CITRON SENTENCED : EX-O.C. TREASURER GETS YEAR IN JAIL, FINE.

Byline: E. Scott Reckard Associated Press 

Former Orange County Treasurer Robert L. Citron, the central figure in the nation's biggest municipal bankruptcy, was sentenced Tuesday to a year in jail and fined $100,000 for defrauding investors in the years before the collapse.

Citron, 71, also received a sentence of six years in state prison but Superior Court Judge J. Stephen Czuleger stayed that term.

Citron pleaded guilty and has been cooperating with the investigations into the bankruptcy. His lawyers argued that brain damage compromised Citron's financial acumen and made him easy to manipulate. Prosecutors had pressed for seven years behind bars.

``I'm not in the vengeance business,'' Czuleger said.

Orange County declared bankruptcy in December 1994. Citron's bets on stable or falling interest rates had resulted in a $1.64 billion loss.

The event shocked the nation's financial markets and intensified the debate about derivatives, a risky breed of securities that were a hefty part of Citron's portfolio.

The six felonies to which Citron pleaded guilty were not directly related to the bankruptcy.

Citron instead admitted participating in a scheme to divert $107 million in interest from an investment pool - where the county's money was mixed with money from schools, cities and other public agencies - into a county-controlled account.

He also was accused of misrepresenting the state of his investment pools to investors in the pool and to buyers of more than $1 billion in municipal bonds.

Holding hands, Citron and his wife, Terry, 72, walked slowly out of the courthouse after sentencing. They declined comment on their future.

``I'm sorry,'' Terry Citron said.

Citron must surrender Jan. 10. He also was ordered to perform 1,000 hours of community service and receive psychological counseling.

The judge said Citron was seduced by ``easy money'' and had severely betrayed the public's trust.

He said there was evidence of mental deterioration, but that at least at the beginning of the scheme Citron made his own choice to break the law.

But Czuleger also said Citron's cooperation with prosecutors helped soften the sentence.

``Certainly his life is all but destroyed,'' Czuleger said. ``I want something positive to come out of this.''

Citron's lawyer, David W. Wiechert, likened a brain-damaged Citron to ``Mikey,'' the 3-year-old in the TV cereal commercial ``who will eat anything.'' He claimed that Merrill Lynch & Co., which the county has sued for $2 billion, realized it could manipulate the frail and debilitated Citron.

Wiechert characterized the situation as: ``Let's give it to Bob. He'll buy anything.''

The sentencing all but ends one case, but others connected to the bankruptcy continue.

Citron's former assistant, Matthew Raabe, has pleaded not guilty to the six felonies Citron faced. He will go on trial in January and could face a maximum sentence of 14 years in prison if convicted.

In addition, two county supervisors and the county auditor have been charged with negligence in office and could lose their jobs if convicted.

On the civil front, the county has accused eight defendants of wrongdoing, including Merrill Lynch.

Finally, a county grand jury is investigating potential criminal wrongdoing by Merrill Lynch and the salesman closest to Citron, Michael Stamenson. Sources speaking on condition of anonymity said Citron already has testified before that secret panel.

Merrill Lynch has consistently denied all wrongdoing in the case, contending that Citron controlled the funds in the treasury and made his own investment decisions.

Under California law, defendants sentenced to county jail normally are released after serving, at most, eight months of a one-year sentence.

Like other such inmates, however, Citron may apply for work-furlough programs that could free him during the days or even allow him to spend no actual time in jail, said prosecutor Matthew Anderson.

The determination of his fate ultimately will be made by the county Sheriff's Department with advice from probation officers, Anderson said.

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PHOTO (color) Robert L. Citron sits in a Santa Ana courtroom Tuesday.

Associated Press