Co-Workers Tell of Raabe’s Role in Diverting Interest

Three friends of former county Assistant Treasurer Matthew Raabe were questioned Wednesday about the role he played in diverting nearly $90 million in interest earnings from depositors in Orange County’s investment pool.

The three witnesses, who worked with Raabe in the treasurer’s office, were called by the prosecution, which is seeking to show that Raabe came up with the idea to steal money from other pool investors for the county’s benefit shortly after he became assistant treasurer, in April 1993.

One witness, Raymond Wells, was Raabe’s predecessor, while the other two, accountants Joy E. Cubbin and Veronica Deves-Aguilera, worked for him.

Raabe is charged with misappropriation of public funds for his alleged role in the interest-skimming operation and violations of securities laws for misrepresentations he allegedly made to outside pool investors.

He has denied the allegations, insisting that it was the idea of his boss, then-Treasurer Robert L. Citron, who pleaded guilty to the same five charges that Raabe faces and is serving a one-year jail sentence in a work-release program that lets him spend his nights at home.

In an attempt to show that the interest diversion began with Raabe, Deputy Dist. Atty. Matthew Anderson asked Wells to describe how interest earnings from the county-run investment pool were allocated to the investors.

Wells gave a detailed description, explaining that at one point the treasurer’s office decided to “spread” the earnings, or calculate interest over a quarterly period to avoid highs and lows in the interest rate paid to investors.

Both Cubbin and Deves-Aguilera testified that Raabe diverted some interest earnings from the investment pool to a county reserve account. The remaining earnings were distributed to the pool participants, they said.

The prosecution is contending that Raabe skimmed interest to hide Citron’s risky but sometimes lucrative investment strategy. Anderson said that cities, schools and other government agencies might have withdrawn their savings from the county’s $7-billion municipal investment pool had they known about the plan.

Cubbin and Deves-Aguilera said that Raabe showed them how to reduce the amount of dollars earned by the pool. No pool investors were informed about the “interest adjustments,” they said.

Under cross-examination by defense attorney Gary Pohlson, both Cubbin and Deves-Aguilera testified that they did not think they were doing anything illegal or improper when they calculated the interest rate.

Through his questioning, Pohlson attempted to show that the treasurer’s office had “smoothed” or “spread” interest for years--before Raabe took the job as assistant treasurer--and that the procedure was not deemed improper.

Pohlson also sought to use Raabe’s former co-workers as character witnesses. All three described themselves as friends, and Cubbin and Deves-Aguilera said that they still socialize with the defendant.

“He was admired by a lot of folks,” Deves-Aguilera said under cross-examination. Pool investors “trusted him. . . . He was an honest person.”

The trial continues today.