Pro-Israel Activist Investigated in Zschau Defeat

Los Angeles area businessman Michael Goland, a pro-Israel activist who spent $1.1 million helping to defeat former Sen. Charles H. Percy (R-Ill.) in 1984, is the target of a federal election fraud investigation into $120,000 that was mysteriously spent in 1986 to aid the reelection of Sen. Alan Cranston (D-Calif.).

Sources said Tuesday that the Justice Department probe seeks to determine whether Goland illegally funneled money through other individuals to a minor party candidate in a plot to drain votes away from Cranston’s major challenger, Republican Ed Zschau.

Investigators theorized that Goland, a generous financial contributor to Israeli causes, opposed the candidacies of Percy and Zschau because of their positions on Israel and Middle East issues.

Last year, the Federal Election Commission fined Goland $5,000 for failing to identify himself in TV ads that he arranged and paid for against Percy, but the commission dismissed a complaint by Percy that Goland’s massive expenditures were illegal.

Goland, whose principal business is Balboa Construction Co., which owns a chain of mini-storage warehouses based in Chatsworth, could not be reached for comment on the latest investigation.

The Times reported shortly after the 1986 California Senate election that a group of more than 40 contributors, many of them members of orthodox Jewish congregations in Los Angeles, gave $120,000 in the last two weeks of the campaign to Edward B. Vallen, the American Independent Party candidate.

Some contributors who were interviewed said their purpose in giving to Vallen was to aid the reelection efforts of Cranston and to undercut the campaign of Zschau. But none of the contributors would divulge who had solicited the money from them or had collected it.

David Zelon of Santa Monica, who gave $2,000 to Vallen, acknowledged in a telephone interview with The Times on Tuesday the accuracy of reports that an “acquaintance” had asked him to make the contribution and then had reimbursed him later. He said an FBI agent had shown him his $2,000 check and the reimbursement check in a recent interview. Zelon declined to name the acquaintance.

It is illegal to contribute to a federal campaign in the name of another person.

Vallen, who used the money for television ads aimed at shifting conservative Republican votes from Zschau, wound up receiving 109,916 votes--about 5,000 more than Cranston’s slim victory margin over Zschau.

Vallen, avowedly “against the Zionists,” has said he never would have taken the $120,000 if he had known where it came from. He and his campaign manager said they were told that the money came from “conservative, patriotic Christians.”

Although most of the contributors contacted by The Times in 1986 appeared to have the means to make the contributions to Vallen, relatives of two of them said their family members could not have afforded the $2,000 donations listed for them. The relatives speculated that the money must have come from some unidentified third party.

Many Vallen contributors continued to refuse comment Tuesday. For instance, Michael Altman, a Sherman Oaks businessman who with his wife gave $4,000, said, “I make it a policy never to grant interviews to anyone, and I’m going to stick with that policy.”

‘Can’t Tell You That’

Similarly, when Alan J. Setlin of Beverly Hills was asked if the FBI had talked to him about a $2,000 contribution to Vallen, he replied, “I’m sorry. I can’t tell you that,” and hung up.

David Hultquist and Maury M. White, who were identified then as executives of Goland-controlled companies, were listed in 1986 campaign reports as giving $4,000 and $2,000, respectively, to Vallen. Another contributor, Jerry Hanrahan, was listed in Vallen reports as living in a Malibu home that records showed was owned by Goland. Yet another donor, Richard M. Horowitz, was described as a Goland friend, although neither Horowitz nor Goland would discuss the matter.

Mark Barnes, a Republican Los Angeles political consultant, told The Times in 1986 that an unidentified man had approached him to relay the money to Vallen and had given him checks from donors.

However, Barnes on Tuesday said that it was actually a woman, whom he identified as Colleen Marrow. He said she was the only person he had worked with directly. He said Marrow was a longtime acquaintance in conservative politics and now works for the International Freedom Foundation

The foundation is a conservative organization with headquarters in Washington and branches reportedly in Israel and South Africa.

Interviewed by Agents

Barnes said he was interviewed by two FBI agents in the summer of 1987 and gave them all the documents he had relating to the contributions, as well as what he knew about Marrow’s role.

An attempt to reach Marrow for comment late Tuesday was unsuccessful.

Zschau, who heads Censtor Corp., a San Jose manufacturer of computer disks, said that if the investigation “results in some kind of action being taken, I’ll feel better about it. This is not the kind of thing you want to condone. It shouldn’t be viewed as just the breaks of the game and let’s go on to the next election. If something was illegal, I hope action will be taken to deter others from doing the same thing in new elections.”

Houston reported from Washington, Reich from Los Angeles.