ORANGE COUNTY IN BANKRUPTCY : County Counsel Sat In on SEC Session

Although county supervisors blasted the Securities and Exchange Commission for failing to alert them to concerns over the county’s investment fund, their own attorney acknowledged Wednesday that he was present when the federal agency first questioned then-Treasurer Robert L. Citron last spring.

Terry Andrus, the county counsel, told The Times on Wednesday that although SEC attorneys questioned Citron and then-Assistant Treasurer Matthew R. Raabe about their investment portfolio and the risky strategies, the inquiry did not seem serious enough to warrant a mention to county supervisors.

“In the bright glare of hindsight, I guess I could have explained it to them, but there wouldn’t have been much to explain,” Andrus said. Citron’s “explanation to the SEC . . . seemed plausible to me.”

Besides, Andrus said, the inquiry was confidential and the four participants--including securities attorney John W. Cotton, who was hired by the county--were told not to discuss it.

County supervisors, some of whom have been critical of the SEC’s handling of the financial crisis in its initial stages, were surprised to learn Wednesday that Andrus had attended the meeting with the SEC months before it began a full-scale investigation into the fiscal debacle that unfolded earlier this month.

“Certainly the board should have been informed, and we weren’t, and that concerns me,” said Supervisor William G. Steiner, who criticized the SEC for failing to step in and freeze the troubled investment fund before the county declared bankruptcy.

Said Supervisor Gaddi H. Vasquez: “Certainly that knowledge would have been beneficial.”

The battle between the supervisors and the SEC heated up earlier this month when the agency’s chairman, Arthur Levitt Jr., referring indirectly to the supervisors, suggested that voters “throw out” any politicians who placed the public’s savings in such speculative investments.

As county counsel, Andrus represents not only the Board of Supervisors but other elected county officials, including Citron.

During the meeting with the SEC, which Andrus said occurred in April or May, Citron brought along Cotton, an attorney for LeBoeuf, Lamb, Greene & MacRae, a Los Angeles law firm that served as counsel for several bond sales. Cotton had special expertise in securities law, Andrus said, and was asked to come along.

Cotton did not return a call for comment Wednesday. Citron’s attorney, David Wiechert, said he found nothing improper or unusual about Cotton, whose firm did securities work for the county, representing Citron before the SEC.

Andrus said he accompanied Citron and Raabe because he did not fully understand the nature and complexity of the investments and thought it might be a good “educational process.” Andrus also said he could not adequately represent Citron during the meeting because he had no expertise in such financial matters.

During the meeting, Andrus said, Raabe did most of the talking, answering dozens of questions about the portfolio, the maturity dates of securities and the risk of the investments.

“It was mostly for information purposes,” Andrus said. “I understood that if they did have concerns, we’d hear back and we never did. There was nothing alarming or significant about the meeting.”

County Supervisor Harriett M. Wieder said she learned a few days ago that Andrus had met with the SEC in the spring and was told that he was “just about admonished” not to discuss the inquiry. Wieder said that if Andrus believed he was representing Citron, there could be problems with attorney-client privilege.

“Terry Andrus is an impeccable counsel,” Wieder said. “I think the SEC should be answering a lot of questions about why they backed off on this whole thing when we needed them.”

The SEC has launched a broad investigation of county leaders and the brokerages that underwrote county bonds and sold investments to the now-bankrupt funds. The SEC has served subpoenas on the five county supervisors, county Administrator Ernie Schneider, Citron, Raabe and two Wall Street investment houses, seeking a variety of bank records, diaries and other records.

The agency is investigating whether campaign contributions, or even kickbacks, were provided to county officials in exchange for the county’s lucrative bond business.