Federal Agents Search State Lawmakers’ Offices

Armed with court orders in a late-night sweep that ended early Thursday, two dozen or more federal agents fanned through the Capitol searching offices and questioning legislators in an investigation into possible violations of the federal anti-racketeering and extortion act.

The probe, by the FBI and U.S. attorney’s office here, centers on two special-interest bills, one carried in 1986 and another this year by Assemblywoman Gwen Moore (D-Los Angeles). The bills, which would have aided specific small businesses, won approval in the Legislature with little opposition but were both vetoed by Gov. George Deukmejian.

Officials of the FBI and the U.S. attorney’s office refused to comment on the ongoing investigation beyond issuing a general statement confirming that six search warrants were executed at the close of the Assembly session Wednesday night. David Levi, U.S. attorney for the Eastern District of California, said that at his request the federal court had sealed all records connected with the warrants, partly to quell speculation about which legislators might be involved in the investigation.

But the secret nature of the investigation prompted a gust of disclosures and rumors, which blew through the Senate and the Assembly chambers as lawmakers tried to complete work on a long list of bills before their scheduled Aug. 31 adjournment. Several legislators expressed the belief that a few of their colleagues had been the subject of an FBI sting operation involving dummy storefront businesses.

Even those whose offices were searched contended that they were not entirely sure why they had been targeted.

Quoting extensively from the warrant directing a search of his office, Sen. Joseph B. Montoya (D-Whittier) said that the federal investigators are looking into two special-interest bills introduced in 1986 and again this year by Assemblywoman Moore. Montoya is chairman of the Senate Business and Professions Committee and Moore chairs the Assembly Utilities and Commerce Committee.

The warrant stated, according to Montoya, that the FBI agents were looking for “memos, letters, minutes of meetings, files, telephone messages, calendars and date books reflecting dates and times of meetings, campaign committee records reflecting receipt and disbursement of funds, or other financial records reflecting receipt and disbursement of funds” concerning the two Moore bills.

The warrant, said Montoya, reading from it, further stated that all of these items “constitute evidence of violation of . . . the Hobbs Act, extortion.”

The Hobbs Act, which carries penalties of up to 20 years in prison and fines of up to $10,000, has been used to convict state legislators and other government officials of seeking bribes.

Legislative records say that the Moore measures would have directly helped the businesses sponsoring the bills: Gulf Shrimp Fisheries Inc. of Mobile, Ala., and Peach State Capitol Inc. The companies were seeking financing for new business operations in California, but wanted changes in state banking law in order to borrow the money they needed.

The bills were passed by the Legislature, but each was vetoed by Deukmejian. In his veto message, the governor said this year’s measure was designed to help “only a single company.” And in 1986, he said that bill was “not in the public interest.”

Montoya complained about the FBI waiting until most legislators had left the Capitol before beginning its searches, which lasted until early Thursday morning.

“I am obviously the target of whatever investigation is going on, so I’d better talk to my lawyer,” he added.

Three legislators--Assembly Republican leader Pat Nolan of Glendale, as well as Montoya and Moore--confirmed that their offices were searched.

Moore and Nolan, like Montoya, both issued brief statements contending that they knew of no reason for the investigation. They expressed confidence that they would not be implicated in any wrongdoing and would be cleared.

Said Moore in a written statement: “I fully intend to respond to any legitimate federal inquiry with the same candor and integrity that has characterized my 13-year career in public service.”

Moving quickly into an elevator just ahead of a group of reporters, she would only say, “I fully cooperated.”

Nolan and his aides would say little beyond the Republican leader’s prepared statement: “It is not clear to me yet what the object of the investigation is. But I am confident that when the investigation is completed, my office will be completely cleared.”

State Sen. Alan Robbins (D-Van Nuys) acknowledged that he talked to the federal agents. “They requested my assistance,” Robbins said. “They clearly advised me that I was not in any way the subject of the investigation.”

Board of Equalization member Paul Carpenter, formerly a Democratic state senator from Cypress, was also interviewed by an FBI agent for several minutes, according to Don Foltz, a Carpenter aide.

Campaign Contributions

Carpenter received two campaign contributions totaling $20,000 from Gulf Fisheries in 1986 at a time when the first of the two business financing bills was being considered. However, records show that the lawmaker did not vote on the measure, which passed the Senate 33 to 0.

Moore received a $2,000 campaign contribution last March from Peach State Capital West.

Moore also received a $5,000 donation from Gulf Shrimp Fisheries in August, 1986, but her campaign contribution report showed she returned the money, according to UPI.

The office of Assemblyman Frank Hill (R-Whittier) was also searched, according to several sources who asked not to be identified, including a Republican legislator and a legislative aide. But Hill left the Assembly chamber early Thursday and could not be reached for comment.

Officials of the companies that Moore’s bill would have assisted could not be reached for comment.

State banking law now allows banks and savings and loans to invest in corporate bonds, but only those of companies with a gross income of at least $10 million a year for at least three of five years, with average annual net income of at least $1 million.

Lowered Qualifying Amounts

Both Moore bills would have lowered the qualifying amounts, reducing the gross income requirement to $5 million and requiring an average net income over five years of $375,000.

A Senate Banking Committee analysis of the 1988 measure points out that the bill would have applied to only a single company--Peach State Capitol Inc.

There was a lot of fuzziness about Peach State that fueled speculation in the Capitol on Thursday that it might have been part of an FBI sting operation. There also was little known about Gulf Shrimp West Fisheries.

Peach State has a second-floor office in an old building about a block from the Capitol on Sacramento’s K Street Mall, but no one appeared to be in the office Thursday.

Peach State’s next-door neighbor in the building--lobbyist and former Sen. John Briggs--said that he rarely saw anyone from the firm. “They do their own cleaning, which is unusual, and pay the rent and that’s about it,” he said. “The rest of us have a cleaning service. They also change the locks.”

Company Not Listed

Briggs said that recently he ran into two men and a woman who worked in the office. “They represented to me that they were raising private capital for investments. They were based in Florida and came to California for more business opportunities,” he said.

Peach State Capitol is not listed in the secretary of state’s corporate records.

However, the city of Sacramento lists a business license for Peach State Capitol West Ltd., according to UPI. The city records show that one of the owners is John A. Shahabian, a consultant to the Senate Elections Committee and a former Carpenter aide.

The state records show a Gulf Shrimp West Inc., but not a Gulf Shrimp Fisheries, the potential beneficiary of the 1986 bill and contributor of $20,000 to Carpenter. According to the records in the secretary of state’s office, Gulf Shrimp West was suspended as a corporation last January.

Aside from the companies standing to benefit from the bills, the only support the measures drew from outside the Legislature came from Superior Valley Small Business Development Corp., according to legislative records. Like Peach State, this company also has links to the Legislature’s staff.

The secretary of state’s office listed Superior Valley as a nonprofit corporation whose president is Clarence Williams, a former Assembly staff member. The company’s chief financial officer is Drue Brown, an analyst at the Assembly Office of Research. The secretary is Norm DeYoung, an analyst for the state Department of Economic Opportunity.

Superior Valley is one of six nonprofit corporations that contracts with the state to guarantee loans to small businesses, primarily those owned by minorities and women, according to the state Commerce Department. DeYoung said he has been a volunteer member of the company’s board of directors for five years and, as far as he knows, the board has never voted to support the Moore bills.

Sen. Leroy Greene (D-Carmichael), who sponsored Moore’s 1986 bill in the Senate, said that he could not even recall the measure.

Similarly, Senate Republican leader Maddy of Fresno said he could not remember carrying the latest Moore bill, although he presented it to the Senate on June 30.

Staffer Reprimanded

He said that he reprimanded one of his staffers for placing the bill on his schedule.

“I don’t carry bills on the floor unless there is some special reason,” Maddy said. He added that as a Republican leader he would not normally carry a bill authored by Democrat Moore.

“No one has any memory of how it got (on my schedule),” Maddy said. And when he sent his staff to review the files in Moore’s office Thursday, the assemblywoman’s aides would not allow them to look.

Maddy was one of several legislators who speculated that the investigation might be part of a federal “sting” operation, designed to uncover possible corruption in the California Legislature. “The sting concept is the only thing being talked about and rumored,” the GOP leader said.

THE OBJECTS OF THE FBI SEARCH

Federal agents searched Capitol offices in an apparent investigation involving bills carried by Assemblywoman Gwen Moore. The bills passed both houses and were vetoed by Gov. George Deukmejian. They would have eased laws limiting the ability of banks to invest in companies doing less than $10 million in annual business. Among those whose offices were searched or interviewed by agents:

Sen. Joseph B. Montoya (D-Whittier), chairman, Business and Professions Committee

“They wanted to know about memoranda, letters, minutes of meetings filed, telephone messages, campaign records. . . . I have talked to the FBI before when they’ve done investigations. . . . Nothing came of it.”

Assemblywoman Gwen Moore (D-Los Angeles), chairwoman, Committee on Utilities and Commerce

“I fully intend to respond to any legitimate federal inquiry with the same candor and integrity that has characterized my 13-year career in public service.”

Sen. Alan Robbins (D-Van Nuys), chairman, Insurance, Claims and Corporations Committee

“I don’t think they asked for my assistance so that I could become their press spokesman. They clearly advised me I was not in any way a subject of investigation.”

Pat Nolan (R-Glendale), Assembly Minority Leader

“It is not clear to me yet what the object of the investigation is, but I am confident that when the investigation is completed, my office will be completely cleared.”

Contributing to this story were staff writers Mark Gladstone, Carl Ingram, Richard C. Paddock, Douglas Shuit, Daniel M. Weintraub and Noel K. Wilson.