ORANGE COUNTY IN BANKRUPTCY Asking for Help Advisers:  Orange County turns to a New York firm for expertise in handling its imperiled fund.  The holdings may be sold piecemeal.

By DEBORA VRANA

Time Staff Writer

From the pick-walled offices of a building adjacent to Grand Central Station, two women who helped pioneer the use of the complex investments known as derivatives-which ultimately helped force Orange County into bankruptcy-are frantically attempting to unwind problems in the county’s troubled portfolio.

“Its like a tornado rocked through here,” an exhausted Leslie Lynn Rahl said Wednesday afternoon, a day after her latest client became the largest local government in U.S. history to file for bankruptcy.

Rahl, 44 and her partner, formed Capital Market Risk Advisors Inc., in July to help clients work out problems stemming from risky investments gone sour.

Now, the fledgling firm faces an unenviable assignment:  helping Orange County salvage as much as possible of its investment portfolio, which has lost $1.5 billion or more in value this year.

If anyone can do this its these two women, “said Grover McKean, a senior vice president with Lazard Freres & Co, In Los Angeles, the investment banking firm that help devise a rescue plan for New York City in the mid-1970s and is putting together a proposal for advising Orange County.  “They really know their stuff.”

Rahl is considered an expert in risk management.  Her company typically advises banks, mutual funds and large corporation on how to avoid or control losses from derivatives-investment contracts that derive their value from an underlying stock or index linked to such things as interest rates, commodities or foreign currencies.

“They are very good at valuing the securities down to last penny,” said Robert J. Schwartz, Chairman of the International Association of Financial Engineers

Rahl, who has a bachelor’s degree in computer science and an MBA from Massachusetts Institute of Technology, establish Citibank’s risk management departments in 1983 and started her own firm seven years later.

Rahl said “derivatives are not to blame for losses suffered by Orange County.  They say it is the way derivatives are used and monitored that creates problems.”

Echoing Federal Reserve Board Chairman Alan Greenspan and others, she suggested that prudent steps be followed, such as clear policies when using derivatives, a real understanding of the structure of the complex deals and making sure the securities are properly valued.

December 8, 1994