Roos Gained $50,000 on Investment With Moriarty

Assembly Majority Leader Mike Roos collected a $50,000 profit on a real estate investment with businessman W. Patrick Moriarty just days after a Moriarty-sponsored fireworks bill, which Roos voted for and helped lobby, narrowly cleared the Legislature, The Times has learned.

Roos, a Los Angeles Democrat, is one of three public officials who received returns on their investments in Moriarty’s Baldwin Hills condominium project, even though the development turned into a financial disaster with only one of the 64 units ever being sold. The other two were then-Assemblyman Bruce Young (D-Norwalk) and then-Los Angeles Fire Chief John C. Gerard.

Roos has declined to discuss specifics of his profits from the investment.

The financial dealings between the three public officials and Moriarty are part of an extensive investigation being conducted by the FBI and the Orange County district attorney’s office.

Moriarty’s condominium development, Skyline Terrace, was built with loans from California Canadian Bank. Several former bank officers also have been named in the investigation.

Former bank officials and others say Roos borrowed $50,000 from California Canadian Bank in 1981 to invest in the Moriarty project. Those familiar with the transaction say that 14 months later Roos reaped a $50,000 profit by selling his interest back to Moriarty’s development company. Roos, who repaid his loan in June, 1983, has publicly reported that his profit was between $10,000 and $100,000.

The former bank officials, who have asked not to be identified, say the loan was given at Moriarty’s request. At the time, Moriarty was a respected California Canadian customer. The bank had given him more than $20 million in loans, which now are in default.

Roos’ public disclosure reports contradict bank records, which indicate the Roos loan was fully secured by his political campaign money. However, Roos’ public financial disclosure forms, filed under penalty of perjury, list the loan as unsecured.

Lobbied for Moriarty’s Bill

During the 14 months that Roos held the investment, he lobbied on behalf of Moriarty’s bill. The measure, which was eventually vetoed by then-Gov. Edmund G. Brown Jr., would have prohibited cities from outlawing the sale of so-called safe-and-sane fireworks, the type manufactured by Red Devil Fireworks Co. The firm was then controlled by Moriarty.

Roos voted for the bill in committee and on the Assembly floor. His committee vote could have spelled life or death for the bill.

The Times reported in January that while the legislation was pending, Roos, 39, was provided prostitutes by the Anaheim businessman, according to a variety of sources including persons who said they were present. Roos has declined comment on the accusation.

Since a joint federal-Orange County investigation of Moriarty was launched last year, Roos has refused to discuss his dealings with Moriarty.

Roos’ association with Moriarty dates to Dec. 10, 1980--eight days after Roos became majority leader--when the assemblyman received a $1,000 contribution from Richard Raymond Keith, who then was working for Moriarty.

Campaign Contributions

Over the years, Roos received $1,500 in campaign contributions from Moriarty and $4,000 from Keith.

In 1981, when the fireworks measure emerged in the Assembly, Roos reported receiving $1,900 in free limousine service from Moriarty’s longtime lobbyist and friend, Frank Michelena. Michelena, who had other clients in addition to Moriarty, also contributed to Roos’ political campaign fund.

Roos’ father, Walter, is listed in public records as an investor in the Moriarty-financed poker parlor in the City of Commerce. Walter Roos said he invested $100,000 in the club in late 1982.

Mike Roos is one of a number of present or former public officials whose varied financial dealings with Moriarty have come under the scrutiny of federal and Orange County investigators.

To date, the probe has resulted in Moriarty, Keith and six other individuals, including three former members of the Commerce City Council, either pleading guilty or being convicted of a variety of federal mail fraud or bank fraud charges. A ninth person has been indicted on Internal Revenue Service banking violations and is awaiting trial.

Guilty Pleas

When Moriarty and Keith pleaded guilty, they promised to cooperate with investigators in their continuing probe of Moriarty and his dealings with public officials.

One former California Canadian Bank official, Floyd Walden, has been indicted and pleaded guilty to mail fraud and income tax evasion involving $230,000 in cash payments and “kickbacks” from Moriarty in exchange for approving loans. At least one other California Canadian banker has been granted immunity in return for his grand jury testimony.

Roos said in a 1983 interview that he sought financial help from Moriarty after he and his wife separated in August, 1980.

The Assembly majority leader said he went to Moriarty after asking an Assembly colleague, whom he refused to name, where he could get a loan. “I didn’t know how to go about it,” Roos said.

At the colleague’s suggestion, Roos said, he got in touch with Moriarty who gave him “the name of someone to call (at California Canadian Bank in Orange) and I called. I needed to borrow the money.” Roos said he never personally went to the bank.

Disagreement on Dates

Roos said he got the $50,000 loan in March or April of 1981, but former bankers said it was June 24, 1981, when Roos actually obtained the loan.

Roos also said that he obtained a second $10,000 loan in the summer of 1981. But the ex-bankers said it was November of that year.

The dates are significant because in his initial interviews Roos said, “I didn’t even know there was a fireworks bill when I got the loans.”

According to his version of events, the loans were obtained before Moriarty’s fireworks bill faced its first legislative vote. However, Roos already had cast two critical votes for the fireworks bill by the time that he obtained the $10,000 California Canadian loan.

In addition, Moriarty began lobbying the Legislature on his fireworks proposal at least three months before Roos got the $50,000 loan.

Moriarty, his employee Albert Hole--a former state fire marshal--and Moriarty’s lobbyist, Michelena, began their lobbying in late March.

According to legislative documents, Michelena, as lobbyist for Red Devil Fireworks Co., held at least one meeting in Sacramento in April, 1981, in which he proposed amending a bill by Sen. Henry J. Mello (D-Watsonville). The amendment would clearly revoke the right of cities and counties to bar the sale of so-called safe-and-sane fireworks, the type manufactured by Red Devil.

Refusal to Amend Bill

Records show that Michelena continued to work on Moriarty’s behalf with Mello, his staff and others in May, June and early July of 1981 on the proposed fireworks amendments. Mello ultimately refused to amend his bill. Opponents of the fireworks proposal also were aware of the plan as early as April because Mello sought their reaction to the amendments.

By early July--only days after Roos received the $50,000 loan--the fireworks proposal, which had not been publicly announced, was well-known in the Capitol. All the major opponents were pleading with their organizations for help in combating the plan.

Ancil Hoffman, at that time the lobbyist for the California Fire Chiefs Assn., told The Times that he remembered discussing the fireworks amendments with Roos before the Legislature took its summer recess in early July.

Hoffman said it was “common knowledge” among legislators in the spring and summer of 1981 that the fireworks industry was going to attempt to get legislation opening up the entire state to fireworks sales.

After his discussion with Roos, Hoffman said, “I probably felt Mike was supporting it. I always thought he was a ‘yes’ vote.”

A letter written July 14, 1981, by Hoffman to the board of directors of the California Fire Chiefs Assn. said then-Senate Republican Leader William Campbell of Hacienda Heights, had agreed to sponsor the Moriarty amendments after they were rejected by Mello.

Roos on Committee

The letter said the Campbell bill was to be amended when the bill was presented in the Assembly Governmental Organization Committee in August. Roos was a member of the committee.

“It is obvious,” the letter said, “that the leadership in the Senate and the Assembly are privy to this issue and are forcing the issue upon the Assembly GO committee members to put the amendments into (the Campbell bill) and then passing the bill out of committee regardless of the opposition. . . .”

Campbell amended the bill in the Governmental Organization Committee on Aug. 19, 1981--two months after Moriarty got Roos the $50,000 loan.

The vote for approval was 8 to 2, the exact majority needed for approval by the 15-member committee. Among the eight supporters were Roos and the committee’s chairman, Assembly Speaker Pro Tem Frank Vicencia (D-Bellflower). Vicencia’s insurance company subsequently received a no-bid contract to insure part of Moriarty’s card club in the City of Commerce.

Roos supported the bill again on Sept. 9, 1981, when it narrowly passed the 80-member Assembly on a 42-31 vote.

The bill was carried on the Assembly floor by then-Assemblyman Young, a friend and former Sacramento roommate of Roos.

Car Leased by Moriarty

In addition to his investment in Moriarty’s Skyline Terrace condominium project, Young was driving a Ford Bronco leased for him by Moriarty. He also used a vacation condominium in Hawaii provided by Moriarty and received other gifts.

Like Roos, Young has been identified as one who received prostitutes from Moriarty.

For almost a year after the fireworks bill cleared the Assembly, it languished in the Senate, awaiting final approval.

On Aug. 31, 1982, the last night of the legislative session, Campbell suddenly brought the bill before the Senate for a vote.

The measure needed 21 votes to win final legislative approval and go to the desk of then-Gov. Brown, but there was major resistance from several senators.

It took about four hours and several roll calls of the 40-member Senate for the tally to reach 21.

Campbell went up and down the Senate aisles, cajoling colleagues to support the bill. Helping him were Young, who had carried the bill in the Assembly, and Roos.

According to one senator who opposed the bill, Young, Roos and some other Assembly members intensely lobbied for the bill.

‘Very Nervous Situation’

“I have never received any more pressure on anything than I did on that bill,” said the senator, who asked not to be identified. “I don’t want to be the snitch. This is a very nervous situation up here.”

The senator said the pressure was applied by civic groups, lobbyists and other lawmakers, recalling how it all came to a head on the Senate floor.

“They (Young, Roos and others) came on the floor and stood around me in an intimidating fashion. I said, ‘No way.’

“It is obvious that it was an important bill.”

The senator said lobbyists and others said Moriarty was “a big (campaign) contributor” and that “if you have a particular charity . . . we’d be happy to make contributions.”

Meanwhile, out in the hallway, Moriarty’s lobbyists were trying to collar lawmakers to support the bill while opposition lobbyists, like Dan Allen of the California Fire Chiefs Assn., were working against it.

Allen said that at one point he was approached by Young and Roos and was urged to drop his efforts to kill the bill. Allen refused.

“Assemblyman Young did the talking, and Roos concurred, nodding his head,” Allen said.

Received 21st Vote

In the chaotic closing hours of the Senate session, Moriarty’s fireworks measure finally received the crucial 21st vote. It was cast by GOP Sen. John Seymour, a former mayor of Anaheim, the home of Red Devil Fireworks.

Two days later, on Sept. 2, 1982, a $100,000 check from Moriarty’s B and M Development was made out to Roos, according to banking officials. Several persons familiar with the transaction said the check was Roos’ return on the Moriarty condominium investment.

Roos, first elected to the Assembly in 1977, has declined to elaborate on sketchy details that he provided to The Times in 1983.

In those early interviews, Roos said he invested $50,000 in the Moriarty condominium project. He received a $50,000 profit when he sold the condo back to Moriarty 14 months later, according to those familiar with the transaction.

But The Times could not find any public record showing that Roos bought a condominium or was a partner in the company that built the project. Roos said he had documentary evidence but declined to show it to The Times.

Asked if he put money into the project, Roos said, “You betcha I did.”

He said he never picked out a specific condominium before selling his investment back to Moriarty.

‘Two-for-One’ Deals

Moriarty in the past had offered some business associates, including former Los Angeles Fire Chief Gerard, “two-for-one” deals on condominiums in which he promised to double their money in two years.

The Moriarty condominium project in which Roos, Young and Gerard held an interest ultimately went bankrupt. According to a court suit filed by 31 individuals who tried to buy homes in the complex, they were bilked out of $183,000 and threatened by banks with foreclosures on their property.

Roos’ public disclosure forms for 1981 and 1982 show that he had “equity” in the Baldwin Hills condominium project. Officials are only required to report the range within which their investments fall, and Roos said his condominium investment was worth between $10,000 and $100,000.

He reported that he acquired the equity in June, 1981--the same month in which former bankers said he obtained the $50,000 loan.

Under penalty of perjury, Roos reported that both California Canadian loans were “unsecured.”

But bank records show the loans were fully secured from the outset--first with campaign funds, then with money from his father and again with campaign funds.

Former bankers give this account of the loan transaction:

Savings Account Required

Roos was required to open a savings account at California Canadian. The account, consisting of money contributed to his political campaign, was opened the day he borrowed the $50,000.

(Roos’ own campaign reports show that his political coffers had dwindled to less than $10,000 in the spring of 1981. But on May 29, 1981, he held a major fund-raiser at the Biltmore Hotel and put enough money into the new California Canadian savings account to secure the loan.)

Roos; his then-campaign treasurer Jerold Krieger, now a Los Angeles municipal judge, and Mike Galizio, a former Roos aide and one-time treasurer of another campaign fund controlled by Roos--Assembly Democratic Caucus fund--all were signers on the savings account that was used as security in 1981.

For several months in the fall of 1982 and early 1983, Roos substituted money from his father instead of the campaign funds as collateral, according to former bankers.

In 1983, Roos and his subsequent treasurer, James McDermott, signed a security agreement pledging the campaign fund savings account as collateral for the loan, according to former bankers.

The bankers said that without the security, Roos could not have obtained the loan. In addition, they said, the security was needed for Roos to receive a 7.5% interest rate at a time when the prime rate was 18% and higher.

Roos was a co-author of a state law that says, “Campaign funds . . . shall not be used for personal use.” The law did not take effect until January, 1982, seven months after Roos first used his campaign funds to secure the $50,000 loan.

The Condominium Investment

Los Angeles Times

Assembly Majority Leader Mike Roos, above left, invested $50,000 he had borrowed in the Baldwin Hills condominium project pictured above. It was developed by businessman W. Patrick Moriarty, bottom left.

Former bank officials say California Canadian Bank gave Roos the loan at Moriarty’s request. Moriarty was a respected customer at the bank.

Roos, in public disclosure reports signed under penalty of perjury, said the loan was unsecured, but bank records indicate the loan was fully secured by his political campaign money.

During the 14 months that Roos held the investment, he voted for and lobbied on behalf of a bill Moriarty was sponsoring to prohibit local bans on the kind of so-called safe-and-sane fireworks manufactured by Red Devil Fireworks, a company controlled by Moriarty.

Only days after the Majority-sponsored bill cleared the Legislature, Roos collected a $50,000 profit on the condominium investment, according to several sources familiar with the transaction. The development turned into a financial disaster with only one of the 64 units ever being sold.