ORANGE COUNTY IN BANKRUPTCY : Agents Subpoena Documents From 2 Wall Street Firms : Investigation: Officials at Merrill Lynch and Rauscher Pierce Refsnes deny any wrongdoing.

As investigators coast to coast turned up the heat in Orange County’s funding crisis, two Wall Street firms at the center of the affair confirmed Friday that federal agents had served them with subpoenas in one of five ongoing inquiries.

Officials with Merrill Lynch and Rauscher Pierce Refsnes, two investment houses involved in Orange County bond deals that have spurred questions about whether federal disclosure rules were followed, said they were subpoenaed this week by the Securities and Exchange Commission, which demanded company documents. Both firms denied any wrongdoing.

In Orange County, officials with the office of Dist. Atty. Michael R. Capizzi said they expect to expand their inquiry into the bond controversy to include allegations that former Treasurer-Tax Collector Robert L. Citron may have accepted improper gifts from investment firms.

On Friday, Citron hired an attorney who handles civil and criminal matters, but Deputy Dist. Atty. Guy Ormes emphasized that investigators have “no evidence of any criminal wrongdoing.”

District attorney’s investigators also sought to interview Acting Treasurer Mathew R. Raabe at his office Friday, but Raabe declined to speak with them.

“The guy was cooperative. He was cordial. But he said, ‘I want to speak with my attorney first,’ ” one source said. The investigators returned later in the day, but Raabe told them he had not yet spoken with a lawyer.

In Washington, sources said the National Assn. of Securities Dealers opened an investigation Friday into $3,000 in contributions from three Merrill Lynch employees to Citron during his hotly contested reelection campaign earlier this year.

The NASD probe came in response to charges leveled Thursday by the International Brotherhood of Teamsters, alleging that the donations--including one for $1,000 from Merrill Lynch executive Michael Stamenson--who worked with the troubled Orange County investment fund--violated federal policy. The toughened new regulations restrict investors from seeking municipal bond contracts for two years after donating to local officeholders or candidates.

The probes could lead to a wide range of civil and criminal responses if any wrongdoing is found. But it already seems clear that investigators are focusing on the political and financial relationships between county officials and their financial advisers--and the influence those ties may have had on how county bonds were bought and sold.

The inquiries have left Orange County officials struggling to keep up.

“The whole thing is very taxing,” County Counsel Terry C. Andrus said. “It’s overwhelming and quite distracting, but everyone understands the need for it. We’re trying to respond to all the (inquiries), but it’s a lot. We’ll keep up, though.”

Officials from the Securities and Exchange Commission, the Commodity Futures Trading Commission and other agencies have been poring over documents from the Hall of Administration all week, and Andrus said he expects “hundreds of thousands of pages” to be copied by the time they are done.

A spokesman for the CFTC, which regulates the federal futures market, said Friday that commission representatives are reviewing the documents in Orange County to determine whether the county portfolio included any futures commodities--and, if so, whether the county met federal regulations for reporting the trading of such commodities.

Officials with the U.S. attorney’s office refused comment on the Orange County fund Friday, but sources said no criminal investigation has been opened.

It was about the only office with a connection to the case that had not opened an inquiry. In addition, the state Department of Corporations has launched a separate investigation into the relationship between Merrill Lynch and the county treasurer’s office.

Officials at the Securities and Exchange Commission refused to comment on their investigation Friday, but the federal agency appears to have taken the most aggressive stance in its investigation.

Officials at Merrill Lynch and Dallas-based Rauscher Pierce Refsnes refused to discuss the contents of the subpoenas they received, but Merrill spokesman Timothy Gilles said: “As is our policy, we plan to cooperate fully with the SEC.”

B. J. French, a spokeswoman for Rauscher Pierce’s parent company, Inter-Regional Financial Group, said the subpoena was in connection with the SEC’s investigation of the Orange County investment pool. She said she had no reason to believe that Rauscher is a target of the investigation.

*

Both firms underwrote notes issued by Orange County and other investors in the pool. The notes’ offering statements are said not to have disclosed that the investment pool was facing losses. Bond experts say any firm responsible for preparing a bond can be held liable if its financial conditions are not properly disclosed to investors.

Merrill Lynch also underwrote a separate note for $600 million that has drawn scrutiny, sources said. Again, the questions are said to center on whether disclosure rules were followed.

The taxable note issue was sold in July by Merrill Lynch & Co, with Leifer Capital of Santa Monica as financial adviser.

Officials with Leifer Capital refused to say Friday whether they had been subpoenaed in the SEC inquiry, but did issue a statement saying the firm, which concentrates on structuring municipal bonds, plays little role in actual investment choices.

“The focus of our activities has always been to assist in achieving the best rates for our clients,” the statement said. “We do not involve ourselves in investment decisions.”

A separate issue in the financial disaster, disclosed Friday in The Times, centers on Citron’s acceptance of meals, a picture frame and other items totaling more than $400 from investment firms after a virtual ban on gifts to county officials went into effect in June, 1993.

Citron has maintained in an interview that the gifts were legal because they came from firms which did business for the county retirement system, an independent body outside the jurisdiction of the county. Sources in the county said they believe the point is a legitimate one, but Ormes said he expected prosecutors to look at the issue as part of their inquiry.

“That’s an interesting distinction,” Ormes said of Citron’s explanation. “But I sure don’t see anything in the gift ban ordinance that excludes something like that.”

Times staff writers Debora Vrana and Henry Weinstein contributed to this report.

*

More on Derivatives

* Reprints of two articles explaining bond transactions by Times Market Beat Columnist Tom Petruno are available. Call Times on Demand, 808-8463, press *8630 and select option 1. Order Item No. 2811. $3.95. For an article explaining the complex world of derivatives, order Item No. 2810. $2.95. Articles sent by either fax or mail.