Ex-O.C. Budget Chief Helped Divert Millions, Jury Is Told

SANTA ANA — On the opening day of the first criminal trial stemming from the Orange County bankruptcy, former county Budget Director Ronald S. Rubino was portrayed by the prosecution as an ambitious official who helped steal millions of dollars so he could solve the county’s budget woes and enhance his own career.

The money--$91 million in 1993 alone--was taken from the investment pool accounts of cities and school districts that entrusted their funds to former county Treasurer-Tax Collector Robert L. Citron, who managed the county’s $7-billion investment portfolio, Assistant Dist. Atty. Jan Nolan said.

Rubino, according to the prosecutor, was among those county employees who concocted and carried out a plan to divert interest earnings from the investment pool to benefit the county’s general fund.

At one point, Nolan said, the group joked about calling the misappropriations the “Bob Citron Endowment Fund,” but dropped that in favor of the “Economic Uncertainty Fund.”

Nolan told the jury that she planned to call Citron as a witness to prove that Rubino knew about the illegal diversion scheme.

Rubino, 44, has pleaded not guilty to two felony counts of aiding and abetting Citron in the illegal diversion scheme to which Citron has already pleaded guilty.

If convicted, Rubino faces up to nine years in prison.

Citron pleaded guilty to six felonies and is cooperating with prosecutors. His deputy, Matthew R. Raabe, has pleaded innocent to six felony charges and faces trial in September.

Rubino’s attorney, Rodney Perlman, vehemently disputed Nolan’s contention that Citron would implicate his client.

To the contrary, Perlman said Citron told prosecutors that he never informed Rubino that the diverted funds were being stolen from the cities and school districts.

In contrast to the image sketched by the prosecution, Perlman described his client as a loyal public servant, a technocrat who was simply taking orders from his elected bosses.

Rubino was “acting unselfishly, doing nothing more than he was hired to do,” Perlman said.

“He was merely assisting the Board of Supervisors in finding ways to pay for the services the county gives to all of its citizens. . . . What you have before you is a good and honest . . . public servant,” he told jurors.

The small, sixth-floor courtroom in the Superior Court building was filled to capacity for the trial’s opening statements. Rubino’s relatives and supporters occupied an entire side of the cramped public gallery. On the other side sat lawyers for Raabe, the U.S. Securities and Exchange Commission, and Merrill Lynch & Co., the giant Wall Street brokerage that sold Citron most of the securities on which the county lost $1.6 billion.

In her opening statement, Nolan said she was not seeking to prove that Citron or Rubino “lined their pockets” or that they caused one of the wealthiest counties in the United States to declare bankruptcy.

“What I am going to prove to you is that Mr. Citron, as treasurer-tax collector, diverted, stole, misappropriated the funds of investors and gave them to the county general fund. And Mr. Rubino helped him, encouraged him,” Nolan said.

Nolan said Citron and Raabe, his top assistant, wanted to divert interest earnings from the investment pool because they worried that the pool’s outside investors might be startled by the excessive interest that Citron’s investments were earning at one point, and might have started raising questions about the risks associated with such returns.

During a period when California’s investment pool was earning annualized interest of 4.5%, Citron was raking in about 11.5%, having purchased some of the most speculative securities that Wall Street could offer, Nolan said.

The treasurer’s office surmised that if pool investors were actually paid what their deposits were earning, “they were going to know there was an awful lot of risk in this pool,” Nolan said.

And that, Nolan said, could have caused “a run on the bank if they reported [these high interest earnings]. It could blow the lid off this . . . [investment] pool,” she added.

In league with the others, Citron decided to report earnings of about 7.85% and shift the remainder to the Economic Uncertainty Fund, Nolan said.

Rubino, who was described by Nolan as a popular county employee who was eyeing the county administrative officer’s job, had a different problem, Nolan said.

In 1993, a prolonged recession was taking its toll on tax revenues and Rubino was struggling to balance the county budget, Nolan said. Because he worked for elected officials who were highly sensitive to service cutbacks and county layoffs, Rubino was anxious to come up with revenues, she said.

“So here you have Mr. Citron. He’s got a truck full of money, and he’s looking for a new home [for it]. Mr. Rubino has a huge [budgetary] hole, and that is the motive” for the diversion scheme, Nolan said.

In November 1993, Rubino and others decided to place the misappropriated funds in a separate account that would earn interest--to “create a new revenue stream” for the county, Nolan said.

Nolan said Rubino successfully lobbied the Board of Supervisors to “take this money, lock it up, and only [use it] for county purposes.” A resolution that Rubino pushed through required the approval of four of the five supervisors before these funds could be spent, Nolan said.

But Perlman said Rubino was only following orders and budgeting money, not “obtaining” it.

The defense attorney denied Nolan’s assertions that Rubino used the diverted money to balance the budget. He said Rubino had successfully spearheaded a move to cut 1,000 jobs from the county’s payroll in 1993.

And the diverted money went into the Economic Uncertainty Fund not to balance the county’s budget, Perlman said.

The trial, which is expected to last three months, continues today.