SANTA ANA — Former Assistant Treasurer Matthew R. Raabe was handed a stinging three-year prison term Friday for his role in Orange County's 1994 financial collapse, making him the only person sent to prison for crimes arising from the largest governmental bankruptcy in U.S. history.
Rejecting a recommendation by state prison authorities that Raabe be sentenced to probation and community service, Superior Court Judge Everett W. Dickey said he wanted to send a message to public officials that they would go to prison if they abused their positions.
"When you handle public money, you are held to a higher standard than a businessperson with private funds," Dickey told Raabe, who sat erect as his sentence was read.
Some of Raabe's supporters, including relatives and friends, appeared stunned by the sentence. Others sobbed softly after the punishment was announced.
The judge said he had no doubt that Raabe helped craft a nefarious scheme to conceal former Treasurer Robert L. Citron's risky but enormously lucrative investment strategy by siphoning nearly $90 million in interest earnings from the county-run investment pool.
Citron's high-flying Wall Street investments began taking a nose dive when interest rates started climbing in 1994, and the exotic securities he had purchased lost $1.64 billion in value, prompting the county to file for bankruptcy.
Raabe, who did not testify at his trial, read Friday from a prepared statement, expressing remorse for not being "more sensitive" and "more diligent" in overseeing the manner in which interest earnings were allocated to nearly 200 cities, schools and special districts with deposits in the county-run pool.
"I was not as careful as I should have been and for that I'm truly sorry," said Raabe, who insisted he never intended to break any laws.
He apologized for his "lack of judgment," saying, "I wish I could undo it. I hope some day [Orange County residents] will ultimately find it in their hearts to forgive me."
The three-year prison sentence fell almost midway between the probation recommendation of the state Department of Corrections and the eight-years incarceration sought by the district attorney.
"I believe a short state prison sentence achieves the objective of letting other public officials who mishandle public money know that they can go to prison," Dickey said.
The judge also told Raabe, a 41-year-old certified public accountant, that he could not benefit from the same leniency shown Citron, who pleaded guilty only a few months after the county's bankruptcy filing and put himself on the mercy of the court.
Unlike Raabe, who will serve his term in a state prison, Citron received a one-year jail sentence that he is fulfilling through a program that allows him to work in the county jail commissary during the day and spend his nights at home. But Citron was fined $100,000; Raabe's fine was set at $10,000.
Dickey allowed Raabe to remain free on $25,000 bail pending an appeal.
Gary Pohlson, a Laguna Hills attorney being paid more than $1 million from a fund for defense of the indigent to represent the former treasurer's aide, said he found it "ironic that Mr. Raabe received more punishment than anyone else. This [sentence] is really off base in light of how Mr. Citron was sentenced."
But Senior Deputy Dist. Atty. Matthew Anderson, who prosecuted Raabe, said that "to compare the two [sentences] is improper and misinformed. I thought Mr. Citron should have gone to prison. But he cooperated early on, and I didn't find him to be untruthful in the least."
Besides Citron, the only other official to face criminal charges, former Budget Director Ronald S. Rubino, was sentenced to two years probation and community service after agreeing to plead no contest to violating a public records law.
Rubino's attorneys worked out the plea bargain with Orange County Dist. Atty. Michael R. Capizzi after the former budget director's trial on misappropriation charges ended with a jury deadlocked 9 to 3 in favor of acquittal.
An appeals court threw out the charges that Capizzi brought against Supervisors William G. Steiner and Roger R. Stanton, who were accused of willful misconduct in office for failing to adequately supervise Citron's operations and prevent the bankruptcy. A similar accusation is pending against Auditor-Controller Steve E. Lewis, who faces removal from office, but no fines or incarceration, if convicted.
Earlier this year, Capizzi accepted a $30-million settlement from Merrill Lynch & Co., the brokerage that the county blames for selling Citron inappropriately risky securities, in return for dropping a criminal inquiry into the firm's conduct.
During the last few weeks, the judge had been presented with a report from Chino prison officials that found Raabe a solid candidate for probation. Dickey was also bombarded with pleas for leniency in 115 letters from the former official's friends and relatives.