R. Citron & the Orange County, CA bankruptcy
After California passed a proposition limiting revenue generated from local property taxes, pressure was put on local governments to raise enough money to fund services. Orange County, like many others in the US, attempted to raise revenue without increasing taxes. Their treasurer, Robert L. Citron, decided to get involved with a high risk high reward product. He chose to invest in derivatives and gamble with public money. Because interest rates were low at the time, Citrons portfolio was returning at an average rate of 8.52%. This was 5% higher than what the state of California was earning. Orange County was enjoying the benefits of their treasure's investments. In 1994, 35% of the county's revenue was from the portfolios returns. The county continued to increase earnings and therefore no one looked into Citrons practices. He did inform the Board of Supervisors that the value of the county’s portfolio depended on interest rates remaining stable or decreasing. So when interest rates rose, the value of the portfolio diminished, eventually leading to bankruptcy. In December 1994, Orange County announced a loss of $1.6 billion, the most significant loss recorded by a local government investment pool. This also displayed the negative side of the high risk investments made by Citron who was gambling with a $7.5 billion portfolio made up of players such as cities, school, water works, and regional transportation. 
There were many factors that led to the bankruptcy of Orange County. A Board of Supervisors member stated that there was a lack of oversight (not an accountable system) and failure of disclosure to investors. Citron also never met with the investment oversight committee that did exist, and as treasurer he had control over Orange County and their trust. Many have questioned if Citron was ever qualified to hold his position in office. Some even blame the state...