SEC REPORT OF INVESTIGATION IN THE MATTER OF COUNTY OF ORANGE, CALIFORNIA AS IT RELATES TO THE CONDUCT OF THE MEMBERS OF THE BOARD OF SUPERVISORS

In addition to the responsibilities imposed on issuers of
municipal securities, the antifraud provisions of the federal
securities laws impose responsibilities on a public official who
authorizes the offer and sale of securities. A public official
who approves the issuance of securities and related disclosure
documents may not authorize disclosure that the public official
knows to be materially false or misleading; nor may the public
official authorize disclosure while recklessly disregarding facts
that indicate that there is a risk that the disclosure may be
misleading. When, for example, a public official has knowledge
of facts bringing into question the issuer's ability to repay the
securities, it is reckless for that official to approve
disclosure to investors without taking steps appropriate under
the circumstances to prevent the dissemination of materially
false or misleading information regarding those facts. In this
matter, such steps could have included becoming familiar with the
disclosure documents and questioning the issuer's officials,
employees or other agents about the disclosure of those facts.

The Supervisors were aware of the financial condition of the
County and that interest income from the County Pools had become
a major component of the County's discretionary budget in an
environment of increasing budgetary pressure. The Supervisors
also knew that the increase in such interest income was connected
to the increased amount of County municipal securities offerings
and approved at least one offering conducted solely to raise
funds for reinvestment. Based on the Supervisors' significant
knowledge relating to the County's finances, they should have
understood the materiality of that information to the County's
ability to repay the municipal securities. The Supervisors
therefore had a duty to take steps appropriate under the
circumstances to assure accurate disclosure was made to investors
regarding this material information. The Supervisors, however,
failed to take appropriate steps. For example, while the
Supervisors believed that they could rely on the County's
officials, employees or other agents with respect to these
offerings, they never questioned these officials, employees or
other agents regarding the disclosure of this information; nor
did they become familiar with the disclosure regarding the
County's financial condition. Had they taken such or similar
steps, it should have been apparent to each Supervisor, in light
of his or her knowledge, that the disclosure regarding the
County's financial condition may have been materially false or
misleading.


Consequently, the Supervisors failed to assure appropriate
disclosure of these matters by authorizing and approving the
dissemination of misleading disclosure documents. This failure
denied investors the fair and accurate disclosure required under
the federal securities laws.

The Supervisors

1. Thomas F. Riley, age 83, was appointed Supervisor
in 1974, elected to the Board two years later, and served
continuously through 1994, after which he retired. Riley was the
Chairman of the Board in 1994.

2. William G. Steiner, age 58, was appointed
Supervisor in 1993, elected in 1994, and is currently a member of
the Board. His term expires on December 31, 1998.

3. Roger R. Stanton, age 58, was first elected
Supervisor in 1980, and is currently a member of the Board and
its Chairman. His term expires on December 31, 1996.

4. Gaddi H. Vasquez, age 40, was appointed to the
Board in 1987, elected in 1988, and served continuously until his
resignation on September 27, 1995. Prior to his resignation,
Vasquez was the Chairman of the Board in 1995.