Citron to Be Star Witness at State Senate Hearing : Bankruptcy: Also expected is Merrill Lynch’s Michael Stamenson, a chief broker in trades. Tough questions from legislators are likely.

There’s no Ollie North and it’s unlikely to involve the high drama of Iran-Contra, but in matters of municipal finance this promises to be big, and steeped in intrigue.

A special state Senate committee will hold a daylong session here Tuesday that will bring together for the first time the key players in Orange County’s financial debacle.

The indisputable headliner is Robert L. Citron, the toppled Orange County treasurer who is expected to make his first public comments since the county filed for bankruptcy in early December.

Also expected are an array of other county officials--including a pair of sitting supervisors--and a gaggle of investment banking impresarios, most notably Merrill Lynch & Co.’s Michael Stamenson, who served as one of Citron’s chief brokers.

The whole bunch could be headed into a buzz saw. During a hearing on the bankruptcy last month, several lawmakers on the 10-member Senate Special Committee on Local Government Investments displayed a zeal to scold and take names.

Now with the prime protagonists in the Orange County drama finally set to speak--and a horde of media expected--some Capitol insiders are worried that the hearing could play out like something under the big top.

“I know there are some members of the committee who are stringing their bows now and sharpening their arrows,” said Sen. William A. Craven (R-Oceanside), the committee’s co-chair.

Sen. Lucy Killea, an independent from San Diego and the panel’s other chairperson, agreed that panel members “certainly are going to ask searching questions” and expressed hope that “we can get some gaps filled in--much of what we know right now is what’s been in the newspapers.”

What has goaded some committee members is the response by Merrill Lynch and Stamenson to a subpoena issued by the Senate to compel the bond dealer to appear.

Senate staffers said the subpoena was sought only after Merrill Lynch employees at Stamenson’s San Francisco office “stonewalled” when inquiries were made about his whereabouts. Eventually they learned that he was in New York and were told that Stamenson would not return to San Francisco until the day after the hearing.

After Craven and others began complaining to the press, Merrill Lynch officials in New York voiced assurances that Stamenson had planned all along to appear and blamed any confusion on a misunderstanding on the part of the sergeant-at-arms who attempted to serve the subpoena in San Francisco.

“I think that has kind of aggravated some on the committee,” Craven said. “They love to sit up there on the dais and question witnesses, and I don’t think these problems with Stamenson have helped the mood.”

In all, the Senate has issued six subpoenas for the hearing, calling, among others, Citron’s chief lieutenant, Matthew Raabe, who often served as the treasurer’s surrogate with investors and salespeople; Jeff Leifer, the Bel-Air financial adviser who associates joke was so close to Citron they were like “Siamese twins,” and officials from Wall Street firms KPMG Peat Marwick and Morgan Stanley.

Also expected to testify is Orange County Auditor Steve E. Lewis, who produced several reports critical of Citron’s investment practices, all of which were ignored. Officials from two of Orange County’s financially strapped school districts are slated to appear.

Much as at a congressional hearing, each witness will give a prepared opening statement and be subject to questions.

Craven and Killea have promised to crack the gavel if any of their colleagues get too far out of line. But that didn’t keep a few committee members from getting digs in during the December hearing.

A trio of Democrats could prove testy for Citron, Stamenson and the rest. Sen. Daniel E. Boatwright (D-Concord), a prosecutor before he came to the Legislature a quarter of a century ago, is a particularly outspoken committee member. Sen. Quentin L. Kopp, an independent from San Francisco and an attorney who doubles as a TV political analyst during election season, also has a reputation for razor-sharp questions.

Perhaps the most pointed inquiries, however, will come from Sen. Tom Hayden (D-Santa Monica), who already has made his mark in the Orange County debacle, penning a newspaper opinion piece a few weeks back taking the county to task for excesses that led to the crisis. Hayden is expected to take dead aim at the connection between Wall Street special interests and government officials such as Citron.

The goal of the committee is to determine what new laws might be necessary to ensure that a fiscal calamity such as the one that has befallen Orange County doesn’t happen again. “I don’t think we can legislate against bad judgment, but we’re interested in separating that from where the system failed,” Killea said.

Committee members want to learn directly from the participants about the sales pitch that investment bankers used to market securities to the county. In turn, they want to determine just what Citron said to woo the scores of cities, school districts, water agencies and other local governments that sank money into the doomed portfolio.

David Wiechert, Citron’s attorney, said he expects “a very cordial and civil question-and-answer session with senators who are interested in knowing the facts.”

Wiechert said Citron would not seek immunity or refuse to answer any question on the grounds that it might incriminate him.

Times staff writers Matt Lait and Jodi Wilgoren in Orange County contributed to this story.