ORANGE COUNTY IN BANKRUPTCY : Citron’s Bid for Legal Aid Near Rejection

As investigators trace how Orange County’s financial crisis unfolded and explore the possibility of wrongdoing by former Treasurer-Tax Collector Robert L. Citron, officials are questioning whether they are obligated to pay for Citron’s legal expenses.

Facing a statutory deadline, county officials said Saturday that they are close to rejecting Citron’s appeal for help in paying his mounting legal costs because of a growing “pattern of deception and misrepresentation” in the former treasurer’s investment practices.

After a flurry of intensive meetings and telephone conversations late Friday, attorneys for Citron and the county worked out a last-minute agreement to extend for 12 days the legal time frame for responding to Citron’s request that his fees be covered, according to high-ranking county officials.

County Counsel Terry Andrus said Saturday that the county has until Jan. 5 to reach a decision, but declined to elaborate.

“To the extent that the county has any legal discretion, a decision will be based solely on what is in the best interest of the county and not anyone or anything else,” Andrus said.

Under state law, a public agency is required to defend and indemnify an employee for non-fraudulent acts or omissions that occur within the scope of employment, county officials said.

In addition, the county’s Chapter 9 bankruptcy filing may shield it from Citron’s request that his legal fees be paid, according to a source close to the case. Because the Chapter 9 filing protects the county from virtually all lawsuits, Citron might have to line up with the county’s numerous other creditors to recoup legal fees, the source said.

Reached at his home Saturday, Citron declined to comment. His attorney, David Wiechert, did not return telephone calls to his home and office seeking comment.

Supervisor William G. Steiner said he had not yet decided whether he believes the county should pay legal expenses for Citron, whose risky investment practices pushed the county into bankruptcy three weeks ago and endangered the savings of more than 180 cities, school districts and other agencies.

Citron’s financial dealings are under investigation by the Orange County district attorney, the Securities and Exchange Commission and the state Department of Corporations, among others.

As the investigations proceed, “things seem to be evolving from a question of poor judgment to more serious considerations,” Steiner said in reference to Citron. “I’d sure like to hear a more comprehensive explanation from his view, but maybe that won’t come out until the SEC and D.A. finish their investigations.”

Meanwhile, weary county supervisors and supervisors-elect grappled Christmas Eve with the challenge of drumming up holiday spirit after days of dealing with the financial crisis.

“It’s the weirdest Christmas I think I’ve ever been through,” incoming Supervisor Marian Bergeson said as she fixed a Christmas Eve dinner for relatives. “It’s supposed to be such a happy time, and instead all of this is going on. It’s tough on families.”

Bruce Bennett, the county’s bankruptcy attorney, spent the day working at his Los Angeles office. He spent about three hours sorting reams of mail he has ignored during the last week and communicated via fax with other lawyers working on the complex case.

At the county administration complex in Santa Ana, most offices were locked and dark for the first weekend since the crisis began Dec. 1. Parking lots were empty. Homeless people replaced the crowds of county officials, lawyers and anxious employees who had traversed the plaza near the buildings throughout the week.

Near the entrance to the treasurer-tax collector’s office, charity workers distributed clothing to several dozen needy people.

When Citron resigned Dec. 4, two days before the county’s unprecedented bankruptcy filing, he verbally requested help with any legal expenses he might incur, several county officials said. Two weeks later, on Dec. 16, Wiechert made the same request in a letter to Andrus, they said.

By law, the county has 20 days to rule on an employee’s request. But because Citron made two requests, officials were uncertain which one started the statutory time clock.

If the 20-day period began with Citron’s verbal notification, the deadline would have been Friday and top county officials said Andrus was prepared to deny the former treasurer’s request.