Tapes Reveal Assurances From Raabe on Orange County Fund : Bankruptcy: They may show that ex-official misled investors, prosecutors say. But his attorney says they bolster defense case.

By speaking at meetings that were tape-recorded, Orange County’s former assistant treasurer, Matthew R. Raabe, may inadvertently have provided prosecutors with a key piece of evidence to prove he knowingly misled participants in the county investment pool about the safety of their deposits.

At two meetings last year of the Orange County Water District’s investment committee, Raabe tried to dispel any suggestion that the pool might incur losses, according to transcripts obtained by The Times under the California Public Records Act.

“This last year was, we believe, a very successful year for our investment fund. . . . We don’t anticipate right now that we’re ever going to have to liquidate anything,” Raabe told the committee on Oct. 31, 1994--more than a week after he privately warned higher-ups that the pool was in grave trouble and one month before publicly announcing a $1.5-billion plunge in the pool’s value.

Several pool participants have previously said that Raabe lied to them or failed to disclose crucial facts about the pool, and the 39-year-old Raabe’s own words could come back to haunt him as prosecutors pursue their six-count felony indictment in Orange County Superior Court.

When Water District Treasurer Andrew Czorny turned over tapes and transcripts of Raabe’s remarks to investigators, Assistant Dist. Atty. Wallace J. Wade told him they had “struck gold.”

“Specific conversations between Raabe and others [are] going to be the turning issue,” said a white-collar crime specialist who spoke on the condition of anonymity because he represents someone else in the case. “The acts are all there, but it’s intent you need to show. And intent is going to be determined on what he knew and what he said.”

Raabe’s attorney, Gary M. Pohlson, agreed that the Water District tapes are strong evidence--but for the defense, not the prosecution.

“I think it shows that Matt was disclosing everything he did know at the time and was not speaking any falsehoods,” Pohlson said Wednesday after reviewing the transcripts and discussing them with his client. “I think Matt Raabe was telling the truth as best he could at all points. This could be a good piece of defense evidence because it verifies what Matt’s always said--that he was telling the truth.”

The charge in Count 1 of the indictment--that Raabe made a false statement or failed to disclose a material fact in connection with the sale of securities to pool investors--is a violation of the Corporations Code that carries a maximum penalty of two years in prison.

For conviction on all six counts of misappropriating funds, improperly transferring securities within the pool, falsifying government documents and lying in connection with more than half a dozen issuances of county debt, Raabe could face 14 years in prison and a $10-million fine. He is free on $200,000 bond and plans to plead not guilty at his arraignment next week.

His former boss, resigned Treasurer-Tax Collector Robert L. Citron, has pleaded guilty to the same charges, saying he committed the crimes with Raabe’s help. Citron has pledged to cooperate with law enforcement efforts.

Assistant Dist. Atty. Maury Evans declined to comment on the tapes and transcripts other than to say: “It’s information we received, and it’s information we have reviewed, and it’s information that might be used in a trial.”

William Mills, the Water District’s general manager, said prosecutors “were extremely interested in the tape.”

As Citron’s right-hand man and public mouthpiece, Raabe was invited to the Water District meetings as officials weighed whether to withdraw some or all of the $115 million that the agency had in the county treasury.

“We were trying very hard to find out more about the pool,” board President Phil Anthony said recently. “We were asking all the right questions, but we got very misleading answers.”

During presentations on May 31 and Oct. 31, 1994, Raabe answered questions about specific transactions in the pool, general investment strategy and long-term economic outlook. Contrary to the image that Raabe has sought to create since the bankruptcy--that he was simply a Citron deputy who lacked expertise in high finance--Raabe exhibited facility when discussing complex investment transactions, and spoke of the office’s investment strategy as though it were his own.

Still, Pohlson noted, “in neither of these meetings does he ever say that it’s his strategy. Just because he understands what’s going on doesn’t mean he’s making the decisions.”

Although he gave overall assurances to the board members, Raabe did acknowledge that rising interest rates placed the investment portfolio in a precarious position and warned the Water District that the pool’s yield in that fiscal year would almost certainly pale compared to previous successes.

“We were as caught off-guard these past eight or nine months as anybody else was with what’s happened with short-term [interest] rates,” Raabe said at the October meeting. “And what that means going forward is that this year is not going to be one of our very best years.”

But Raabe nevertheless exuded confidence about the fund, and his presentations were a key factor in persuading the Water District to stay put, according to several officials who were at the investment committee meetings.

The district still faces the possible loss of more than $20 million, depending on what the county recovers in litigation and whether voters approve a half-cent sales tax increase in a special June 27 election.

“He was very good at calming the board and had responses for virtually every question that was put to him,” said Czorny, one of about 50 witnesses who testified before the grand jury in connection with the Raabe indictment.

“He always talked about the vibrancy of the fund, the health of the fund, and made the board and myself believe that it was very safe,” Czorny said. “I’m not a judge and jury, but it appears as though there were misstatements. I believe that he knew more than he was letting on.”