Raabe’s Relatives Post Bond as Judge Cuts Bail to $200,000

Former Orange County Assistant Treasurer Matthew R. Raabe, who once routinely handled billions of dollars of government money, was declared too destitute to pay for his own attorney Wednesday and had to rely on family and friends to post the bond to free him from jail.

A day after he was incarcerated on six felony charges of fraud and misappropriation of public funds, Raabe endured a day in court during which his psychiatrist testified that Raabe was once suicidal and requires antidepressant medication. Raabe’s mother and sister were questioned about the source of the money they agreed to post so Raabe could make bail.

Superior Court Judge David O. Carter reduced Raabe’s bond from $500,000 to $200,000. The judge indicated that he would have lowered the bail 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 was expected to be released from jail late Wednesday or early Thursday. He is scheduled to return to court June 13 to be arraigned on charges that he helped orchestrate an illegal investment scheme that squandered the money of cities, schools and other public agencies, leaving the county in financial disarray.

Raabe, 39, appeared in court twice Wednesday to settle a variety of legal issues. During a morning session, Raabe, wearing a gold jailhouse jumpsuit and tennis shoes with no laces, listened intently 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 a secretary in the public defender’s office.

Carter named Gary M. Pohlson--who has worked about 350 hours representing Raabe, about 200 of them without pay--to represent Raabe at taxpayers’ 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 may be a lengthy one.

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

Prosecutors had asked for a $1-million bond, arguing that he was a flight risk. The judge reduced bail Tuesday to $500,000, still twice the amount typically set for those accused of first-degree murder.

Prosecutors contend that Raabe and his former boss, Treasurer 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 soured, the county declared the largest municipal bankruptcy in U.S. history Dec. 6.

Prosecutors contend that 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.”

Prosecutors argued vigorously that Raabe should remain in custody, saying he was a flight risk and posed 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.

Pohlson countered that his client had nowhere to go and wanted to stay in Orange County to fight the allegations against him. He also said Raabe was willing to give up his driver’s license if it meant a reduced bail.

Before deciding the bail issue, Carter asked to hear testimony from Dr. 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 noted that Raabe suffers from post-traumatic stress syndrome.

Carter said he set bail at $200,000 because he hoped family members would have to pitch in to get Raabe released, putting their assets on the line if Raabe thinks about fleeing prosecution.

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.

After the court hearings, Pohlson said Raabe was happy to be getting out of jail but was upset that his family and friends would be paying $20,000 to make his bail.