer and urged an oversight committee to be more aggressive in policing investment decisions.
Rodenhuis said the treasurer "welcomes additional scrutiny and transparency. We already have in place a robust system of checks and balances, and we'll work with the oversight committee regarding the report's recommended actions."
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