Nolan’s Failure to List $5,000 From Bogus Firm Told

Assembly Republican Leader Pat Nolan of Glendale failed to report a $5,000 campaign contribution made in June by a bogus company set up by the FBI as part of its Capitol sting operation, two sources close to Nolan said Tuesday.

The failure to report the money from the “company” called Peach State Capitol Investment was an oversight and was one of several payments from various contributors that were not reported, one source said, giving the GOP leader’s explanation. Nolan reportedly is now preparing paper work to report these payments.

The omissions could be a violation of the state Political Reform Act, which requires reporting of all contributions of $100 or more. It could also intensify efforts of dissident Republican assemblymen to strip Nolan of his leadership post.

Nolan did correctly report that a campaign committee he controls also received $5,000 from Peach State, the Secretary of State’s office disclosed Tuesday.

But regarding the unreported Peach State payment, a source said that “nobody knew about it. Pat, in trying to figure out what is going on, discovered that only one of the two checks was reported, and he consulted with his attorneys about what the appropriate thing to do is.”

New Disclosure

The unreported Nolan money was one of the latest disclosures involving the FBI sting operation, in which agents set up phony companies and posed as money-laden lobbyists in efforts to uncover political bribery and extortion in the Capitol. It was learned that in at least one instance, agents posed as out-of-town businessmen, meeting their investigative targets at the newly opened Hyatt Regency Hotel across from the Capitol.

Peach State also contributed $3,500 this year to the local political campaign of a legislative aide, Tyrone Netters, at a time when he was pressing for passage of a special-interest bill to benefit the phony firm, according to records obtained Tuesday.

Netters works for Assemblywoman Gwen Moore (D-Los Angeles), who carried two separate bills that would have benefited “companies” set up by the FBI as part of the sting. Both Netters and Moore are targets of the investigation.

Netters at the time of the contribution was troubled both by political and personal debts. In 1986, he was an unsuccessful candidate for a local utility board of directors seat, ending his campaign $8,200 in debt. In fact, that campaign still was $5,850 in debt this June.

Home Repossessed

Earlier this year, Netters faced foreclosure proceedings on his home and it ultimately was repossessed.

In addition to the contributions to Nolan and Netters, “companies” set up by the federal sting--Peach State Capitol Investments and Gulf Shrimp Fisheries Inc.--donated at least $23,500 to legislators over the last two years, according to campaign reports filed with the secretary of state.

The FBI investigation into political corruption became public last week, when 30 federal agents swept through the Capitol late at night, searching the offices of four Los Angeles-area legislators: Moore and Nolan, as well as Assemblyman Frank Hill (R-Whittier) and Sen. Joseph B. Montoya (D-Whittier).

Details of the federal probe have emerged fitfully, in part because court records of the search warrants have been sealed pending the conclusion of the investigation.

What is clear is that the FBI at various times used at least two bogus companies, and their supposed subsidiaries, to sponsor legislation that could only have benefited the phony enterprises.

Benefit to ‘Companies’

The bills, by Moore, would have allowed the “companies” to receive financial help from banks and savings and loans not now permitted under state law.

Both bills were passed overwhelmingly by the Legislature but were vetoed by Gov. George Deukmejian after he was tipped off by the FBI that a sting was in progress.

Assemblyman Sam Farr (D-Carmel) on Tuesday said that he was approached by Darryl O. Freeman, a former legislative staffer, in the spring of 1986 to carry what later became the first of the special-interest bills.

Farr said he did not know the bill was part of an FBI sting operation and rejected the overture because the proposal was “too narrowly focused.”

Records released by the secretary of state Tuesday show that Freeman registered as a lobbyist for Gulf Shrimp, which supposedly was seeking funds to build a shrimp processing plant in West Sacramento.

Worked for Lobbying Firm

According to the records, Freeman was employed by a Sacramento marketing and lobbying firm called Northern California Research Associates.

During the same period, Northern California Research paid out $8,147 in campaign loans and political contributions to the local election campaign of legislative aide Netters. In late 1986, Assembly Speaker Willie Brown (D-San Francisco) received $6,500 and Assemblywoman Moore got $3,500 in campaign contributions from Northern California Research, records show.

Terry Miller, a consultant to the Senate Banking and Commerce Committee, said that “Netters was the main contact in Moore’s office for both bills. He was in my office several times in 1986 and 1988 on these bills.”

Netters has been ducking reporters since the FBI raid and could not be reached for comment Tuesday.

His attorney, former State Sen. Bob Wilson, said Tuesday that he had advised Netters not to discuss the case with the media.

“He would like to talk to the press because he is innocent, but we have instructed him not to,” Wilson said. “We prefer the matter be tried in court, if it goes that far, rather than trying it in the newspaper.”

Peach State Capitol Investments gave $3,500 to Netters’ campaign committee in May while Netters was pushing for passage of a bill that would have changed state banking law to permit loans to the “company.”

Sacramento County court records show that Netters has had personal financial problems since 1985, when a lending institution began foreclosure proceedings against him. This June, the house was repossessed and Netters and his wife vacated the home, which they had purchased in 1981.

An attorney for Netters’ boss, Moore, said that she is cooperating with federal investigators and urging all of her staff to cooperate. The lawyer, Philip S. Ryan of Los Angeles, said that the investigation will show Moore’s “integrity is beyond question.”

Contributing to this story were staff writers Dan Morain, Richard C. Paddock and Daniel M. Weintraub.