ORANGE COUNTY IN BANKRUPTCY : Supervisors Say It’s Time for Raabe to Go : Treasurer: Credibility needs to be restored to office, they say. Citron’s heir reportedly reassured governmental investors in October that the investment pool could cover any potential losses.

Less than three weeks after he assumed control of the embattled treasurer’s office, a majority of the Orange County Board of Supervisors--which pressured Treasurer Robert L. Citron to resign--said Wednesday that it is time for acting Treasurer Matthew Raabe to go too.

Raabe, Citron’s chosen heir apparent, was initially hailed for alerting the county to problems with the fund in early November.

But supervisors said Wednesday they could not ignore reports that Raabe continued to aggressively reassure other governmental investors--as the fund lurched toward collapse in October--of the investment pool’s ability to cover any potential losses.

“We need to restore credibility to the office,” said Supervisor Roger Stanton.

Supervisors Stanton and William G. Steiner said they favor installing as interim treasurer Thomas E. Daxon, the former Oklahoma auditor who was brought in Dec. 12 as a special consultant to the treasurer’s office.

“There is such a cloud over the treasurer’s office,” Steiner said. “It’s time to appoint Daxon.”

Supervisor Gaddi H. Vasquez, who becomes chairman of the Board of Supervisors in January, said that although Raabe now serves as an important “link” in unraveling Citron’s investments, he most likely will not be part of a post-bankruptcy treasurer’s office.

“A change will occur,” said Vasquez, who declined to elaborate.

Depending upon the outcome of investigations of Raabe and Citron by the Securities and Exchange Commission and the Orange County district attorney’s office, supervisors are considering everything from Raabe’s reassignment to complete removal.

Vasquez said a decision about a leadership transition in the office will occur “in a matter of days.”

Although it remains unclear whether Raabe had a hand in devising the risky investment strategies that torpedoed the multibillion-dollar fund, interviews and documents indicate that Raabe was a devoted disciple of Citron, fervently preaching the reclusive treasurer’s investment gospel to the fund’s inglorious end.

For 10 months this year, while interest rates rose five times and the treasurer’s office relied on a stepped-up series of borrowings for cash, Raabe, 38, crisscrossed the state, reassuring gatherings of city treasurers and other participants in the investment pool that the fund was sound.

In April, after the Federal Reserve Board had increased interest rates three times for a total of three-quarters of a percent, Raabe sold skittish Newport-Mesa School District officials on the idea of rolling over a $47-million loan they had taken out to invest more heavily in the fund.

And at several meetings of public finance officers and treasurers--including one in mid-October--Raabe dismissed questions about the fund’s risks, saying the county had $1 billion to $1.5 billion in “overnight money” to be used in case an interest-sensitive investment went awry, or investors in short-term county bonds or notes demanded their money back.

“You never, ever got a sense that they weren’t confident,” said Howard Longballa, Placentia finance director. “(Raabe) said, ‘Yes, the pool has exposure if interest rates rise,’ but that (the county) always kept liquid just for that reason. He said they had a billion set aside.”

Raabe, under scrutiny for possibly misrepresenting the fund’s solvency to investors, would not comment Wednesday on a possible shake-up in his office.

But in his first public comments about his involvement in formulating and carrying out the county’s failed investment strategy, he said Citron made all such decisions alone, and that he had virtually no input into the process.

“It would be fair to say that anywhere I went I was explaining what Mr. Citron’s investment strategy was,” Raabe said. “I never had anything to do with devising investment strategy.”

But investors say that if Raabe was not designing the car, he was selling it--and neglecting to tell them that this year’s version could turn out to be a lemon.

“I do not believe he was just a lieutenant responding on the directions of the captain,” said Edward Decker, a Newport-Mesa school board member who met with Raabe in April. “I came away with the feeling that he was as much a part of the scheme or proposal as his boss was.”

Raabe was certainly Citron’s chosen successor in the eyes of many county officials.

He first joined the auditor-controller’s office 10 years ago, but switched to the treasurer’s office in 1987 because there was a greater opportunity for advancement, his friends said. When Citron’s longtime deputy Ray Wells retired, Raabe, who had earned his certified public accountant certificate, became the assistant treasurer in 1993.

Steiner said he remembered asking county administrative officer Ernie Schneider in spring if there were plans for succession in Citron’s office, which he considered “a one-man show.” Steiner said he was led to believe Raabe was being groomed for the job. “He was the heir apparent.”

In a Sept. 14, 1993, memo to the supervisors accompanying his financial report, Citron devoted half a page to praise of Raabe, who he said was “directly involved in the day-to-day operation of the treasury.”

Citron wrote that Raabe “is involved or aware of the daily decisions being made. He is responsible for implementing investment decisions. . . . I thought you would be interested in knowing that there is in the county treasury a person such as Mr. Raabe who can actively manage and operate the county treasury.”

Raabe also served as Citron’s front man. Calls to Citron were invariably answered by Raabe. Citron signed most requests to county supervisors to issue notes, but Raabe was the person the supervisors were asked to contact if they had any questions.

“You didn’t get to talk to Citron. Citron is the mountain,” said one investment banker, who asked that his name not be used. “The oracle is Matt Raabe.”

City and county treasurers and finance directors say Raabe’s attitude about the fund strategies was: “Don’t try this at home, kids. Leave it to the professionals.”