New Tack Taken by Raabe Defense

The defense in the trial of former assistant county treasurer Matthew R. Raabe contended for the first time Thursday that the county had the authority to determine the interest rate paid to depositors in its ill-fated investment pool.

The argument represents a new--and additional--line of defense for Raabe.

By arguing that former Treasurer-Tax Collector Robert L. Citron had the discretion to set interest rate earnings for pool investors, the defense is apparently contending that it was not illegal for the treasurer to decide to skim interest earnings from the pool and divert them to a reserve treasury account.

Citron has pleaded guilty to the interest-skimming charges and violations of securities laws. He is serving a one-year sentence in a work-release program.

Citron has fingered Raabe as architect of a scheme to divert $90 million in interest earnings from the investment pool to the county reserve account.

Raabe has insisted that Citron and former county Budget Director Ronald S. Rubino instructed him to divert excess interest earnings to the rainy-day account known as the Economic Uncertainty Fund.

Since the trial in Santa Ana began Monday, Raabe’s attorneys have pursued a second line of defense, contending that the county had a history of retaining pool investors’ interest earnings.

Assistant Dist. Atty. Matthew Anderson has called witnesses to testify that Raabe ordered county workers to skim interest into the Economic Uncertainty Fund before paying the remainder to pool investors. The prosecution is contending that Raabe skimmed interest to hide Citron’s risky investment strategy.