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ORANGE COUNTY IN BANKRUPTCY : Officials Say Citron Resisted Plans for Oversight Committee : Investments: Ex-treasurer thought county panel could not properly represent the varied investors, and the group would slow his work in the fast-paced market.

December 29, 1994|DAN WEIKEL | TIMES STAFF WRITER

SANTA ANA — An oversight committee that was supposed to scrutinize the practices of now-departed county Treasurer-Tax Collector Robert L. Citron never held an official meeting because Citron did not like the concept and refused to participate, county officials say.

Orange County Auditor-Controller Steve E. Lewis proposed in a 1987 county audit that a broad-based panel--including the county's top administrator and a member of the Board of Supervisors--should monitor Citron's operations on a regular basis.

But a member of the auditor's office who was close to the situation said Citron opposed having a committee and repeatedly frustrated efforts by Lewis and others to convene the group on an informal basis with him to try the idea out.

"Citron said no," said the official, who requested anonymity. "They went ahead informally to show Citron that they would not usurp him. But you could tell it would not work. There was no interaction, and it just died a quiet death."

The fate of the committee is similar to what happened to a string of Orange County Grand Jury reports and other county audits that formed a crescendo of warnings about Citron's operation during the past 13 years.

Whether the oversight committee could have avoided the disastrous investment strategy that led to the nation's largest municipal bankruptcy, no one will ever know. But county sources said it might have added a valuable check in an office that has traditionally operated with little oversight.

"There was the potential for more scrutiny," said the auditor's official. "It is hard to say what might have happened. It could have been an active committee and gotten involved in the operation. Things might have been different."

Neither Citron nor his attorney could be reached for comment. He has maintained in the past that oversight was unnecessary and would hamper the treasurer's ability to make investment decisions in a fast-paced market.

County auditors recommended the oversight committee in an Oct. 20, 1987, report, which disclosed their findings from an examination of the treasurer's procedures and accounting practices for the entire year of 1986.

The audit detailed a list of management problems, including a lack of written procedures, incomplete record-keeping, and the continual failure of Citron to report the office's investment policies to the auditor-controller as required by the Board of Supervisors.

The 1987 audit by Lewis' office took note of a 1985 Orange County Grand Jury report that stated that there was little or no review of Citron's investment activity by the County Board of Supervisors, the county administrative officer or the auditor-controller.

Although the audit stated that the treasurer had obtained good yields on his investments, auditors stated it would be prudent for the county administrative officer and the Board of Supervisors to become more involved in the county's investment program.

"The investment function has a tremendous impact on the funding of the county's entire operation and added participation of the board, and the CAO should help ensure that the investment strategies and policies best serve the county," the audit stated.

When the investment portfolio collapsed, the county of Orange had close to $3 billion in the $7.8-billion treasurer's pool--the largest single contributor of the 187 governmental entities with money in the fund.

Lewis' auditors envisioned a panel that would assure a long-term consistent investment strategy by setting policy and analyzing investment returns. It was to consist of the treasurer, assistant treasurer, auditor-controller, the county administrative officer, a member of the Board of Supervisors as well as a county department head or a knowledgeable member of the public.

In his official response dated Nov. 20, 1987, Citron argued against the audit's recommendation. He said the majority of investment funds came from districts and agencies unassociated with county government, hence county officials could not properly represent those interests on the committee.

Citron maintained that the panel would be burdensome because investment decisions must be made on a daily basis in response to ever-changing markets and opportunities.

"Establishing a committee to perform the investment function not only removes the investing of public funds from those most capable to perform this important task, it would also make the county unable to react quickly to investment opportunities, which could materially affect interest earnings," Citron said.

He concluded by saying that no other county in California, including Los Angeles County, which had a $4-billion treasury at the time, uses an oversight committee.

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