Trial of Raabe, Ex-Citron Aide, to Begin Today

Mastermind or scapegoat?

The outcome of The People vs. Matthew R. Raabe will hinge on that question.

When Raabe’s trial opens here today, a jury of six men and six women will hear sharply different depictions of the role he played more than two years ago in the Orange County treasurer’s office as the county careened toward the nation’s largest municipal bankruptcy.

Raabe, prosecutors contend, was among the architects of a nefarious scheme to conceal his boss’ exceedingly risky but sometimes enormously lucrative investment strategy, by skimming $100 million in excess interest earnings that might have alarmed the cities, schools and other government agencies that kept their savings in the county’s $7-billion municipal investment pool.

His defense attorneys, however, will portray Raabe as the unsuspecting underling who merely carried out the instructions of his boss, convicted Treasurer-Tax Collector Robert L. Citron.

If the prosecution’s view prevails, Raabe, who is so broke that his attorneys are being paid with taxpayers’ money, faces the possibility of $10 million in fines he could hardly pay, and 14 years in prison.

And any prison sentence for Raabe would be the first--as well as the last--meted out to any of the officials caught up in a $2.5-million bankruptcy investigation conducted by the office of Dist. Atty. Michael R. Capizzi. Another $2 million in taxpayers’ money has gone to hiring defense attorneys for those charged.

The other two officials who faced the possibility of prison, Citron and former Budget Director Ronald S. Rubino, have both avoided spending any time behind bars. Citron was sentenced to a year in jail but is serving the term in a work-release program that lets him spend his nights at home. Rubino got two years of unsupervised probation and must perform 100 hours of community service.

Citron pleaded guilty last year to the same six felony counts that Raabe faces: misappropriation of public funds and lying to investors in the county pool.

Rubino pleaded no contest to one count of falsifying public records. Prosecutors were forced to work out a plea bargain with Rubino after his trial last September ended with the jury deadlocked 9 to 3 in favor of acquittal.

Robert Pugsley, a professor at Southwestern University School of Law, opines that Capizzi’s prosecutors “will be looking for a more hard-hitting result this time.”

The trial that begins today is a far cry from the future that Iowa native Raabe envisioned as a child when he moved to Orange County with his family in 1960. Raabe appeared to be on the fast track when he got a job with the county’s auditor-controller in 1984, the year he graduated from Cal State Fullerton with a degree in business administration.

He quickly worked his way up in the bureaucracy at the auditor-controller’s office, moving a few years later to the office of the treasurer-tax collector. By the time he became assistant treasurer, Raabe was widely viewed as the heir-apparent to Citron, the longest serving and best entrenched county official.

To many colleagues, Raabe already was the de facto treasurer. Because Citron had a speech impediment and shied away from public events, it was Raabe who gave the pitches to potential pool investors, assuring them that the county’s investment fund was a sound, safe place for their cash.

And when the investment pool suffered $1.64 billion in losses in December 1994, forcing the county into bankruptcy, it was to Raabe that desperate county officials turned for help in sorting out the financial mess.

When Citron was forced to resign on Dec. 4, 1994, Raabe was appointed by the Board of Supervisors to take Citron’s place. Only three months later, however, he was fired by then-Chief Executive Officer William J. Popejoy after the county’s outside financial advisors discovered the misappropriation of millions of dollars in interest belonging to pool investors.

In May 1995, Raabe was hit with a grand jury indictment charging him with multiple felonies: embezzlement for his part in the interest-skimming operation and violations of securities laws for misrepresentations he allegedly made to outside pool investors.

Since then, Raabe’s life has been a shambles. His lawyers say that at one time he was seeing a psychiatrist four times a week and has been taking medication for depression.

While Raabe’s attorneys have been plotting his defense, investigators for the district attorney have been stitching together their case against him.

Working from “the bunker,” a windowless chamber one floor beneath the County Courthouse, investigators have been poring over reams of documents to isolate Raabe’s role in the interest-diversion scheme.

Prosecutors secured the indictment against Raabe after several witnesses testified that he repeatedly misled investors about the soundness of their pooled investments while helping to skim some of their interest earnings into a county account.

Prosecutors have alleged that it was Raabe, a certified public accountant, who created new accounts to receive the stolen interest. Raabe devised the scheme, the prosecutors say, because he couldn’t tell investors about the high interest, fearing they would realize their money was being gambled on risky securities.

“Raabe could not tell [pool investors] what the true interest was because he was afraid there would be a run on the bank. So he knowingly lied to them,” said Assistant Dist. Atty. Jan J. Nolan when she asked county grand jurors to return an indictment against Raabe.

Prosecutors plan to call several of Raabe’s former colleagues to testify against him.

Among them is Joy Cubbin, a former senior accountant in the treasurer’s office, who told the grand jury that Raabe showed her how to make false interest entries, giving her an amount every month by which to adjust the pool’s interest earnings.

Prosecutors won’t comment on their trial strategy, but it is also likely that Citron will take the stand to confront his former assistant. At Rubino’s trial, Citron testified that he approved Raabe’s idea to transfer high earnings from the investment pool into a special county account, where it was used to earn tens of millions for the county general fund.

Some of the charges against Raabe alleged that he duped investors into putting their money in the county pool. Prosecutors are expected to call a parade of witnesses to testify about Raabe’s alleged misstatements.

Among them is Costa Mesa Finance Director Susan Temple, who said Raabe told her just two weeks before the Dec. 6 bankruptcy filing that the pool had $1 billion in cash. In reality, the pool had less than $400 million.

“I feel I was misled by Mr. Raabe because I asked him specific questions that I don’t believe he gave correct answers to,” Temple told the grand jury.

Raabe’s attorneys have kept their trial strategy a closely guarded secret but they consistently portray their client as a financial neophyte who was simply following Citron’s orders.

“Matt Raabe was doing what he was told. He had nothing to do with the investments or the policies of the office,” said Gary Pohlson, one of Raabe’s attorneys. “The only difference between him and other people in the office is that he is being prosecuted.”

In testimony before the grand jury, Raabe said he was simply following orders of Citron and Rubino to move the interest into a reserve account.

And Raabe said he “never told anybody anything about the investment fund that I knew to be untrue at the time.”

“As far as being a scapegoat . . . I think the fact that I was the spokesperson for the investment fund, and people suffered losses, I think it made me an easy target for people to say I lied to them,” Raabe told the grand jury. “It certainly makes it easy for some of those people to keep their jobs.”

Raabe’s trial will pit several respected county attorneys against each other.

Leading the prosecution team is Matthew Anderson, a former public defender who joined the district attorney’s office nearly nine years ago.

Anderson, who will be 40 next Monday, is known around the courthouse as a dogged and ethical prosecutor. When he worked in the child abuse unit five years ago, he persuaded a judge to sentence a convicted child molester to 136 years in state prison--the longest sentence in California history in a child-molestation case.

David Wiechert, who represented Citron, calls Anderson “one of the most reasonable people I know.”

Anderson will match wits with Pohlson, a well-connected Laguna Hills attorney who recently served as president of the Orange County Bar Assn. Pohlson relies heavily on his partner, Richard Schwartzberg, a former deputy public defender who is known for crafting brilliant legal arguments--especially on appeal.

Only recently, the California Supreme Court agreed with Schwartzberg, ruling that prosecutors could not use a vague elder-abuse law to charge one of his clients in her mother’s death.

Raabe’s trial is expected to last until May, but could be much shorter if Superior Court Judge Everett J. Dickey runs true to form.

With his silver hair and attentive demeanor, Dickey looks like someone who has been picked by Central Casting for the role.

Even though he worked for eight years in the district attorney’s office, Dickey is known as a middle-of-the-road jurist--and as one who has made many courageous decisions during his 27 years on the bench.

Last August, the judge reluctantly granted a new penalty trial for a convicted triple murderer, citing misconduct by a juror who sought spiritual advice while deliberating.

In 1995, Dickey was the object of a short-lived recall campaign inspired by the angry mother of a San Clemente murder victim, whose youthful attackers were sentenced to a youth facility instead of tougher state prison. Dickey said his sentence, which amounted to eight years at most, combined punishment with a chance or rehabilitation.

In the Raabe case, Dickey has already admonished jurors to focus on the charges against Raabe, not the county’s bankruptcy.

“Mr. Raabe is not accused of causing the county bankruptcy,” Dickey said during jury selection. “The subject of this trial will not be why the county went into bankruptcy or what caused it.”