Closing Arguments Give Divergent Views of Raabe

Prosecutors and defense attorneys took turns Tuesday painting different pictures of the role former Assistant Treasurer Matthew R. Raabe played in a scheme to steal nearly $90 million in interest belonging to investors in Orange County’s ill-fated investment pool.

In her closing arguments, Assistant Dist. Atty. Jan J. Nolan told jurors that there was little doubt that Raabe masterminded the diversion scheme, citing a litany of documents, tape-recordings and testimony presented during the trial.

Raabe, who is charged with five felony counts involving misappropriation of public funds and securities law violations, diverted the money with former County Treasurer Robert Citron’s approval to plug a large shortfall in the county’s budget during 1993, the prosecutor said.

Nolan said Raabe and Citron wanted to be “heroes to everybody” by “taking from the rich and giving to the poor.”

Raabe, she said, had a another purpose: to hide the fact that Citron was earning double-digit interest rates, which would have tipped outside investors to the treasurer’s risky investment strategy.

Money from a pool of investors that included school districts, sewer and water works, city funds and other institutions went into a “gaping hole” in the general fund, she said.

“We’ll probably never know how many schoolbooks were never bought, how many school repairs not carried out,” Nolan said.

Raabe’s attorneys were scheduled to sum up the defense case Tuesday afternoon. If convicted, he faces up to 14 years in state prison and $10 million in fines.

Raabe’s lawyers called only six witnesses and presented their entire case in a day. Defense witnesses described him as a hard-working employee who toiled in Citron’s shadow.

Citron pleaded guilty to identical charges and was sentenced to a one-year work release term at the county jail.

Raabe has maintained that he never fully understood the complicated dealings that led to the nation’s biggest municipal bankruptcy.

Nolan disputed the defense portrayal of Raabe as a hapless subordinate to Citron.

“Mr. Raabe is probably the smartest man over at that treasurer’s office at that time,” she said, referring to 1993 and 1994.

He never intended to steal money for his own use, Nolan admitted at the outset of her summation. But the diversions were illegal anyway, she said.

“The bottom line is, it doesn’t matter,” Nolan said. “All you’ve got to do [to be guilty] is commit the act.”

Nolan said Raabe kept a spreadsheet of his diversions. He didn’t want the schools and others to know their money was tied up in risky securities earning unusually high yields, she said.

“It was all based on his calculations,” Nolan said.

Raabe, 40, sat with his attorneys as Nolan produced oversized charts showing what the investors should have earned and what Raabe allegedly told them about.

“There it is, ladies and gentlemen. He accomplished that,” she said, pointing to a chart. Raabe not only “stabilized” interest rates, but “he has succeeded in giving the county general fund 88.5 million bucks,” she said.

The county asked for federal bankruptcy protection in December 1994, revealing that it had lost $1.64 billion in risky securities deals arranged by the treasurer’s office.

Orange County returned to solvency last summer after taking on 30 years worth of debt.

Immediately after the bankruptcy, Raabe was portrayed as a whistle-blower who exposed the risky deals and tried to reassure investors.

However, he was fired in a housecleaning Feb. 24, 1995, and his life began a downward spiral. He was declared indigent, and he lost his driver’s license after leading police on a chase through a mall parking lot.