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 punished with 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 in his chair as his sentence was pronounced.
Some of Raabe's supporters, including relatives and friends, appeared stunned by the sentence. Others sobbed softly after the punishment was read.
The judge said he had no doubt that Raabe helped craft a nefarious scheme to conceal longtime Treasurer-Tax Collector Robert L. Citron's risky but enormously lucrative investment strategy, by siphoning nearly $90 million in excessive interest earnings from the county-run investment pool.
Raabe feared that if the nearly 200 cities, schools and special districts with deposits in the county-run pool were paid their actual earnings, they would soon figure out that Citron was gambling with their money and perhaps withdraw their funds.
Citron's high-flying Wall Street investments started taking a nose dive when interest rates began climbing in 1994, and the exotic securities he had purchased lost $1.64 billion in value, prompting the county to file for bankruptcy in December that year.
Raabe, who did not testify at his own trial, read from a prepared statement, expressing remorse for not being "more sensitive" and "more diligent" in overseeing the manner in which interest was allocated to the pool investors.
"I was not as careful as I should have been and for that I'm truly sorry," said Raabe, who insisted that he never intended to break any laws.
He apologized for "my lack of judgment," saying, "I wish I could undo it. I hope some day [the residents of Orange County] will ultimately find it in their hearts to forgive me."
Dickey's three-year prison sentence fell almost midway between the probation recommendation of the California Department of Corrections and the eight years of confinement 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 threw himself on the mercy of the court.
Unlike Raabe, who will serve his sentence in a state prison, Citron received a one-year jail term that he is serving in a program that allows him to work in the county jail commissary during the day and to spend his nights at home. But Citron was fined $100,000, while Raabe's fine was set at $10,000.
Dickey allowed Raabe to remain free on $25,000 bail pending an appeal of his conviction to the 4th District Court of Appeal in Santa Ana.
Dressed in a navy blue suit and wearing a pained expression, Raabe declined to comment on the judge's sentence.
Gary M. Pohlson, a Laguna Hills attorney being paid more than $1 million from an indigent defense fund to represent Raabe, 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."
Although the judge did not sentence Raabe to the eight-year prison term prosecutors had sought, Anderson nonetheless said "this was a just resolution" of the matter.
Raabe's other attorney, Richard Schwartzberg, said his client was expecting the worst when he entered court. "There is always a certain fatalistic feeling in these situations," Schwartzberg said.
Anderson's boss, Dist. Atty. Michael R. Capizzi trumpeted the punishment as a fitting end to his office's 30-month criminal investigation.
"We think justice has been served by the sentence," said Capizzi, an all-but-declared candidate for state attorney general in 1998.
Raabe's prison sentence represents Capizzi's biggest victory in his bankruptcy-related prosecutions.
Besides Citron, the only other official to face criminal charges, former county 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.