ORANGE COUNTY IN BANKRUPTCY : Q & A : How His Guilty Pleas Could Affect Citron, County and Investors

Former Treasurer-Tax Collector Robert L. Citron’s admissions that he misappropriated public funds, falsified documents and misled nearly 200 government agencies that trusted him to invest their money raised a host of questions about what happens next. Here is a look at some of those issues.

Question: Will Citron continue to draw his $89,000 yearly pension?

Answer: This remains unclear. A portion of every county employee’s pension is funded by his own contribution, with the county making up the remainder. At least four California Supreme Court decisions have said that public pension benefits are a vested right of employees who meet the age and service requirements. So before Citron pleaded guilty Thursday, lawyers for the county said there was no way to deny him his pension. But county officials asked legal staff Friday to research the law and determine whether the felony pleas might provide an exception to that.

Q. Citron faces a maximum of 14 years in prison. What will his likely sentence be, if he goes to prison at all?

A. Criminal defense attorneys and lawyers close to the case said Citron’s age--he is 70--his lack of a prior criminal record and the fact that he didn’t commit the crimes for personal financial gain should help him when he faces a sentencing judge.

“People usually do things for sex, drugs or money, or to improve their own position. I think this poses some very unique sentencing issues,” said Santa Ana criminal defense attorney John D. Barnett. “It’s also highly unlikely that he would ever re-offend.”

Still, the level of damage the county suffered almost guarantees that Citron will do some time, legal experts said. Citron might not have profited, but his financial strategies did win the adulation of peers and county leaders when his investments yielded high returns.

“I think the court will deem it necessary to make an example of him,” said defense attorney Ronald G. Brower, who predicted Citron would be sentenced to two or three years behind bars. “He has cost scores of people their jobs, their livelihoods, benefits to their families, possibly their homes through reckless irresponsible conduct. The damage is too widespread to ignore.”

Q. Will Citron do time in a comfortable facility or be sentenced to some sort of home detention?

A. Not likely. State prisons are “substantially less desirable” than federal prisons where some notorious white-collar criminals have served their time. “There isn’t anything in the state prison system like home release or electronic surveillance,” Brower said.

Q. Will Citron be ordered to pay the county back?

A. He faces a maximum $10-million fine, far less than the $1.7-billion loss to the county investment pool spurred by the former treasurer’s high-risk investments. Some attorneys speculated Friday that because Citron doesn’t have $10 million in assets, his fine would be substantially lower, if he is fined at all.

Q. Who is next to fall?

A. Citron agreed as part of his plea agreement to cooperate fully with authorities, who are continuing to investigate the possible wrongdoing of a host of other figures in the county’s bankruptcy. In the plea agreement, Citron repeatedly said he committed the felony crimes “with the assistance of” his chief assistant, Matthew Raabe. “There is no question Raabe is next,” said one attorney close to the case. “Citron can definitely hurt Raabe, there’s no question about it.”

Q. Will Citron’s guilty pleas help the county in its $2.4-billion lawsuit against Wall Street giant Merrill Lynch & Co., which sold the county many risky securities?

A. Some lawyers said Friday that Citron’s admission of guilt could severely hurt the brokerage if he can show that the brokerage violated securities laws in its dealings with the county. It all depends on what Citron has to say to investigators in coming weeks about his dealings with Merrill Lynch and its brokers, they said. But some attorneys point out that there is a vulnerability to Citron as a witness--especially if he is not yet sentenced--because he has admitted to lying and has agreed to cooperate in the hope his assistance will bring a reduced sentence.

Q. How might Citron’s guilty pleas affect the settlement with the 200 agencies that invested in the now-collapsed county investment pool?

A. The majority of the cities, schools and other agencies with money in the pool have agreed to accept Option A of a settlement offer that guarantees most of their money back and provides IOUs for much of the rest. These investors have signed away their rights to sue the county, so Citron’s admissions will have little effect on them. But 23 agencies, who had $400 million in the pool at the time of bankruptcy, went for Option B, retaining the right to sue for all their money back. They are eager to take depositions from Citron, who has given up his rights against self-incrimination by pleading guilty.

“The biggest effect for the Option B parties is that we will be able now to ask our questions to Mr. Citron without him being able to take the Fifth Amendment,” said one attorney. “I look forward to it as an opportunity for more information to come out.” The fact that Citron admitted to lying to pool participants also simplifies their litigation against the county, he said.

Q. How might Citron’s guilty pleas affect bondholders?

A. Citron admitted he lied to bond investors when selling Orange County bonds. Bondholder attorneys said Friday that if the county defaults on its debt coming due this summer, Citron’s admission of guilt almost guarantees that they will be able to recover their money. They contend that because they bought the bonds based on lies, the county would no longer be able to walk away from the debt.

Times staff writers Debora Vrana and Jodi Wilgoren contributed to this report.