The State - News from June 29, 1987

Drexel Burnham Lambert Inc., a large New York brokerage firm, has agreed to pay the city of San Jose $300,000 to settle its portion of a lawsuit stemming from the city’s $60-million investment loss three years ago. The city lost the money, and for a time was in danger of not meeting its payroll and other short-term obligations, because speculative investments in the long-term bond market hampered its cash flow. San Jose city spokeswoman Jan Berry said the brokerage firm is the second investment firm to settle in the case. Last fall, Salomon Bros. paid the city $250,000 without acknowledging any fault. Eleven other investment firms, including First Interstate Bank of California, are still contesting the suit, as is the city’s former independent auditor, Price Waterhouse. The trial is scheduled to begin May 9, 1988, in U.S. District Court in San Jose.