Former O.C. Treasurer Is Freed Early

Later today, Robert L. Citron will probably climb into his 1994 Chrysler New Yorker with the license plate “LOV USC” and drive off into Orange County history.

A free man after serving two-thirds of his one-year sentence, 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 nights at home. That part of his debt to society will have been repaid for his conviction on charges of misusing public funds and securities law violations.

But there’s also the matter of a $100,000 fine.

The Orange County Probation Department initially said the county’s 2.5 million residents, the victims of Citron’s crimes, had no right to know whether he has paid it, department spokesman Rod Speer said.

“We’re really bad on giving out this kind of information,” said Speer, expressing concern that such disclosures might violate a defendant’s privacy rights.

After Los Angeles County Superior Court Judge Stephen J. Czuleger intervened, however, the probation department disclosed that Citron is “up to date” on his $1,725 monthly payments. He has made 10 so far, and has nearly four more years of payments.

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

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

It will take a generation and a half 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 last payment won’t be until 2027.

“We’re spending it and getting nothing for it but Bob Citron’s pipe dream,” said county Clerk-Recorder Gary Granville, a longtime friend who was left somewhat embittered by Citron’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. It was a nectar to him.”

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

Even today, his defenders point to the number of times Orange County outperformed the more conservatively managed state of California’s 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 its elected 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--not even half the amount the county ultimately lost--did not become clear until months after Orange County’s bankruptcy.

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

By gambling that interest rates would remain low, Citron earned more than $500 million in that period before the Federal Reserve Board began an unprecedented series of rate hikes that 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 steep bankruptcy debts.

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 J.W. Moorlach, the current county treasurer 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-Orange County Transit Assn. chief Stan Oftelie, a strong supporter of Citron at the time, urged investors not to panic or pull their money out.

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

But Oftelie said he was disturbed to learn that Citron had skimmed interest earnings from other pool participants into a county account--one of the six felonies to which he pleaded guilty. He used the money to fill gaps in the county’s general fund budget.

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

Because he pleaded guilty four months after the bankruptcy and has spent considerable time since testifying in courtrooms and giving depositions, Citron received a one-year jail sentence. He had faced a maximum 14-year prison term.

“It’s certainly been insufficient, the punishment that Bob Citron has received,” said Bruce Whitaker of the Committees of Correspondence, a watchdog group 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,” Moorlach said. “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.”