High-Stakes Negotiations Led to Citron’s Guilty Plea : Bankruptcy: Former official admitted lying and misappropriating funds, but won some key demands.

SANTA ANA — More than anything, Robert L. Citron wanted to stay out of jail.

He would admit to lying about the condition of Orange County’s investment pool to help peddle bonds, to misappropriating public funds, to falsifying documents--all to keep from landing behind bars. At least for now.

In a plea agreement reached Thursday, the former Orange County treasurer-tax collector appeared to lose everything and gain nothing. He implicated his faithful assistant treasurer. He subjected himself to fingerprinting. His booking photos was taken. At the age of 70, he exposed himself to a possible 14 years in prison--and a legacy of disgrace.

But the once-vaunted official got assurances of a few of the things he valued most--that his ultimate prison sentence will be determined by a judge outside Orange County, where he has been vilified, and that he will stay out of jail as long as he cooperates with the government’s criminal investigation.

“Here is a man who has been a pillar in the community,” said H. Dean Steward, a federal public defender. “The prospect of being put in prison at his age, I’m sure, put him in a desperate frame of mind.”

The prospects for a criminal case against Citron seemed strong as early as January, when it was discovered that his office had diverted about $80 million in interest earned by investment pool participants into county accounts.

But the mechanics of Thursday’s guilty plea came together only about three weeks ago, when Citron’s attorney, David W. Wiechert, contacted Assistant Dist. Atty. Wallace J. Wade and raised the issue, according to those involved in the negotiations.

The Orange County Grand Jury--meeting for weeks on the historic collapse into bankruptcy and issuing subpoenas to county employees--seemed poised to issue an indictment against Citron, possibly by mid-May, prosecutors told Wiechert.

“He said something about seeing news reports about witnesses appearing before the grand jury,” Wade said. “Dave knew we had a number of investigators on the case. The grand jury had been impaneled. He knew we were moving very quickly.”

Wiechert, Wade and Assistant Dist. Atty. Jan J. Nolan, head of the fraud unit, met April 11 at 10 a.m. Nolan recalled being surprised that Wiechert had come in as early as he did in the investigation.

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Seated in padded blue chairs at a long conference table, Nolan and Wade laid out what they had, how they could prove it and the penal and corporation code sections they intended to charge Citron with violating.

Privately, prosecutors feared a grand jury indictment could be challenged because of all the pretrial publicity generated by the bankruptcy. For Citron’s part, an indictment meant an immediate trip to jail, with the probability that he would not be granted bail.

Hanging over the proceedings was the involvement of the U.S. attorney’s office, which had been investigating the bankruptcy for months. Citron did not want to be prosecuted for the same crimes by both state and federal authorities, which could cost him extra years in prison, according to Wade.

(Ultimately, the veteran officeholder pleaded guilty to six felony counts. Two counts involve making false, material statements in connection with the sale of securities. The other four counts involve misappropriation of public funds, failure to transfer public funds and maintaining false entries in a public record. He faces a maximum prison term of 14 years.)

During that first, hourlong meeting, Wade said, it was made clear to Citron that the investigation “was like a train moving very fast down the track. There would come a time when it would be very difficult to stop it.”

Nolan remembered feeling the beleaguered ex-treasurer was ready to come clean. “We got a sense at that meeting that he was getting close to making a determination that he was responsible for what happened and he wanted to do something about it,” she said.

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Despite his plea to state charges, Citron has received no assurances that he will not be prosecuted by federal authorities. Several defense attorneys, though, said it is likely the U.S. attorney’s office will use Citron’s testimony to secure federal indictments of others involved in the case, such as investment brokers and financial officials who did business with the ex-treasurer.

In particular, authorities are gearing up to prosecute Citron’s former assistant, Matthew R. Raabe, and Merrill Lynch & Co., which the county contends illegally sold it most of the riskiest securities in Citron’s portfolio.

Attorneys for Raabe and Merrill Lynch steadfastly maintain their clients’ innocence, arguing that Citron alone was responsible for gambling the investments of nearly 200 cities, school districts and other public agencies. The portfolio lost nearly $2 billion in the collapse of Citron’s investment scheme, though prosecutors say there is no evidence that Citron used any of his dealings for personal financial gain.

The deal between the district attorney’s office and Citron heated up last Monday afternoon, when Wade left an urgent message at Wiechert’s office. Wiechert got the message the next morning. They agreed to get together at 2 p.m. at Wiechert’s Costa Mesa office.

In a rush, Wade forgot the plea agreement, which had to be faxed over.

For the next 2 1/2 hours, the attorneys hammered out fine points. Nolan and Wade wanted Citron to plead on Wednesday. Wiechert insisted he needed to talk to his client that day.

Nolan and Wade left, feeling that Citron “was going to plead up to everything Thursday morning.”

Back at the office, the pair told Dist. Atty. Michael R. Capizzi that a deal might be close.

Yet Wednesday dawned with an intense series of conference calls and faxes as the lawyers haggled over provisions of the law and other details. The biggest sticking point was an ongoing argument over the reason Citron had committed one of the crimes detailed in the plea agreement.

“By Wednesday, the whole thing was off,” Nolan remembered. “By the time of our last conversation Wednesday, Wiechert decided he wasn’t going to do it.”

All day the office’s top brass peeked in on the two prosecutors. Wade would say, “It’s 50% now. It’s about 60%. Maybe 75%.”

On Thursday morning, Nolan came to work wearing casual clothes, convinced there would be no deal.

Wiechert called at 9 a.m.

By midday, a deal looked to be struck. By 4:10 p.m., Wiechert and Citron were back in the blue chairs with Nolan and Wade. At 4:50 p.m., Citron was led by district attorney investigators to a conference room to wait while the attorneys met with Superior Court Judge David O. Carter.

Forty minutes later, Citron entered his plea.

Finally, they had a deal.

Times staff writers Matt Lait and Michael G. Wagner contributed to this report.

* HIGH-STAKES CASE: Does Citron plea bolster county’s case against Merrill? D1.

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Citron’s Fall

Key developments in the Orange County financial crisis and the criminal investigation that led to former Treasurer-Tax Collector Robert L. Citron’s guilty plea Thursday:

* Dec. 2, 1994: After stock market closes, local officials verify rumors that the county’s investment portfolio has lost nearly $1.5 billion of its value.

* Dec. 4: Citron resigns from the treasurer-tax collector post he held for 24 years.

* Dec. 6: Orange County files the largest municipal bankruptcy in U.S. history, freezing the assets of the county investment pool.

* Dec. 8: Internal audit is released showing county auditor warned officials more than a year earlier that the investment pool was not adequately supervised.

* Dec. 19: Orange County district attorney’s investigators raid Citron’s office, confiscating boxes of documents and files.

* Dec. 27: Municipalities with investments in a more risky county portfolio say Citron led them to believe their money was in safer investments.

* Jan. 21, 1995: County audit discloses possible falsification in bookkeeping records; $85 million in interest was diverted from pool participants to an account managed by Citron.

* Jan. 27: Officials announce that Citron or his office transferred securities that had lost value from a county fund to an investment account shared by pool investors.

* Feb. 2: State auditor questions diversion of more than $200 million from the investment pool to a general fund.

* April 27: Citron pleads guilty to six felony charges relating to the county bankruptcy.

Source: Times files