Secretary of State Shelley Steps Down

Buffeted by investigations into his campaign finances and official conduct, Secretary of State Kevin Shelley announced his resignation Friday, saying he could no longer adequately run California’s elections office.

One of the state’s highest-ranking officials who only two years ago was considered a rising star in Democratic politics, a somber Shelley was near tears as he faced television cameras.

For months, he had been dogged by federal and state criminal inquiries and scathing audits of his financial management and treatment of employees:

* A federal grand jury is probing his acceptance of campaign contributions from people and companies that received money from a grant he helped arrange in 2000 while serving as a state Assembly member.

* The state attorney general is examining his alleged acceptance of a private campaign contribution on state property, his alleged use of state staff for political work and his hiring of the son of a campaign supporter.

* Federal regulators are conducting a special audit of his handling of election reform funds issued under the Help America Vote Act.

* And a state audit of the same accounts concluded that Shelley’s office mismanaged the money and used it to pay some contractors to attend partisan political events.

As the charges piled up over the past six months, lawmakers and newspaper editorials began calling for Shelley’s resignation -- despite his consistent denials of deliberate wrongdoing. Finally, he could no longer resist.

“During the past several weeks and days, it has become clear to me that the tides of this storm are overtaking this office’s ability to function effectively,” Shelley said, standing outside the home he recently mortgaged to help pay legal bills.

“Therefore, it is with deepest regret that I resign the office of secretary of state effective March 1.”

Shelley is the first state constitutional officer to resign since Republican Insurance Commissioner Chuck Quackenbush quit five years ago amid allegations that he had used his public office for political purposes.

Shelley informed Gov. Arnold Schwarzenegger just before his announcement. In a statement, the Republican governor said he would move quickly to name a replacement to “ensure that the important duties of the office of secretary of state [are] carried out in a manner that instills public trust and confidence.”

As specified in the state Constitution, whenever a statewide-elected official leaves office before the end of the term, the governor must nominate a replacement who is subject to legislative review.

Potential nominees already being mentioned in Capitol corridors include former Republican Sen. Ross Johnson and former Republican Sen. Bruce McPherson -- both recently termed out of the Legislature -- and former Secretary of State Bill Jones, a Republican who ran unsuccessfully last fall for U.S. Senate.

As the state official responsible for ensuring fair and efficient elections and maintaining campaign and financial disclosure records, Shelley won wide praise in 2003 for smoothly handling the state’s historic gubernatorial recall.

He also became a national advocate for requiring that electronic voting machines provide a paper record so balloting can be audited.

But last fall, federal and state agencies began investigating the allegations against him, and his public image began to erode.

With his wife, Dominique, at his side, the 49-year-old Shelley told reporters that ending his four-year term after two years was the hardest decision of his life.

In his statement, Shelley again denied the allegations against him: “While I have made errors that I deeply regret, I have never, ever done so with the intent of subverting the law or of benefiting myself.”

Yet, it became evident, he said, “that my persistence in fighting to explain the actions of my office has been, in reality, an obstacle to bringing closure and allowing the state to move forward” with voting reforms required by federal law.

Shelley said he was confident that the ongoing investigations would eventually show “I have done nothing wrong in the eyes of the law.”

Shelley delivered his statement with a subdued but steady voice that faltered when he thanked his family members for their support. He broke down briefly at the mention of his 84-year-old mother, who a spokesman later said had been hospitalized with double pneumonia after collapsing Wednesday.

Former Senate President John Burton, an old friend of Shelley, said the two men had talked frequently in recent weeks. In the end, he said it was the illness of Shelley’s mother that drove the decision to resign.

“Who needed this? ... Stories every day in the paper, up, down and sideways,” Burton said. “He just bit the bullet. His lawyers have been telling him for months he ought to resign but he wanted to fight and then his mother was the final straw. How can you keep on if your mother is in intensive care? Nobody’s that emotionally strong.”

Burton said Shelley, a lawyer who has worked for or served in government throughout his career, has no job prospects at the moment and faces huge legal expenses. “Nobody’s promised him a job. There are no soft landings,” Burton said.

It is unclear how the secretary’s resignation may affect his legal problems.

In Sacramento, Shelley’s most immediate concern involves the bipartisan Joint Legislative Audit Committee, which has called him to testify under oath at a Feb. 22 hearing on his handling of federal election funds.

Shelley recently had agreed, under threat of subpoena, to answer the committee’s questions. But his legal advisors feared that such an appearance could subject him to perjury charges if other witnesses were to contradict him.

Assemblywoman Nicole Parra (D-Hanford), who heads the committee, said Shelley’s resignation “does not end JLAC’s interest in having him testify.”

Senate GOP leader Dick Ackerman (R-Irvine) said Republicans also have “the intention to go forward” with the hearing.

But Assembly Speaker Fabian Nunez (D-Los Angeles), who spoke to Shelley about 10 minutes before his announcement, said legislative leaders need to talk first with the independent attorneys hired to advise the committee.

“We need to confer with our counsel to determine what the scope of the JLAC hearings ought to be,” Nunez said. He praised Shelley for walking away with dignity.

Senate President Pro Tem Don Perata (D-Oakland) said in a statement Friday that he respected Shelley’s decision. “My thoughts are with him and his family on a difficult day for them and the people of California,” Perata said.

Shelley -- son of the late San Francisco Mayor Jack Shelley -- won election by a narrow margin in 2002 after serving in the state Assembly, where he was majority leader. He had previously served on the San Francisco County Board of Supervisors.

But Shelley, known for having a volatile temper, alienated many county registrars and his own staff.

His troubles took a serious turn in August, when the San Francisco Chronicle reported that money from a state contract appeared to end up in Shelley’s campaign chest. Shelley had helped arrange a $500,000 grant to a San Francisco community center headed by activist and campaign fundraiser Julie Lee. Several companies and individuals who had received money from the grant subsequently donated $125,000 to Shelley’s 2002 campaign. Lee has denied wrongdoing, and Shelley has said repeatedly that he was unaware of any improper donations to his campaign. “I’ve had people call me a tough guy,” Shelley said in August, “but not unethical.”

Shelley was soon the subject of published reports that political friends and associates were among those who were awarded no-bid contracts under the federal voting program, which was designed to prevent problems like those that arose in the 2000 presidential election in Florida. Records released by his office showed that some of them attended partisan political events, including some fundraisers.

The Times later reported that Shelley’s staff members were sent to pick up contributions from a campaign mailbox in San Francisco and were assigned to attend partisan political events -- and both matters became part of an investigation by the attorney general.

A federal grand jury in Sacramento has taken testimony from Shelley campaign contributors about the circumstances of their donations. Sources said two testified they did not know Shelley and wrote blank checks that ended up in his campaign coffers.

A spokeswoman for the U.S. attorney’s office in Sacramento declined to comment when asked whether Shelley’s resignation would affect the investigation.

Matthew R. Jacobs, his criminal defense lawyer, said that while he believes Shelley has done nothing illegal, “there is no deal with anybody.”

In recent months, Shelley’s problems deepened.

A report by the state auditor in December criticized Shelley’s management of $46 million in voting act funds and accused his office of circumventing state contracting rules.

And last month, the state Personnel Board concluded an investigation prompted by complaints in 2003 from three women employees who alleged that Shelley subjected them to tirades.

Auditors also found that a sexual harassment complaint of a former Shelley administrative assistant was missing, and the hiring and promotion of the son of Julie Lee may have been aided by a rigged employment test. Both matters were referred to Atty. Gen. Bill Lockyer for investigation.

While denying wrongdoing, Shelley made attempts to address critical news reports and audits.

He said he was tightening controls on federal voting funds, and hired a private firm to help. At one point, he reorganized his management staff. But he did not directly answer his critics or face reporters.

When the governor nominates a successor, the nominee would need to be confirmed or rejected by the Assembly and Senate within 90 days. The nominee would automatically take office if either house declined to act within that period.

John J. Pitney Jr., a professor of government at Claremont McKenna College, compared Shelley’s resignation speech to that of former President Richard Nixon and said they were both probably most appealing in their defeat.

“I thought of Nixon today while listening to Shelley’s resignation announcement,” Pitney said. “He came across as a highly sympathetic figure. Had he shown that level of humility throughout his career, he might not have gotten into this degree of trouble.”

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(BEGIN TEXT OF INFOBOX)

Kevin Shelley

Facing state and federal investigations into his campaign financing, management of voting reform funds and handling of employee complaints, Shelley resigned Friday as California’s 28th secretary of state.

Continuing Inquiries

* Shelley is to be questioned under oath Thursday by the Joint Legislative Audit Committee investigating his use of $46 million in federal voting funds.

* The federal Election Assistance Commission will try to determine whether Shelley’s office properly spent $6.9 million in discretionary funds from the Help America Vote Act. If problems are found, the state might have to repay some of it.

* A federal grand jury in Sacramento continues to investigate whether money from a grant that Shelley helped award to a community center headed by a political supporter was kicked back to his campaign accounts.

Replacement Process

* The governor nominates a successor.

* The Legislature has 90 days to confirm or reject the nominee.

* If either the Senate or Assembly fails to act within that period, the appointment becomes automatic.

* If either house rejects the nominee, the governor would withdraw that nomination and offer a new candidate.

*

Times staff writers Dan Morain, Jordan Rau and Nancy Vogel contributed to this report from Sacramento.