Citron Sentence Ending, With Good Behavior

Today, former Treasurer-Tax Collector Robert L. Citron will climb into his 1994 Chrysler New Yorker with license plate LOVUSC and drive off into Orange County history.

He will be a free man after serving only two-thirds of his one-year sentence, but Citron’s name will nonetheless remain forever shackled to the largest governmental bankruptcy of all time.

His jail sentence was shortened by 120 days for good behavior in a sheriff’s work-release program that allowed the 72-year-old former Orange County treasurer to spend his nights at home. When he leaves his job with the county jail this evening, that part of his debt to society will have been repaid.

But there’s also the matter of a $100,000 fine, which isn’t being paid quite so expeditiously.

The Orange County Probation Department initially insisted that the county’s 2 1/2 million residents, the victims of Citron’s crimes, had no right to know whether he has paid it, said department spokesman Rod Speer.

“We’re really bad on giving out this kind of information,” said Speer, indicating that the department was concerned that such disclosures might violate a criminal’s privacy rights.

After Superior Court Judge Stephen J. Czuleger intervened, however, the department disclosed that Citron is “up to date” on his $1,725 monthly payments. He has made 10 of them so far, and has almost four years of payments yet to go.

As Citron returns home for good to the things he loves the most--his wife, Terry, his dog and the gridiron exploits of his college alma mater--he leaves a painful and expensive legacy that will be felt in Orange County well into the next century.

His lawyer, David W. Wiechert, said, “This is not the end of Bob’s personal commitment or legal responsibility to repay society. Bob will continue to perform community service, make restitution payments and cooperate with parties investigating the bankruptcy.

“He is very thankful that his health will permit him to enjoy some twilight years with Terry.”

It will take a generation and a half for Orange County taxpayers to repay the $1.64 billion Citron lost speculating on some of the riskiest Wall Street securities ever devised.

From last year until the year 2000, the county must devote $76 million a year--roughly one fourth of its discretionary spending--for interest and principal payments on the nearly $1 billion worth of bonds it issued to extricate itself from the calamity caused by Citron’s reckless investment strategy.

Beyond 2000, the payments rise to $88 million a year and, although the amount drops in 2012, the very last payment won’t be made until the year 2027.

“We’re spending it and getting nothing for it but Bob Citron’s pipe dream,” said County Clerk-Recorder Gary L. Granville, a longtime friend who was left somewhat embittered by the former treasurer’s betrayal of the public’s trust. “The devastation was too great in too many people’s lives,” he said.

“We can’t say he did this for personal gain, but I think Bob did enjoy that lofty status he once had, and he did cling to it preciously,” said Granville. “It was a nectar to him.

“I think the mystique [that Citron enjoyed] was cultivated and somewhat cherished.”

Indeed, until the stunning revelations of Citron’s trading losses in December 1994, the quirky treasurer--whose passions include Chryslers, psychic phenomena, the USC Trojans and homeopathic remedies--had openly boasted for years of his investment prowess.

Even today, his defenders point to the number of times Orange County outperformed the more conservatively managed California state investment pool.

Irvine lawyer Greg Sanders, a neighbor and friend, said Citron “made the county a lot of money over the years, but I don’t hear anyone praising Bob for that.”

The county earned $3.6 billion in interest over Citron’s 22-year run as treasurer. Had the county and the 200 various schools, agencies and special districts socked that money away in the state’s pool, they would have earned about $2.9 billion.

“Our very high investment [returns are] obtained by using investment strategies not used by the majority of other investment funds,” Citron once told county supervisors in an annual report.

But just how much risk he was taking to earn that extra $700 million to $800 million over two decades--less than half of what the county ultimately lost--did not become clear until months after the bankruptcy.

From 1991 to 1994, the amount of money deposited in the county’s investment pool rose from $2.9 billion to $7.2 billion. Citron then borrowed twice that much in order to invest nearly $21 billion.

By gambling that interest rates would remain low, Citron was able to earn more than $500 million in that period before the Federal Reserve Board began an unprecedented series of rate hikes that wiped out all of his earnings and left the county $1.64 billion in debt.

The county’s obligation to repay those losses, coupled with the enduring costs of borrowing money to do that, has permanently altered the shape of county government.

Gary Burton, the county’s chief financial officer, said the county has “pent-up” spending needs it simply can’t afford to satisfy because of its steep bankruptcy debts.

There’s that new $50-million to $60-million courthouse for fast-growing South County, for example. And some $13 million to $15 million required for much-needed improvements to Juvenile Hall, and a similar amount that’s needed to meet annual operating expenses there.

“One of the first things cut back on was maintenance,” said Burton, who joined the county after working at the Orange County Transportation Authority. There, because funds had to be diverted to repay the bankruptcy debt, existing “bus routes are going to remain [frozen] for the next 20 years.”

How Citron sank the investment pool without county supervisors and auditors discovering his risky ways is still a matter of debate.

“There was just this unbelievable faith and reliance on Mr. Citron. A blind faith, really,” said John M.W. Moorlach, the current county treasurer and the man who tried to warn that Citron was headed toward disaster nine months before the bankruptcy.

“I was always criticized for screaming ‘fire’ in a crowded theater. Yeah, I did that, but there was a foot of gasoline on the theater floor at the time.”

In late November 1994, as nervous county officials scrambled to understand the gravity of the situation, then-OCTA chief Stan Oftelie, a strong supporter of Citron at the time, urged investors not to panic or pull their money out.

Looking back, Oftelie said: “I have real mixed feelings. Bob Citron was completely dedicated to the county and genuinely wanted to do the right thing.”

But Oftelie said he was “startled” and “disturbed” to learn after the bankruptcy that Citron had skimmed interest earnings from other pool participants into a county account--one of the six felonies to which he pleaded guilty.

“I think Bob knew what he did was wrong, admitted it quickly, and it must have tormented him a great deal,” Oftelie added.

Because he pleaded guilty four months after the bankruptcy and has spent much of his time since testifying in courtrooms and giving depositions, Citron received only a one-year jail sentence.

“It’s certainly been insufficient, the punishment that Bob Citron has received,” said Bruce Whitaker, a spokesman for the Committees of Correspondence, the watchdog group strongly critical of the county officials who allowed the bankruptcy to happen. “The fact he’s getting off after only one year, that’s a little bit grating.”

Whether he will be forgiven over time remains to be seen.

“I certainly hope he will,” said Moorlach. “But when we think of Citron, we’ll think of how this great county became an international embarrassment. Bankruptcy and Orange County are now synonymous, and that’s a tragic legacy to leave.”