Rubino Judge Calls a Mistrial in First O.C. Bankruptcy Case

Ending seven days of rancorous jury deliberations, a judge declared a mistrial Friday in the first criminal trial resulting from Orange County’s $1.64-billion bankruptcy.

The action came after jurors deadlocked 9 to 3 in favor of acquitting former Orange County Budget Director Ronald S. Rubino on two felony counts.

Some tearful jurors hugged Rubino as they left the courtroom and expressed frustration that they could not exonerate him on charges that he helped then Treasurer-Tax Collector Robert L. Citron skim nearly $100 million in interest earnings belonging to nearly 200 cities, school districts and other agencies. The money was not used for personal profit.

Dist. Atty. Michael R. Capizzi appeared unfazed by the jury’s vote and vowed to retry the case next month.

“There was evidence that indicates criminal activity,” he insisted during an interview.

But the majority of jurors said prosecutors failed to incriminate Rubino in the money-skimming scheme and presented little hard evidence during the three-week trial.

Among them was Christina Sinclair, who told Judge J. Stephen Czuleger she didn’t think Rubino got a panel of 12 impartial jurors.

“Good luck,” Sinclair told Rubino outside the courtroom. “I tried. I went to bat for you.”

Rubino, 44, said he was pleased with the jury’s decision, though disappointed that he did not get an outright acquittal.

“It wasn’t the victory that we wanted, but it was a victory,” Rubino said. “I was doing my job. I have done nothing wrong. Now I’m subjected to going through the entire process again.”

The mistrial resonated Friday throughout the County Hall of Administration, a block away from the courthouse. Members of the Board of Supervisors, who had vowed to limit Rubino’s defense to $500,000, promised to reconsider that decision in light of the hung jury.

“I have no intention of abandoning Ron Rubino,” said Supervisor William G. Steiner, one of two sitting supervisors defending himself against bankruptcy-related misconduct charges.

Rubino “basically won,” Steiner said. “The district attorney’s office didn’t prove its case.”

Supervisor Don Saltarelli, who in July opposed increasing Rubino’s defense cap from $300,000 to $500,000, said he will now review Rubino’s request for more help.

“The Rubino jury overwhelmingly [voted] for acquittal, indicating to me that the evidence was very weak.”

Supervisor Marian Bergeson, who donated some of her own money to Rubino’s defense fund, said she would also reconsider additional legal fees.

The jury’s vote represents a setback for Capizzi, who had hoped to secure a conviction in one of the highest-profile cases his office has tried in recent years.

Some jurors said they were planning to write letters to Capizzi, asking him to withdraw the two felony counts against Rubino.

“He doesn’t have a leg to stand on,” said Diana Chairez, a real estate agent from Anaheim. “Why are they wasting our money pursuing a case that should not have been [filed] in the first place?”

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The sentiment was echoed by some legal experts.

Robert Pugsley, a professor at Southwestern University School of Law in Los Angeles, said prosecutors could not reasonably expect a different result on retrial.

“Realistically, they should lay down their weapons,” Pugsley said. “Considering all the costs involved and the unlikelihood of success, they’ll be best advised to drop it. It’s a hurtful defeat, but it’ll be pouring good money after bad.”

The jury’s inability to agree came as no surprise, especially after jurors sent a steady stream of notes earlier this week to Czuleger indicating they were hopelessly deadlocked and bogged down in personal infighting.

After some coaxing by the judge, jurors deliberated for the entire day Thursday.

But at 10:03 a.m. Friday, less than one hour after resuming deliberations, jurors sent their final note to Czuleger.

It read: “We are currently a hung jury. However, there are some jurors who are basing their verdicts on assumptions and not facts that were introduced into evidence. These jurors no longer wish to deliberate even though the rest of us do.

“Please, please help.

“Some of us really don’t want to go out there as a hung jury. However, if you decide we cannot go on, we will abide by your decision.”

*

Czuleger later asked jurors if they felt they could break the deadlock if he provided further jury instructions. Seven jurors said it was possible. Others complained that some jurors were not willing to follow the judge’s legal instructions.

“We’ll go crazy in that room,” said Naholowaa Russell Edwards of Anaheim, the lone male juror, when asked by the judge for his thoughts on resuming deliberations.

Czuleger later said he was declaring a mistrial and setting Oct. 8 as the retrial date.

As jurors exited the courtroom, the jurors who voted for conviction--three women, ranging in age from 68 to 72--headed for the elevators.

“Never again. Never again,” muttered 71-year-old Julia Saakvitne, one of the three holdouts, waving her hands in disgust as she left the courtroom.

The other nine jurors--and four of the five alternates--remained outside the courtroom for nearly two hours talking to the prosecutor, defense lawyers, Rubino, his family and their small band of supporters.

During the trial, prosecutors contended that Rubino, Citron and his former top assistant Matthew Raabe, agreed to distribute 7.85% in interest earnings to the 200 agencies with money in the county-run investment pool. But the $7-billion pool was actually earning 11.5% at the time.

Prosecutors said the trio plotted in 1993 to skim interest earnings from the pool because they were worried that investors might be startled by the excessive interest Citron was earning and start asking questions about the heavy risks associated with such returns.

At the time, Citron’s risky investments were producing double-digit returns while the state investment pool was yielding less than 5%. Citron has testified that Raabe believed excessive returns would tip off the other investors to the risks he was taking.

Rubino helped to set up a special pot of money--the so-called Economic Uncertainty Fund--so that he could fill an unprecedented shortfall in the county’s budget and advance his own career, the prosecution alleged.

But the plan fell through when Citron’s 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.

Citron, who pleaded guilty to six felony counts of misappropriation and fraud, is cooperating with district attorney’s investigators and is scheduled to be sentenced in November. Raabe is expected to go to trial in January on the same fraud and misappropriation charges.

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Prosecutors sought an indictment against Rubino largely on Raabe’s grand jury testimony that the former budget director masterminded the scheme. In securing Raabe’s cooperate with the grand jury, prosecutors agreed that he would not testify at any trial until his case was resolved.

And citing his 5th Amendment rights against self-incrimination, Raabe refused to testify at Rubino’s trial.

After realizing they had lost their star witness, prosecutors asked that Raabe’s grand jury testimony be presented to the jury in place of his appearing in person.

Judge Czuleger denied the request, saying Rubino’s attorneys would not have the right to cross-examine Raabe.

The prosecution’s strongest evidence was Rubino’s handwritten notes on a spreadsheet that Raabe distributed in September 1993, which showed a 400% increase--from $25 million to $125 million--in new interest earnings. Scrawled on the spreadsheet were the words: “Moving 7.85% to avoid 10% yield.”

Prosecutors sought to tie the notes to the testimonies of former Rubino aides, Steve Franks and Pamela Leaning, who said Rubino rebuffed them when they asked if Citron’s unusually high interest earnings were achieved through legal means.

“This is the kind of thing, if the grand jury ever asks, you don’t want to know,” Franks quoted Rubino as saying.

*

But Rubino’s attorney, Rodney M. Perlman, blunted that testimony. He got Franks to acknowledge that Rubino made the statement about the grand jury “jokingly.” And Franks also conceded that Rubino told him how the treasurer had explained he was making a windfall by employing “aggressive investment practices.”

Some jurors who voted for acquittal said they believed Rubino’s testimony that he did not know that Citron was depositing stolen funds in the county’s treasury.

Some said they also believed Rubino’s testimony that Citron was earning 7.85% for all pool investors but the county was generating even higher rates--up to 15%--because the treasurer had made more lucrative investments on its behalf.

Jurors who voted for acquittal said they found Citron, who was called as a prosecution witness, one of the “most credible witnesses” in the trial.

In unexpected testimony, Citron said he never told Rubino about the diversion scheme.

In closing statements, Assistant Dist. Atty. Jan J. Nolan implied that either Citron was lying to take the fall for Rubino or had simply forgotten.

But most jurors said they rejected that argument.

Chairez, the Anaheim real estate agent, said she and others gave great weight to Citron’s testimony.

“Citron had a lot on the line,” Chairez said. “Why would he lie in front of [Czuleger], his sentencing judge?”

*

Lisa Barnes, another juror who voted for acquittal, said the prosecution never convinced her beyond a reasonable doubt that Rubino was part of the diversion scheme.

“This case should never have been brought in the first place,” Barnes said. “They don’t have enough evidence. They’re wasting taxpayers money to [prosecute] and to put a family through this.”

Legal experts said they were not surprised that most jurors voted for acquittal.

H. Dean Steward, who heads the federal public defender’s office in Santa Ana, said the prosecution’s case virtually fell apart when Raabe refused to testify

“The D.A.’s strategy is a classic example of what can go wrong when you put all your eggs in one basket and rely on one witness to make your case.”

Laurie L. Levenson, dean of Loyola Law School, said prosecutors took a risky gamble by counting on Raabe’s testimony.

“I think most people in the legal community realized that this would be a difficult case to win, but this one just went downhill fast,” she said.

By Friday afternoon, even Capizzi acknowledged that convicting Rubino was a difficult task.

“This was not a case that had a 200% chance of achieving a guilty verdict,” Capizzi said.

Prosecutors will attempt to strengthen their case for the retrial, Capizzi said, and will explore ways to use Raabe’s grand jury testimony.

Capizzi said there were some jurors who “felt that it was [a solid case]. So I felt it was a case that should have been tried no matter what the outcome may have been.

“For people to focus on one case and say that it is a setback and say it shouldn’t be tried, they just don’t understand our business.”

But Rubino’s lawyer, Perlman, said he would have no problem defending another case, even with Raabe as a witness.

Rubino said he was disappointed that Capizzi was pursuing a retrial, but he has already started planning his defense.

On Friday afternoon, three hours after the judge declared a mistrial, Rubino returned to an empty courtroom to cart away 20 storage boxes containing transcripts and other exhibits in the case.

Rubino plans to rest during the weekend but will begin to pore over evidence in earnest starting Monday.

“I’m tired and I’m not looking forward to a retrial,” Rubino said, “But I’m gonna win it the next time. I’m not going to slow down.”

Also contributing to this report were Times staff writers Michael G. Wagner and Anna Cekola and correspondents Jeff Kass and Shelby Grad.

* STANTON MAY BE OFF HOOK

D.A. concedes Stanton’s term may end before he’s tried. A14

* SEC ISSUES WARNING

Lawyer Jean M. Costanza gets notice of possible charges. A15

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

The Bankruptcy Bunch

With a mistrial in the trial of Ronald S. Rubino, the former Orange County budget director, here is an update about those charged in connection with the largest municipal bankruptcy in U.S. history:

Robert L. Citron: The only public official to admit any guilt in the county’s bankruptcy, he pleaded guilty to six felony counts of securities fraud and misappropriation of interest, diverting money from the investment pool he managed into the county treasury. Called as a prosecution witness in Rubino’s trial, Citron stunned the courtroom when he failed to implicate Rubino in the diversion scheme. A probation report has recommended no prison time for the former treasurer-tax collector, who is scheduled to be sentenced in November.

Matthew R. Raabe: Former assistant treasurer, he was indicted by the grand jury in May 1995 on the same six felony counts to which his former boss pleaded guilty and is scheduled for trial in January. Prosecutors hoped to use Raabe’s testimony against Rubino, but when Raabe declined to testify, citing his 5th Amendment right against self-incrimination, it hurt the government’s case.

Roger R. Stanton: The chairman of the Board of Supervisors, Stanton was accused last December by the grand jury of “willful misconduct” for failing “to safeguard the financial health of the county.” A Superior Court judge threw out one of the four civil accusations against Stanton, and the 4th District Court of Appeal is considering whether to throw out the remaining charges.

William G. Steiner: Supervisor charged by the grand jury with bankruptcy-related civil misconduct for failing to adequately supervise Citron and others in the county whose actions led to the massive investment losses. A Superior Court judge threw out one of the four accusations against Steiner, and the 4th District Court of Appeal is deciding whether to dismiss the remaining counts.

Steve E. Lewis: Auditor charged with willful misconduct because he “failed to make adequate inquiry, review, and ascertain the amount of revenues available for the repayment of the indebtedness” of the county at the time of the bankruptcy. All civil charges against Lewis have been stayed pending a ruling from the 4th District Court of Appeal.

Source: Times reports

Dollars for Defense

The Board of Supervisors has so far allocated $1.3 million in legal defense funds for four officials accused of misdeeds related to the county bankruptcy. The amounts:

Former County Budget Director Ronald S. Rubino: $500,000

Auditor-Controller Steve E. Lewis: $300,000

Supervisor William G. Steiner: $250,000

Board Chairman Roger R. Stanton: $250,000

Source: County of Orange