Emergency Meeting on Fund Today : Finance: Orange County supervisors plan special session about imperiled investment portfolio.

Scrambling for a recovery strategy after learning that Orange County’s investment portfolio has lost $1.5 billion in value this year, officials spent Sunday in a series of special briefing sessions, and the county Board of Supervisors called an emergency meeting for today.

The crisis was triggered by Thursday’s disclosure that risky financial maneuvers had cost the investment fund the equivalent of 20% of the money put in by various government agencies.

Today will be critical as the financial markets, closed for the weekend, re-evaluate the fund.

While city and county officials held strategy sessions Sunday, some Republican activists began calling for the ouster of Treasurer Robert L. Citron, the only elected Democrat in the county government.

And some investors in the fund expressed dismay on learning that a special guarantee was given to three school districts and the Orange County Board of Education, which borrowed a total of $200 million for the sole purpose of reaping profits through Citron’s investment pool.

The special arrangement “was wrong in my mind,” said Andrew Czorny, treasurer for the Orange County Water District, which has $87 million in the pool. Citron “was putting potential returns of other participants in the county at risk. . . . We experienced losses because of this side deal.”

Supervisor Roger R. Stanton, acknowledging that some of his fellow Republicans are calling for Citron to step down, said he would not pass judgment “until I get a further briefing on how bad this situation is.” But if Citron’s resignation “would facilitate a speedy resolution of this problem, I am not going to stand in his way.”

Those who know Citron, however, describe him as a fighter who is not likely to walk away, especially if he sees a possibility for financial recovery.

Assistant Treasurer Matthew Raabe, designated as the county’s spokesman on the investment fund crisis, could not be reached for comment Sunday. County Counsel Terry C. Andrus and County Administrative Officer Ernie Schneider did not return phone calls.

Citron, who managed the nearly $20-billion investment fund, would not speak with reporters.

“Everything is going nuts right now,” said Tustin Councilman Jeff Thomas, a longtime foe of Citron. The situation, he said, “is like a bunch of cockroaches going for cover now that the lights have been turned on.”

While county officials worked on damage control, longtime Citron critics said they are considering a recall campaign. The issue was a topic at political gatherings Saturday, including a Christmas party hosted by state Assemblyman Gil Ferguson (R-Newport Beach) and a fund-raiser for presidential hopeful U.S. Sen. Phil Gramm (R-Texas), several GOP activists said.

But County Supervisor Harriett M. Wieder said the response to the investment fund loss should not be a political issue. “I think we ought to stop this partisan bickering,” she said. “Scapegoating is no answer.”

Among actions to be discussed at today’s meeting, supervisors said, is whether to form an oversight committee of the pool’s largest investors, who would be consulted before any major investment decisions are made.

One of the biggest investors, the Irvine Ranch Water District, has said it will withdraw its remaining $300 million from the fund this month unless a committee of the top four investors is given full disclosure of the portfolio’s activity and the opportunity to approve strategies for recovery.

Some investors expressed concern about the special deal that Citron apparently made with the four school groups in June, 1993.

All 31 school districts in the county have money invested in the pool, including about $350 million in borrowed funds to cover operating expenses while the districts await tax receipts.

But four agencies--the Newport-Mesa Unified School District, Irvine Unified School District, North Orange County Community College District and Orange County Department of Education--borrowed an extra $200 million and invested it through Citron, armed with oral and written guarantees that the overall pool would back their investment so none of it would be at risk.

The agencies agreed to the unconventional arrangement in an attempt to raise badly needed cash as state funding for education dwindled, and their investment earned them about $1 million each in the first year.

Other investors wondered why they were not offered the same terms.

“It’s rather upsetting,” said David Watson, treasurer of Huntington Beach, which has $43.5 million in the county fund. “If you are in a pool, you should all be under the same circumstances.’

Thomas R. Mueller, a securities attorney who specializes in public finance, said the idea of backing some investors’ risk with other investors’ money “raises some questions.”

“I don’t think I can tell you on a Sunday afternoon that it’s illegal, but it raises questions as to whether the treasurer acted within his authority in granting preferential treatment,” said Mueller, with the Los Angeles office of law firm Jones, Day, Reavis and Pogue. “I just find it somewhat astonishing that he finds that authority and thinks it’s prudent to make that guarantee.”

Times staff writers Greg Hernandez, Ross Kerber and Chris Woodyard contributed to this story.