Citron gets a year in jail
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November 19, 1996: 4:39 p.m. ET
Former Orange County Treasurer also fined $100,000 and put on probation
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SANTA ANA, Calif. (CNNfn) -- Former Orange County, Calif., Treasurer Robert Citron was sentenced Tuesday to one year in jail, five years probation and fined $100,000 for his role in the largest municipal bankruptcy in U.S. history.
Citron pleaded guilty to six felony counts of fraud, including making false statements in the sale of securities and misusing public funds.
Citron was a star during the late 1980s and early 1990s, earning returns on the county's investments far higher than prevailing rates. He did so well, other municipalities and government agencies throughout California put their money in the Orange County investment pool.
But bad bets on the direction of interest rates in 1994 led to the collapse of the investment pool, a $1.6 billion loss and the county's bankruptcy in December of that year.
Citron's crimes were not directly related to the bankruptcy nor did he profit personally from them. They occurred during 1993 and early 1994, and involved illegally transferring interest payments from the Orange County investment pool, which included schools, cities and other government agencies, into an Orange County account. The intent was to hide the pool's soaring returns so as not to spook investors about Citron's risky strategies.
Citron faced a maximum 14-year prison term and $10 million in fines, but Orange County District Attorney Michael Capizzi recommended to Superior Court Judge Stephen Czuleger that Citron be sentenced to seven years in prison and fined $400,000.
Citron's attorney, David Wiechert, called the recommendation harsh and said his client, who has been cooperating with investigators, deserved probation and a $10,000 fine.
During a pre-sentencing hearing Monday, several friends, former colleagues and medical experts testified that Citron suffered from a brain disorder, was mentally impaired and never fully understood the risks and consequences of his actions.
One witness said a seven-year jail term would be tantamount to a death sentence for the 71-year-old Citron, whose lawyer said the former treasurer was manipulated by Merrill Lynch, the county's former investment adviser. Merrill Lynch released a statement Monday repeating its assertion the firm acted properly in its dealings with Orange County.
Citron's sentencing does not bring the Orange County bankruptcy saga to a close. His former assistant, Matthew Raabe, still faces trial early next year on the same six fraud charges. A grand jury is investigating the actions of Merrill Lynch and others, and the county is suing Merrill Lynch for $2 billion.
Orange County filed for bankruptcy protection from creditors on Dec. 6, 1994, after sustaining losses of more than $1.6 billion on risky investments. It was the largest municipal bankruptcy in U.S. history. The county emerged from bankruptcy last June with the help of budget cuts and new loans from Wall Street.
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