The FBI Sting : How System Let 2 Bills Get Through

Newspaper reporters and television cameras crowded into a Capitol hearing room in May as an Assembly committee considered several controversial measures sponsored by five rebel Democrats in a showdown with Speaker Willie Brown.

But none of the reporters took note when the panel, without debate, routinely approved a bill that Assemblywoman Gwen Moore (D-Los Angeles) said would help a small Alabama company obtain financing to build a shrimp processing plant in West Sacramento. That little-noticed bill, and another just like it two years earlier, actually were tools used by the FBI as part of its Capitol sting operation.

So far, four legislators--Assembly members Pat Nolan (R-Glendale), Frank Hill (R-Whittier) and Moore and Sen. Joseph B. Montoya (D-Whittier)--have been named as subjects of the probe into possible extortion and bribery. So have former Sen. Paul Carpenter (D-Cypress), who now is a member of the State Board of Equalization, and two legislative aides.

How It Happened

This is the story of how the FBI’s bills breezed through the Legislature with little fanfare and few opposing votes, and of how they might well have become law had FBI agents not tipped off Gov. George Deukmejian, who vetoed both measures.

It is a story of legislators pushed against deadlines and of pre-dawn sessions where hundreds of measures are passed in a matter of hours. It is about “spot bills” and “low-balling” and a buddy system that discourages members from challenging the proposals of their colleagues. And it is a tale of campaign contributions and speech-making fees that coincided with crucial moments in the legislative process.

The two bills also illustrate how the Legislature routinely violates its own parliamentary rules while adhering to an unwritten code of conduct that can smooth the way for the passage of poorly drafted or misguided measures.

Called a Matter of Conduct

“No matter what may be found to be illegal, the real issue here is how the house is conducted,” said Assemblyman Steve Peace (D-Chula Vista), an outspoken critic of Speaker Brown’s leadership. “The FBI got a bill passed for a company that didn’t exist. The reason it was relatively little challenged is that very few people knew what they were voting on.”

Often, legislators put themselves in the bind of having to weigh the fate of hundreds of bills with little time for serious consideration, many members say.

“There is no thorough airing of the pros and the cons of a bill or its genesis,” said Sen. Quentin L. Kopp, an Independent from San Francisco. “The bills are rushed through and the proponents play upon the sympathies of their fellow legislators. You tend to be courteous rather than mean.”

The FBI’s bills were like many others written and passed by the Legislature to benefit a specific industry or, in this case, a single company. These bills tend to pass quietly because they are so narrowly drafted that they engender little opposition. The only difference this time was that the companies that supposedly were to gain from the legislation were phony.

The FBI’s first bill was sponsored by a “company” calling itself Gulf Shrimp Fisheries Inc. of Mobile, Ala. Gulf Shrimp purportedly wanted to change state law so it could obtain low-interest financing to build a shrimp processing plant in West Sacramento.

But by the time Gulf Shrimp appeared on the Sacramento scene in the spring of 1986, the Legislature’s annual deadline for introducing bills had passed. The deadline is designed to prevent bills from being taken up late in the year when there is very little time for analysis or debate.

Gulf Shrimp simply did what countless real companies have done: It found another measure that had been introduced before the deadline, but had since stalled in committee. A Gulf Shrimp representative, former legislative aide Darryl Freeman, asked Assemblyman Sam Farr (D-Carmel) if the company could remove the original contents of one of Farr’s bills and substitute its own.

“I wasn’t interested in carrying it,” Farr said. “It was too narrowly focused.” But Farr did agree, as is common legislative courtesy, to help Gulf Shrimp accomplish its ends by abandoning his bill if the company could find another lawmaker to carry the cause.

Undercover Agent

Farr’s aide, Tim Masanz, then shuttled Freeman and the supposed president of Gulf Shrimp, Jack Gordon--actually an FBI agent--to an Assembly committee consultant to help them find a willing author.

The consultant, Will Brown, said he suggested that Freeman and Gordon seek a Sacramento-area legislator to carry the bill as a district issue. Freeman later approached three Sacramento lawmakers, Assemblymen Phillip Isenberg and Lloyd Connelly, both Democrats, and Sen. John Doolittle, a Republican, all of whom rejected his overtures. An aide to Isenberg said the assemblyman turned Freeman away because Freeman refused to complete a standard form giving information about the proposal’s sponsor.

Consultant Brown said he found it odd when the pair returned four days later having not only located an author--Democrat Moore of Los Angeles--but also having had their proposal already written in legal language suitable for legislation.

“High-profile, sophisticated lobbyists do that,” Brown said. “You don’t expect that of small businessmen. One day they came with a concept, no author, and a one-page outline. A few days later, they come back with an author and all the material.”

The FBI apparently accomplished this feat by modeling its bill after a similar special-interest measure carried in 1981 by Sen. Ed Davis (R-Valencia). Davis’ bill never really got off the ground in the Legislature and he was surprised when told by The Times that the measure served as the FBI’s model years later. “Well, I’ll be damned,” he said with a laugh. “Maybe they stung me.”

As they were preparing to move their bill, the Gulf Shrimp proprietors again took a page out of the typical Sacramento playbook: They arranged to buy $1,000 worth of tickets to a fund-raiser put on by Speaker Brown (D-San Francisco). After Gulf Shrimp passed the money in cash under the door of one of Brown’s aides--it is illegal to accept political contributions of more than $100 in cash--the aide returned the money and later received a cashier’s check to replace it.

Transformation of Bill

On June 23, Moore formally took over the bill, removing Farr’s name and the entire contents of his measure and inserting, as a single amendment, the new bill sponsored by Gulf Shrimp.

Two weeks later, the bill was approved 12 to 2 by the Assembly Finance and Insurance Committee, and two days after that it was whisked through the full Assembly on a 72-5 vote.

Assemblyman Eric Seastrand (R-Salinas), who along with Assemblyman Peace opposed the bill in committee because of its special-interest provision, said the measure probably passed with ease because it faced no organized opposition.

“These bills get up there and people low-ball them,” he said, referring to the practice of underplaying the importance of bills. “You don’t see anything with red flags on it. You don’t tend to vote against them.”

Peace added that unwritten legislative rules discourage members from challenging one another.

“It’s a buddy-buddy system,” Peace said. “I opposed this bill but sat there with my mouth shut. Why? Because you don’t have an antagonistic author. Knowing the way the system works, you figure you can’t defeat the bill anyway. But we’re doing a disservice to each other by not standing up and speaking.”

After winning Assembly approval, the bill’s next stop was the Senate Banking and Commerce Committee. Terry Miller, that committee’s consultant, said he was bothered by the measure’s late arrival at his panel on Aug. 13, well after the deadline for considering Assembly-passed bills. The day before, Gulf Shrimp had donated $500 to the Senate Democratic Caucus.

Exception to the Rule

“Generally speaking, our last hearing is the end of June. That’s it,” Miller said. “We rarely hear bills in our committee in August. But there was no opposition. It was probably a courtesy.”

The committee approved the bill on a 6-0 vote and sent it to the Senate floor, where it was amended to apply to a broader array of companies, rather than only to Gulf Shrimp.

Two days later, Gulf Shrimp contributed $15,000 to then-Sen. Carpenter, whose aide, John Shahabian, was helping to introduce Freeman and Gordon around the Senate. Shahabian ultimately became an FBI informant and was wired to record his Capitol meetings.

As the bill was awaiting final approval in the Senate and Assembly, Gulf Shrimp, through an intermediary, gave $3,500 to the campaign of Moore. The check was dated Aug. 25.

The measure was considered by both houses on Aug. 29, which was slated as the final day of the 1986 legislative session. (The Legislature actually kept on passing bills for a few more days.) The measure was approved 33 to 0 in the Senate, where it was carried for Moore by Sen. Leroy Greene, a Sacramento County Democrat. Greene said his trust of Moore was a factor in his decision to push the bill for her on the Senate floor.

“There’s a certain amount of that in carrying and voting for any bill,” he said.

Later on Aug. 29, the bill was returned to the Assembly for a vote on Senate amendments. It was a typical end-of-session hectic day in the Legislature, with nearly 200 bills considered, and most of them passed, in a few hours.

Moore took up the bill two hours before midnight, but failed to get the 54 votes needed for passage as an emergency measure. Republicans, many of whom had voted for the bill in its earlier form, were holding up its passage the second time around, apparently because a GOP analysis had offered only a lukewarm endorsement for the bill, calling it “marginally supportable.”

Bill Passes Assembly

Sometime after the scheduled midnight adjournment--the Assembly stopped the clocks at 11:55 p.m.--Moore brought up the bill and won passage on a 56-22 vote. Although all 22 votes against the bill were from Republicans, nine members of the minority party voted for it, providing the margin needed to put the measure over the top.

Gulf Shrimp Fisheries gave Moore a $5,000 campaign contribution that day. Alarmed at the size of the donation, Moore later returned it.

As the bill sat on Deukmejian’s desk, Gulf Shrimp, through an intermediary, donated $6,500 to Speaker Brown. It also gave another $5,000 to Carpenter’s campaign. Carpenter had not voted on the bill when it was on the Senate floor, but his aide, Shahabian, had helped shepherd the measure through the Legislature.

Deukmejian--with the knowledge, according to federal sources, that the measure was part of a sting--vetoed the bill on Sept. 30, saying the increased risks that the bill would create for savings and loans were not in the public interest.

The FBI sat out the 1987 legislative session, waiting until February of this year to re-emerge with another bill.

The 1988 bill had a much easier time of it. Moore introduced the measure on Feb. 19, the last day for bills to be introduced. But this time she introduced a “spot bill”--a meaningless measure used by lawmakers to save a spot on the legislative calendar for another purpose.

On March 21, the bill’s new sponsor, Peachstate Capital, another phony FBI firm that claimed to have purchased Gulf Shrimp, contributed $2,000 to Moore. Two weeks later, Moore amended her bill, removing the “spot” language and inserting the original special-interest provisions tried in 1986 for Gulf Shrimp.

According to consultant Brown of the Finance and Insurance Committee, Moore’s bill sat in a file in his office for several weeks because the assemblywoman failed to respond to repeated requests for details about the proposal or its sponsors. She also ignored requests by the committee’s staff to set a date for the bill to be considered by the committee, Brown said.

Moore’s bill was finally scheduled for a committee hearing on May 19, the last day for the panel to consider bills of its kind. On that day the committee had 25 measures to consider, many of them complicated and several of them controversial because they were sponsored by the “Gang of Five,” a group of five rebel Democrats seeking to oust Speaker Brown.

Against this backdrop, Moore--a member of the committee--stepped down from the dais to present her bill, No. 16 on the agenda.

Consultant Brown recalls: “She steps down and she says, ‘Members, I won’t burden you. I know we’ve got a long file and a lot of complex issues. This is a very simple one.’ ”

With no opposition and no supporting witnesses, the bill was approved on a 19-1 vote. Only Chairman Pat Johnston (D-Stockton) dissented. He says now he voted against the bill because of its special-interest provisions.

$4,000 Contribution

One week later, as the bill moved to the full Assembly, Peachstate contributed $4,000 to Speaker Brown, a common practice for private firms pushing bills.

The Assembly approved the bill 62 to 5 and sent it to the Senate Banking and Commerce Committee, where consultant Miller reports that he, too, found only a “scanty” file backing up the bill.

“We got very little information on why the bill was needed,” Miller said, not realizing that the measure was nearly identical to the one he had questioned in 1986. “No depth whatsoever. One piece of paper with a couple of lines on it.”

His analysis pointed out that the measure was written to help one company, but this time, the committee made no effort to broaden the bill’s scope.

Still, the committee approved the bill on a 6-0 vote, the exact number necessary to move the bill along. Sen. Montoya, who received a $3,000 honorarium from Peachstate this year, cast the deciding sixth vote, committee records show. Another member of the committee, Sen. Alan Robbins (D-Van Nuys), who did not vote on the bill, said he was also offered an honorarium by Shahabian but turned it down.

The committee vote moved the bill to the full Senate. As the measure sat on the upper-house agenda, Peachstate contributed $5,000 to Assembly Republican Leader Nolan of Glendale and $5,000 to the Assembly Republican political action committee controlled by Nolan.

On the Senate floor the next day, the bill was carried for Moore by Nolan’s Senate counterpart--GOP Leader Ken Maddy of Fresno--and passed on a 37-0 vote. Maddy said later that he knew little about the bill at the time and, he added, he reprimanded the staff member who arranged for him to carry it without first clearing it with the senator.

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

Because the bill was not amended in the Senate, it was sent directly to the governor’s desk. Deukmejian, tipped off that the bill was part of an FBI sting, vetoed it.