Rubino Sees Praises Turn to Accusations

A glass of Chardonnay in his hand, Ronald S. Rubino beamed during a retirement party at the Bowers Museum as a slew of county officials and two supervisors sang his praises in front of dozens of happy guests last year.

One by one, they portrayed him as the county’s financial savior, a man who performed miracles when the budget picture seemed most bleak, often with the help of then-Treasurer-Tax Collector Robert L. Citron.

“You made us look good over these years,” said then-Supervisor Harriett M. Wieder. “It was going to be a terrible year when I was chairman and a terrible year when Roger [R. Stanton] was chairman and you got us through. So thank you for making us look good.”

At that retirement party in April 1994, County Administrative Officer Ernie Schneider credited Rubino’s “creativity, enthusiasm and his new ideas about how to make money for the county.” He even joked that the Board of Supervisors should have rebated Rubino a percentage of the money the budget director had saved over the years.

On Wednesday, Rubino, 44, was charged with two felony counts of helping Citron misappropriate funds and failing to transfer interest owed to the accounts of other governmental entities that had entrusted the county with their money.

Rubino faces nine years in prison if convicted of both counts and a sentence enhancement that pegs the loss of funds at more than $2.5 million.

He declined to answer questions after appearing briefly in court Wednesday without an attorney. Rubino has not yet retained counsel.

Citron, who was so taken with Rubino that he offered him his No. 2 post in early 1993, has pleaded guilty to six felony counts related to the illegal transfer of public money and is expected to be sentenced Dec. 29. Citron’s assistant, Matthew Raabe, has pleaded not guilty to the same six counts and is cooperating with government authorities.

According to Wednesday’s criminal indictment, Rubino is accused of helping skim about $60 million belonging to participants in the investment fund Citron managed on behalf of 187 public entities, including cities, schools and special districts. The alleged violations occurred between April 1993 and February 1994.

During that time, Rubino and Citron were trying to develop ways to earn higher interest on investments to balance its budget in the wake of state funding cuts that threatened to close county fire stations and libraries.

Those who worked with both men said Rubino, as budget director, was pushing Citron to come up with more and more interest to help balance the books.

When it worked, both men were showered with praise. Citron was applauded by his colleagues in executive management meetings and Rubino was openly praised by supervisors.

In early 1993, they hatched a plan: They would sell $400 million worth of taxable short-term notes at low interest rates to invest in long-term notes paying a higher rate of interest.

Although two supervisors and the auditor-controller expressed concern about the financial risk in such a scheme--which Rubino predicted at the time could net the county $17 million a year--the deal was approved. It ultimately led to $2 billion more in borrowings, many of them pitched personally by Rubino to elected officials.

In February 1994, with investments doing well, Rubino endorsed the idea of transferring into a special “economic uncertainty fund” enough surplus interest to earn the county an extra $8 million to $10 million a year.

Last January, officials discovered that $93 million of other investors’ interest payments was illegally diverted to the county-controlled accounts, and determined that the investment pool absorbed $271 million in losses that belonged to the county.

At the time, Rubino called news of the illegal interest diversion “a real shocker.” He later said that everything he did at the county was “aboveboard.”

Rubino said Citron developed his investment strategy on his own. But the budget director’s written reports to the Board of Supervisors showed Rubino encouraging many of Citron’s riskiest practices, including the use of reverse repurchase agreements, one of the investment schemes that backfired on the county and contributed to $1.64 billion in losses.

Resigning months before disaster struck in December 1994, Rubino took a job with Leifer Capital, a Santa Monica company that served as the financial advisor to Citron and Orange County on its massive borrowings. Leifer Capital has been paid about $3 million in fees for its work.

After just six months with Leifer as a vice president in charge of “investor and rating agency relations,” Rubino left to join the accounting firm of Ernst & Young.

Jeffrey R. Leifer, the company president, said through a spokesman Wednesday that he had no comment on the indictment of his former employee.

In the midst of his interviews with the district attorney’s office and his appearance before the Orange County Grand Jury this year, he left Ernst & Young and in July, worked on at least one project for a marketing consulting firm, Stranberg & Associates.

Stranberg would not discuss the project, citing “client privilege,” but he added, “He’s a friend of mine, and I hope everything works out. He’s a nice person.”

Added Eileen Walsh, the former county finance director: “I feel very sad about Ron. He is a decent human being who worked hard for the county. He was absolutely committed to carrying out the will of the board. . . . Unfortunately, this takes the public’s attention away from the real culprits--the dysfunctional system of governance and the corruption of political abuse, which is Orange County’s legacy.”

At his retirement party, attended by Walsh, Leifer, Stranberg and numerous county officials, including Supervisors Wieder and Stanton, Rubino had kind words for Citron.

“Bob is magic, and his efforts to help the county get through this financial crisis are absolutely important,” he said. “I cannot tell you how important Mr. Citron is to our financial well-being.”

The assembled crowd burst into applause.

In turn, Rubino was called “an outstanding professional,” “a great father and a great husband,” and a “decent, honorable friend” by those in attendance. His wife, Sharon Esterley, a former spokeswoman for the John Wayne Airport, was there, as were his high school-age daughters.

Citron fondly recalled scheduling a visit with officials of Moody’s Investors Service in New York in 1982 and grabbing Rubino--who then worked in the county auditor-controller’s office--to accompany him as a replacement for someone else who couldn’t make the trip.

“He was a fast learner, and I was never more glad that I took Ron than I was then,” Citron said, adding that Rubino was able to “talk that good finance talk” to Moody’s.

Known for his dry wit, Rubino kept a plaque in his county office that read “Plausible Deniability.”

As “budget czar,” Rubino, who held a variety of posts over 20 years with the county, was lauded for his talents in restructuring the data processing department, putting together a financing plan for a public safety communications system and consistently putting cash into the county’s coffers.

Stanton, accused Wednesday along with William G. Steiner of willful misconduct in office, stood with Rubino at the retirement bash last year and laughed about how Rubino would always make dire financial predictions and then come up with funds at the last minute.

“Didn’t you ever catch what was going on?” Stanton asked the party-goers. “They always came up with scare stories and then they always came through.”

Times staff writer Dexter Filkins contributed to this report.