Jury Starts Deliberating Case of O.C. Vs. Rubino

Jurors begin deliberating today whether ex-Budget Director Ronald S. Rubino plotted with the former treasurer to plug a gaping hole in the county government’s budget by skimming nearly $100 million in interest earnings intended for other agencies.

Closing arguments in the three-week-long trial, the first to stem from Orange County’s devastating collapse into bankruptcy 21 months ago, ended Tuesday with lawyers from both sides painting contrasting portraits of Rubino.

The prosecutor, Assistant Dist. Atty. Jan J. Nolan, said Rubino had deep knowledge of a scheme by longtime Treasurer Robert L. Citron to steal the pool investors’ money and place it in a special county treasury account.

Rubino’s attorney, Rodney M. Perlman, insisted that his client was not aware of any illegal skimming operation and portrayed Rubino as a mid-level county manager who was simply following county policies and his bosses’ orders.

Perlman argued that even if money-skimming occurred, it might not have been illegal because the county was the legal owner of the pool investments and could have distributed interest earnings as it wished.

The jury of 11 women and one man will begin deciding Rubino’s fate this morning after receiving final instructions from visiting Los Angeles County Superior Court Judge J. Stephen Czuleger.

In closing arguments, the prosecution sought to distance its case from Citron’s unexpected testimony that he never told Rubino about the illegal diversion. Citron, a witness for the prosecution who has pleaded guilty to six felony counts of fraud and misappropriation of public funds, had been expected to implicate Rubino in the scheme.

Nolan said Citron’s testimony “is not accurate” and speculated that he may have been trying to shield his former protege from prosecution.

“He could be trying to protect an old county family member,” Nolan said. “Why shouldn’t he take the fall in the whole thing and leave Rubino out of it?”

But Nolan said a more likely scenario was that Citron’s testimony came “three years down the road” from some of their financial dealings together, adding that the former treasurer might have forgotten some facts.

“These two men crossed the line and crossed it big time,” Nolan said about Citron and Rubino. “These are two big people that violated the law.”

But Perlman seized on Citron’s testimony, saying it showed that his client knew nothing about the efforts to siphon interest from the investment pool and place it in the so-called Economic Uncertainty Fund, where it would generate up to $13 million a year to boost county revenues.

Perlman reminded jurors that Citron testified “absolutely not . . . I didn’t tell Mr. Rubino” when he was called as a prosecution witness.

Citron has good reason to tell the truth, Perlman argued, because he has pleaded guilty to six felony counts--including two of the same money-skimming charges Rubino is accused of--and is cooperating with the district attorney’s office.

Perlman said Citron had an incentive to be truthful because his sentence may be reduced, depending on his cooperation with prosecutors. He said Citron’s testimony “was forceful, absolutely clear” and went unchallenged by the prosecution.

Referring to Citron’s insistence that he didn’t tell Rubino about the diversion, Perlman asked jurors: “Would you bet your child’s college tuition whether Mr. Rubino knew of Citron’s criminal purpose?”

After Perlman ended his closing remarks, and the judge took a brief recess, Rubino’s wife, Sharon Esterley, brushed away tears from her cheeks and hugged her husband. The courtroom was packed with Rubino supporters and lawyers for some of the Wall Street brokerages the county used in selling investments to Citron.

Closing arguments in the case marked the end of nearly three weeks of testimony by investors, county officials and financial experts.

During the trial, prosecutors contended that Citron and Rubino agreed to distribute 7.85% in interest earnings to the 200 outside agencies--including cities, school districts and other entities--with money in the county-run investment pool. But the $7-billion pool was actually earning 11.5% at the time.

Citron’s wrong-way bets on interest rates caused the investment pool to suffer a $1.64-billion loss in the fall of 1994, triggering the largest municipal bankruptcy in U.S. history. The diversions were unearthed in an ensuing investigation.

Prosecutors asked the grand jury to indict Rubino on charges of aiding and abetting Citron, largely on testimony by then-Assistant Treasurer Matthew Raabe that the former budget director masterminded the diversion scheme.

But Raabe, who is expected to go on trial in January on the same fraud and misappropriation charges, declined to testify against Rubino, citing his 5th Amendment right against self-incrimination.

Without Raabe’s testimony, prosecutors are depending on Rubino’s own handwritten notes to prove his guilt. One such note read: “Moving 7.85% to avoid 10% yield.” Prosecutors contend that note showed Rubino knew that Citron was cheating pool investors.

“Documents don’t have hazy memories, documents can’t forget and documents can’t change their mind three years later to fit some fact pattern,” Nolan said.

Nolan expressed irritation at the indifference of a few prosecution witnesses, including former County Administrative Officer Ernie Schneider, who testified that he was concerned with the county’s share of the investment pool, not the pool investors’ money.

“That’s the attitude of the top guy in this county, that he didn’t care about the commingled pool participants’ money,” she said.

Perlman said prosecutors had failed to prove their case--that Rubino had knowledge of Citron’s crimes and encouraged his county colleague to break the law.

“This is a prosecution that is not supported by the facts,” Perlman said.