Bob Citron’s Right-Hand Man
Some Say Investment Woes Began When Ray Wells Retired
In April 1993, the staff of the Orange County treasurer gathered for an elegant party at Elizabeth Howard’s Curtain Call Dinner Theater in Tustin. The party was for the gentlemanly, soft-spoken Raymond L. Wells. After more than 30 years as a public servant for Orange County, most of it as Bob Citron’s steady right hand, Wells was retiring as assistant treasurer.
Wells knew his way well around county government and Wall Street. He had already been in the treasurer’s office for a dozen years when the newly elected Citron arrived in 1973. He was known to sometimes curb Citron’s investment urges, and he had taken over more of the treasurer’s duties as Citron became increasingly detached.
Citron named Matt Raabe, Well’s brash, ambitious understudy, to replace him. By the end of 1994, a year and a half after Wells had left, Orange County declared bankruptcy.
Citron took much of the blame and received a one-year sentence. But it was Raabe who got the longest prison sentence, three years. Raabe remains free on appeal.
Did the changing of this guard from Wells to Raabe contribute to the eventual bankruptcy? Many of the county’s political and bureaucratic insiders think so.
Wells had been cool to other government entities joining Citron’s investment pool. Raabe not only felt otherwise, he actively recruited others’ investments,and it was his skimming of these funds into county coffers that led to his conviction.
And while Wells knew all about Citron’s complex investments (some say he engineered at least a few of them), the pool’s leverage increased sharply after Wells departed.
“Ray Wells was the governor on a carburetor so a car cannot go faster than a certain speed,” said John Moorlach, the current county treasurer.
“Ray was kind of the watchdog,” echoed Ernie Schneider, who was the county administrative officer at the time of the bankruptcy.
When reached for comment, Wells declined an interview, saying the bankruptcy was too painful. “That’s a chapter in my life that I want to close,” he said.
It could be Wells’ way of not speaking poorly about Citron or Raabe. Wells has even written a letter to a court saying that Raabe shouldn’t be put in prison, because “If anyone is ever deserving of a second chance, I believe Matt Raabe should be given one.” But Wells may have shied away from this interview for another reason,he was the one who helped Citron develop the strategies of investing in reverse repurchase agreements and leveraging them.
Chriss Street, a Newport Beach financier who dealt with the Orange County treasurer’s office, said that the county had been using reverse repurchase agreements as far back as the early 1980s. He contended the county nearly had to declare bankruptcy years before the 1994 meltdown.
“That near miss scared everybody a bit. But just like a drunk, it didn’t keep them away from the bar,” said Street.
Merrill Lynch said it was warning Citron as early as 1992 about his strategy. That was months before Wells retired. But Moorlach noted that once Wells retired, the leveraging increased sharply.
In 1961, Wells began working as manager of the Orange County Retirement Fund, which held the pensions of the government employees and was managed by the Treasurer’s Office. That fund was separated from the Treasurer’s Office in the 1980s, although Citron made efforts to get it back.
Raabe first came to Citron’s attention in the mid-1980s when he was working for Auditor Controller Steve Lewis and doing an audit of the Treasurer’s Office. Citron liked the young man and offered him a position in 1987.
Wells began training Raabe to handle the accounting functions of the office. It was an odd pairing.
“Matt Raabe was an extremely arrogant person. Ray Wells was the consummate gentleman,” recalled Street.
When Citron began withdrawing in the early 1990s from day-to-day functions because of his health conditions, Raabe’s responsibilities increased. Raabe did much of the public speaking for the shy Citron, a poor public speaker.
It was Raabe who pitched the county’s investment fund to school districts, cities and public utilities. But it was Wells whom Citron still relied upon, recalled Schneider.
“He really believed in Ray,” said Schneider. “Looking back on this, I think that Bob realized his ineptness and relied on Ray to guide him down the right path and when that trusted advisor was no longer there, he had no one else to rely on,” said Schneider.
“I remember saying to Bob after Ray retired, ‘You need a No. 2 guy, because if something happens to you, we’re really in the dark.’ That’s when Bob brought Raabe in as the assistant treasurer.” n
