Keene’s Records Subpoenaed; Aide Investigated

Federal authorities, widening their probe of alleged Capitol corruption, have subpoenaed the records of Senate Majority Leader Barry Keene and named his top aide as the latest target of their investigation, it was learned Friday.

The FBI also plans to interview Sen. Leroy Greene (D-Sacramento), who sponsored a bill on the Senate floor for a phony FBI company after an agent posing as the company’s president asked how much it “would cost” for the state senator to do the firm’s bidding, according to Greene.

“I ain’t squeaky, but I’m clean,” Greene told The Times.

Additionally, federal sources said the FBI is looking into whether Assemblyman Mike Roos (D-Los Angeles) acted improperly when he accepted a $2,500 honorarium after authoring a bill for a real group not involved in the FBI’s elaborate sting. But the federal sources said Roos is not a primary target of the probe.

Neither Keene (D-Benicia) nor Greene is considered a target of the FBI investigation. But Friday’s disclosures shed new light on how the Capitol sting operation wound its way through the Legislature, starting with low-level Democrats and ending with some of the Capitol’s most powerful Republicans.

Among elected officials, Assembly members Pat Nolan (R-Glendale), Frank Hill (R-Whittier), Gwen Moore (D-Los Angeles), Sen. Joseph B. Montoya (D-Whittier) and former Sen. Paul Carpenter of Cypress have been named as subjects of the probe.

Aided FBI Agents

During the FBI’s sting, Keene’s aide, Terry Frost, helped lead FBI agents posing as businessmen to Assembly Republican Leader Nolan. The “businessmen” hoped Nolan could ensure that Gov. George Deukmejian would sign legislation to benefit their bogus company, according to Frost’s attorney, Frederick M. Hanelt.

Keene said he has received a grand jury subpoena for records regarding the sting legislation, and added: “I’m prepared to tell them whatever I know, which isn’t much.”

Frost was asked to testify Sept. 2 before a federal grand jury, but declined when the U.S. attorney’s office sent him a letter saying he was a “target” of the probe, Hanelt said.

Hanelt said FBI agents interviewed Frost about a meeting he set up early this year between John Shahabian, a Senate aide who was then an FBI informant, and Karin Watson, an aide to Nolan. Shahabian was seeking Frost’s advice about the best way to get the “businessmen’s” bill signed into law by Deukmejian.

Shahabian, according to Hanelt, made “vague” references to Frost about one of the phony FBI “companies” contributing to legislators’ campaigns. But, the attorney said, Frost cut off such talk and became irate.

But Frost suggested that Shahabian contact Watson, “since she was connected to Nolan and it was fairly common knowledge that Nolan had access to the governor’s office,” Hanelt said.

Nolan received $10,000 in contributions from Peachstate West Capital Ltd., an FBI front “company.”

Nolan’s office was searched Aug. 24 along with those of Hill, Moore and Montoya.

As for Sen. Greene, he received $7,000 in campaign contributions from then-Sen. Carpenter in 1986 while playing what Greene said was an unwitting role in the sting. Carpenter had received $20,000 from Gulf Shrimp Fisheries, a phony FBI company that was pushing for passage of the bill that Greene sponsored in the Senate.

Greene told The Times on Friday that the FBI already has interviewed a member of his staff and will meet with the state senator next week. Greene acknowledged that it appears federal agents at one time had him in their sights.

“When you’re looking for mud, you don’t look for clean hands,” Greene mused.

Greene said that he met briefly on the Senate floor in August, 1986, with Jack Gordon, “president” of Gulf Shrimp Fisheries. As Gordon, who actually was an FBI agent, left the Senate chambers, he asked a Greene aide, “How much is this going to cost us?” Greene said.

Greene said the aide rebuffed the overture.

Still, Greene received a $2,000 contribution from Carpenter on the same day Greene provided a key committee for the Gulf Shrimp bill. And, five weeks after Greene carried the bill on the floor, he received another $5,000 from Carpenter.

Wired for Sound

This year, Shahabian, who had worked for Carpenter but was by then wired for sound, called Greene’s aide and asked how much money Greene had received in exchange for carrying the bill, the senator said.

“Her first response was ‘I don’t know,’ ” Greene said of his aide, whose name he would not disclose. “Apparently he was somewhat insistent. He said, ‘Would you find out and tell me?’ She refused. She didn’t do it.”

Roos has come under FBI scrutiny because of a $2,500 honorarium he received after carrying a bill in 1986 for the California Assn. of Personnel Consultants. The measure eliminated state regulation and a $300 annual fee for about 600 employment agencies that receive their payments from employers, rather than job applicants.

U.S. Atty. David Levi would not comment specifically on a report in the Sacramento Bee that quoted “three sources close to the probe” as saying that his office is considering prosecuting Roos under a federal racketeering statute.

But he cautioned: “While federal authorities are going to check all leads and allegations, it is far too premature to reach conclusions about these sorts of things.”

Before Roos agreed to carry the measure for the group, Roos aide Peter Taylor wrote a memo to his boss indicating that he had told the group’s lobbyist, James Randlett, that he was “mistaken” in thinking that the lawmaker would sponsor the bill. However, Taylor noted that Randlett “then started talking about getting you an honorarium for speaking at the (group’s) convention in Palm Springs.”

Roos subsequently introduced the bill, but has denied any impropriety.

In addition to his $2,500 honorarium shortly after the bill was passed by the Legislature, Roos spoke to the group again in 1986 and 1987, receiving an additional $5,000, the records show.

Contributing to this story was Times staff writer Paul Jacobs.