U.S. Is Expected to File Civil Charges Against Citron, Raabe, County

Federal securities regulators are expected to file civil charges today against Orange County, its former Treasurer-Tax Collector Robert L. Citron and his one-time top aide, Matthew Raabe, ending an extensive investigation into the worst municipal bankruptcy in U.S. history.

At the same time, the U.S. Securities and Exchange Commission is also expected to file settlements, which will not involve any financial penalties but will require an agreement by all three parties that they will not violate securities laws again.

The SEC has scheduled a press conference at its Los Angeles office for this morning, but officials declined to discuss the matters being announced. If the agency does indeed file suit against Orange County, it will mark the first time that the SEC, which regulates the stock and bond markets, has taken action against a county or municipality.

A well-placed source said that the County Board of Supervisors met in closed session Tuesday and authorized the settlement agreement. The source said the SEC will announce the settlements today. Another source, in Washington, also said the agency would announce the results of its probe today.

“I don’t think there will be any other individuals named other than Citron and Raabe,” said the source, who spoke on condition of anonymity.

The pending settlements have come to light in recent weeks as those familiar with the SEC investigation revealed that the agency had decided against seeking any criminal investigations of county officials. It also ruled out seeking fines from Raabe, Citron or the supervisors, who lack the ability to pay substantial fines.

Raabe’s attorney, Gary Pohlson, said last week that his client won’t admit any wrongdoing under the terms of his settlement. “We’re just agreeing to an injunction that he will not violate any laws” in the future, Pohlson said.

Citron pleaded guilty last April to six felony counts of securities fraud and misappropriation of funds while managing an investment pool for the county and dozens of other public entities. The pool, overloaded with borrowings on risky securities, lost $1.64 billion and sent the county into bankruptcy in December 1994.

Citron is scheduled to be sentenced next month.

Raabe, who was assistant treasurer, still faces six felony charges of fraud and misrepresentation in connection with the bankruptcy. He is charged with helping Citron illegally skim millions of dollars in interest from accounts of other public agencies.

The criminal charges and civil actions don’t accuse anyone of using funds for personal gain, but rather allege that funds were used to cover losses from bad investments.

Times staff writers Matt Lait and Debora Vrana and the Associated Press contributed to this report.