Lips Unsealed, Bankruptcy Truth Is Told

The state Supreme Court has decided Orange County citizens don’t need to know how their public officials and Merrill Lynch blew more than $1.6 billion and sent the county into bankruptcy in 1994.

Too bad. The public will never learn about the Zebra, the Whistling Woman or the man everyone thought was Mike Capizzi. Or how what happened on the Ferris wheel in the Fun Zone changed everything.

Quick background: The county grand jury investigation into Merrill Lynch’s activities ended in 1997 when the company and the Orange County district attorney’s office agreed to a $30-million settlement.

A district court judge, however, ruled it was in the public interest to release several thousand pages of grand jury testimony already on the record.

Last week, the Supreme Court squelched that, ruling that because no one was indicted the transcripts should remain sealed.

They’re happy, I guess, with people thinking that county Treasurer Robert Citron simply made some bad financial decisions and that then-Dist. Atty. Capizzi settled because he wanted voters thinking he’d beaten Merrill Lynch.

What really happened is far more sinister. . . .

For years, Citron did well with the county’s investments. So well, in fact, that the Board of Supervisors paid no attention to what he was doing.

That was not lost on Merrill Lynch’s top people. They liked Orange County’s money, but they thought Citron was investing too conservatively.

One night in the spring of 1994, Citron’s wife sent him to the store for some grapes, fish sticks and a head of lettuce. He never got there.

Oh, someone returned to the Citron home that night. It just wasn’t Bob Citron.

It was Harry Lee Osgood, a former CIA operative and longtime “go-to guy” for Merrill. He had earned his stripes so many times over he was nicknamed “the Zebra.”

After months of rehearsal in 1993, Osgood had Citron’s mannerisms down pat. On March 4, 1994, he became Bob Citron. Citron colleagues who later said their boss changed in recent years had no idea how right they were.

With their man on the inside, Merrill Lynch cut loose. With the supervisors ignorant of the markets, the Zebra had a free hand.

Orange County money poured into Merrill Lynch. The market downturn late in 1994 caught the firm by surprise, but it wasn’t worried.

Merrill overlooked one thing: it couldn’t anticipate the Board of Supervisors panicking and declaring bankruptcy, which it did in December 1994.

Eventually, the grand jury began investigating. With a disaster in the making, Merrill Lynch knew it had to “get” Mike Capizzi.

It tried the easy way. It arranged for corporate spy Mattie Harrigan to channel hundreds of thousands of dollars to Capizzi over a period of months in early 1997, in exchange for him not directing the grand jury toward an indictment of the firm. The exchanges occurred in a “safe” place: on the Ferris wheel at the Balboa Fun Zone.

Harrigan was beautiful but quirky. Whenever someone said something she found unusual, she let out a low whistle. At once annoying and endearing, it earned her the nickname, “the Whistling Woman.”

Capizzi was in her clutches. Or so Merrill Lynch thought.

From the start, Capizzi had secretly taped all conversations with the Whistling Woman. He planned to bring the financial giant to its knees and become the state’s next attorney general in 1998. And, later, governor.

One Saturday morning, fate intervened. The Ferris wheel engine stalled and, as Capizzi and the Whistling Woman were trapped upside down in their seats, a segment of Capizzi’s body-wiring apparatus spilled from his shirt.

He hoped the Whistling Woman hadn’t seen it.

Two weeks later, Capizzi went shopping at a Miller’s Outpost, needing some dungarees for an ad campaign photo shoot in Northern California.

He went into a changing room and put his right leg into the pant. He never got to lift the left. Nor did he ever see what hit him.

You know the rest. The new Capizzi, another crafty double, settled the case for a paltry sum. Merrill is back in the saddle again.

Capizzi’s campaign for attorney general--what a surprise--flopped. And as for the real Capizzi and Citron . . . they’re still missing. Dead, maybe--we’ll never know.

Trust me. My theory is solid.

And with the transcript under lock and key and likely to be destroyed, who can prove me wrong?

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Dana Parsons’ column appears Wednesday, Friday and Sunday.

Readers may reach Parsons by calling (714) 966-7821, by writing to him at The Times Orange County Edition, 1375 Sunflower Ave., Costa Mesa, CA 92626, or by e-mail at dana.parsons@latimes.com.