Family Posts Bond, So Raabe Could Be Out of Jail Today : Courts: Bail is reduced from $500,000 to $200,000. The former O.C. assistant treasurer is ruled to be destitute enough to receive public funds for his trial defense.

Former Orange County Assistant Treasurer Matthew Raabe was scheduled to leave jail this morning after family members moved to post bond Wednesday and a judge declared Raabe so destitute that taxpayers must pay for his defense against charges connected to the county’s financial collapse.

Superior Court Judge David O. Carter reduced Raabe’s bail from $500,000 to $200,000. The judge indicated he would have lowered the figure further if Raabe had not raced through South Coast Plaza and city streets Tuesday in an apparent attempt to evade investigators who were tailing him.

“That’s what stopped the bail from going to $50,000, that lack of judgment,” said Carter, who was so concerned about the incident that he stripped Raabe of his driver’s license and passport.

Raabe’s bail bondsman said the former high-level county official, who earned more than $77,000 when he was fired March 14, was likely to be released from jail late Wednesday night or early today.

He is scheduled to return to court June 13 to be arraigned on six felony charges that he helped orchestrate an illegal investment scheme that squandered the money of cities, schools and other public agencies.

Raabe’s attorney has said his client is not guilty of the charges and vows to fight them.

On Wednesday, Raabe spent a day in court during which his psychiatrist testified that he was once suicidal, suffers from “post-traumatic stress syndrome” and requires anti-depressant medication.

Raabe’s mother and sister were questioned by a prosecutor and the judge about the source of the money used to post Raabe’s bail, part of an attempt to ensure that none of the funds were obtained illegally.

In a declaration filed with the court, Raabe said he had no income and has bills totaling more than $3,000 a month, including child- and spousal-support payments.

Although prosecutors say there is no evidence that Raabe benefited from his alleged crimes, they nonetheless challenged his contention that he is penniless. The judge instructed them to continue to look into Raabe’s finances, and said any assets he holds could be used to reimburse the county for the costs of counsel.

Raabe’s attorney did not object to that unusual proposal, saying Raabe wanted to do all he could for the county.

Raabe, 39, appeared in court three times Wednesday to settle a variety of legal issues. During a morning session, Raabe, clad in a gold jailhouse jumpsuit and tennis shoes with no laces, listened intently and nodded as Carter discussed who should represent him, who should pay and whether the fallout from the county’s bankruptcy made it impossible for him to receive a fair trial here.

“Potentially, this court has a conflict. Potentially, the district attorney’s office has a conflict,” Carter said. “The question is whether it is fatal.”

The answer, at least for the county public defender’s office, was yes.

“Public employees have been the most hard hit by the bankruptcy,” Chief Deputy Public Defender Carl C. Holmes told the judge. “Many lost money in the county’s deferred compensation plan and face salary cuts. Mr. Raabe was responsible for the administration of the deferred compensation fund, and as [assistant] treasurer, he was involved in decisions made relative to the bankruptcy.”

Further complicating the situation was the fact that Raabe’s mother is employed as a secretary in the public defender’s office.

Carter named Gary M. Pohlson--who already has worked about 350 hours representing Raabe, about 200 of them without pay--to represent Raabe at taxpayer expense. Carter ordered Pohlson to draw up a contract outlining his legal fees instead of billing the county by the hour, because the complex case might be a lengthy one.

The judge told the attorneys that unless a plea agreement is reached, he wants the case to go to trial as soon as possible. Both sides agreed that a trial in the complex case would last between three and four months.

In the afternoon, Raabe returned to court, this time wearing a dark business suit, to plead for reduced bail.

Prosecutors had originally asked for $1 million bail, arguing that Raabe was a flight risk. The judge set bail Tuesday at $500,000, still twice the amount typically set for first-degree murderers.

Pohlson argued Wednesday that his client will not flee Orange County and wants to fight the allegations against him.

But prosecutors contended that Raabe was a threat to himself and others. They said the episode in which he tried to evade investigators who were following him demonstrated irrational and dangerous behavior.

The judge agreed, dismissing Raabe’s contention that he drove erratically because he feared he was being pursued by the media.

“I’m laughing at that,” Carter said. “He was fleeing from undercover investigators from the district attorney’s office.”

Before deciding the bail issue, Carter asked to hear testimony from Edwin C. Peck, a psychiatrist who has seen Raabe about 60 times since January. Peck told the court that Raabe was depressed and suicidal when he first saw him, but has been doing much better recently.

“He’s no more a danger to himself or others than any other citizen in Orange County,” Peck said.

The psychiatrist also noted, however, that Raabe suffers from “post-traumatic stress syndrome,” the first symptoms of which manifested in 1993.

In the grand jury indictment returned Tuesday, prosecutors contend that Raabe and his former boss, Treasurer-Tax Collector Robert L. Citron, lied to investors, never warning them that the county’s investment pool was highly leveraged and losing money.

The risky investment strategy, which relied on an incorrect gamble on the direction interest rates were heading, lost $1.7 billion last year as the Federal Reserve Board raised rates six times.

When the investments ultimately soured, the county on Dec. 6 declared the largest municipal bankruptcy in U.S. history.

Prosecutors also allege Raabe helped Citron skim about $80 million in interest earnings from other pool investors, money the pair allegedly placed in a county-held account. Investigators also charge that Raabe and Citron attempted to minimize the damage to the county’s investment holdings by transferring securities that were losing money into the investment pool, where the losses were spread among other investors.

Citron implicated his once-trusted aide when he pleaded guilty last month to the same charges Raabe now faces.

Prosecutors acknowledge that neither Raabe nor Citron benefited personally from the offenses they allegedly committed.

Pohlson said Raabe’s first night in custody was as pleasant as circumstances allowed.

“The jail personnel were very nice to him. The inmates in the jail were very nice to him,” Pohlson said of his client. “He had good conversations, a couple of notes of ‘good luck’ to him. He’s fine.”

Carter said he was satisfied that Raabe would not flee when he was told that Raabe’s mother, sister, two brothers and a girlfriend would come up with a non-refundable $20,000 in cash to post the $200,000 bail. Raabe’s mother’s home will be used as collateral for the bail.

“That’s exactly what I want to occur,” Carter said.

After the court hearings, Pohlson said Raabe was happy to be getting out of jail but was upset that his family would be losing $20,000 to make his bail. “He’s disappointed by that. The only one who really suffers here is his mother,” Pohlson said.

Raabe’s mother, Esther Hamilton, said she has recently finished paying off a 30-year mortgage on the house.

“We’ve worked hard to do it,” Hamilton said. But she said she was willing use her house as collateral for the bond if it meant getting her son out of jail.

“We’ve been praying for him,” she said.

* BOTH SIDES GAINING? Recent developments hearten both sides of Measure R. A19