Cashing out to PayPal can be done relatively safely. On the #bitcoin-otc marketplace you likely would have been able to have found a trading partner who wanted LR USD and had a trust history in the #bitcoin-otc Web of Trust (WoT) such that you could trust that a PayPal payment from them.
Another method would be to convert LR to to bitcoins and then to get PayPal USD redeem those bitcoins at SpendBitcoins.com
An exchange that takes LR for deposits is BTC-e.com. Also does BTCTree.com but they are new and currently there are no sell offers on the book. Antother method that would work is to use AurumXChange and exchange LR USD 1:1 with a MTGUSD redeemable code. Then buy bitcoins with that and go the SpendBitcoins.com route:
($0.30 + 2.9% fee)
Or offer to trade the MTGUSD for PayPal USD 1:1 on the #bitcoin-otc marketplace.