Former Orange County Official’s Lawyers Wrap Up Case

SANTA ANA —  Matthew R. Raabe, the former assistant treasurer and chief spokesman for Orange County’s ill-fated investment pool, chose to remain silent at his trial on interest-skimming and securities law violations Monday, opting not to testify in his own defense.

Presenting a whirlwind defense, Raabe’s attorneys called only six witnesses and wrapped up their entire case in one day. The prosecution took more than two weeks to present its case against Raabe.

Most defense witnesses described Raabe as a dedicated and hard-working government employee who labored in the shadow of a domineering boss.

Defense attorneys also sought to use their witnesses to hammer home the contention that the county ran the investment pool like a bank and enjoyed the right to set interest rates as it pleased.

Raabe, 40, is charged with five felony counts of misappropriating public funds and violating securities laws for allegedly lying to investors about the pool’s soundness.

Prosecutors contend that Raabe masterminded a scheme to skim for county use nearly $90 million in interest earnings belonging to 187 cities, school districts and agencies that had money in the pool.

Authorities allege that Raabe diverted the money to a county treasury account to conceal from outside investors the highly risky--and sometimes highly lucrative--investment strategy that former Treasurer Robert L. Citron--Raabe’s boss--pursued in managing the pool’s $7-billion portfolio.

During a brief opening statement Monday, defense attorney Gary Pohlson told jurors that the former assistant treasurer would not testify. “You are not going to hear from Mr. Raabe,” Pohlson told the jury.

Pohlson told jurors that they had already heard most of the defense evidence through his cross examination of 22 prosecution witnesses.

Under law, Raabe is not required to testify in his own defense and prosecutors are barred from pointing out to the jury that the defendant opted to remain silent.

Among the defense witnesses was Ernie Schneider, the county’s former chief administrative officer, who testified that in the days leading to the county’s bankruptcy, Raabe expressed concern about the manner in which Citron was investing the money of depositors. At that time, Citron was engaged in leveraging investments in the county’s investment pool, which was rapidly beginning to experience severe cash-flow problems, Schneider said.

“Mr. Citron wasn’t doing what Matt thought was appropriate,” Schneider said.

Schneider recalled the hectic weeks preceding the county’s declaration of bankruptcy Dec. 6, 1994, and how a New York firm hired by the county to value the Citron-run pool had determined that it had suffered “a paper loss” of an estimated $1.5 billion.

Schneider and other witnesses described Raabe as a government official who worked long hours and as a man who had an impeccable reputation among his peers.

Joy Cubbin, a former accountant in the treasurer’s office, said Raabe “worked like a dog.”

On Monday, the defense continued to portray Citron as a domineering boss who called the shots on even the most minor matters in the treasurer’s office.

Cubbin testified that office employees “didn’t dare” pick out a fabric or wood finish for furnishings without Citron’s approval.

If convicted, Raabe faces up to 14 years in state prison and $10 million in fines.

Lawyers in the case will hash out jury instructions over the next few days. Jurors will return next Tuesday to hear closing arguments before beginning their deliberations.