FBI Reportedly Drawn by Nolan’s Tactics on Funds

Assembly Republican Leader Pat Nolan and one of his top lieutenants, Assemblyman Frank Hill, were ensnared by the FBI’s Capitol sting operation because of a high-profile, hard-sell approach to fund raising that boasted of their influence with Gov. George Deukmejian, sources have told The Times.

Rival Republicans and former legislative staff members said in interviews that Nolan and his allies reshaped the Assembly Republican staff into an efficient political and fund-raising apparatus designed to rival that of Assembly Speaker Willie Brown (D-San Francisco).

These sources suggested that it was the eagerness of the Republican leaders--their aggressive, even brazen, attempt to match the Democrats--that led them into the net of undercover FBI agents ostensibly seeking support for special-interest legislation that would benefit their phony companies.

In pitches to Capitol lobbyists and in press releases, the Republican leaders repeatedly have asserted that a unified Assembly GOP is a force to be reckoned with, both because of its influence with the governor and because it has a reasonable shot in an election or two of becoming the lower house’s majority party. Nolan boasted in a press release last year that Deukmejian “has vetoed almost 90% of the bills that Assembly Republicans have requested him to veto.”

A Republican source, who asked not to be identified, said Nolan and Hill were extracting contributions from lobbyists, saying they had influence with the governor on legislation.

In one 1987 presentation to lobbyists, complete with pie charts and bar graphs, the Glendale lawmaker asserted that he and other Assembly Republicans had raised more than $3.5 million for 1986 elections, in which the GOP gained three Assembly seats. The record fund-raising effort put the Republicans “in the same financial league with the Democrats’ $5.5-million war chest,” according to a fund-raising packet Nolan presented to lobbyists.

The session ended with Nolan reminding the lobbyists of an upcoming Republican fund-raiser, according to one lobbyist who attended the meeting.

An internal Assembly Republican Caucus memo obtained by The Times declares flatly that the lawmakers’ top priority for their state-paid legislative consultants is “to aid members in their reelection efforts and . . . unseat Democrat incumbents.”

Nolan met with an FBI agent posing as a businessman on June 28 after being promised a hefty campaign contribution, according to sources familiar with the federal probe into Capitol corruption.

The businessman, operating under the name of George Miller, insisted on meeting with Nolan directly before giving the GOP lawmaker’s campaign committees checks totaling $10,000.

Also attending the meeting was one of Nolan’s chief legislative aides, Karin Watson, a $52,488-a-year legislative consultant who had been acting as a Nolan-”Miller” go-between until the FBI agent sought his direct meeting with the GOP leader.

Watson’s usual job was to act as an intermediary between lobbyists and Nolan, according to a number of legislative aides and lobbyists who agreed to be interviewed only if they were not identified.

Watson is one of a handful of the Assembly Republicans’ “super-consultants” whose job was to sound out lobbyists and to raise money from them, according to one GOP lawmaker who asked that he not be identified.

One veteran Capitol lobbyist recalled approaching Watson for help on a bill only to be reminded that his clients had not contributed money to GOP election campaigns. He quoted Watson as saying, “If we are going to help you, you guys ought to help us.”

It was Watson who had promised Nolan’s help in getting a special-interest bill through the Legislature to benefit the FBI-created “company”--Peachstate Capital West Ltd.--although a similar bill had been vetoed by the governor two years before.

Support Urged

An Assembly Republican Caucus bill analysis urged support for the 1988 version of the measure carried by Democratic Assemblywoman Gwen Moore of Los Angeles, although the document noted that it was “special-interest legislation” that passed two years before “only to be vetoed by the governor.”

Republican lawmakers depend heavily on such bill analyses--packaged as “floor alerts”--to guide their votes. Not one Republican voted against the Moore bill when it passed the Assembly on a 62-5 margin last May.

Even before Nolan received the checks from Peachstate in late June, one of his closest allies, Whittier Assemblyman Hill, had received a $2,500 honorarium from the phony company.

Hill, who is the Republican caucus liaison to the governor, “bragged openly” in party circles about his ability to extract contributions from lobbyists, said one former GOP legislative aide.

Although he had no significant reelection opposition, Hill was able to raise large sums for his campaign committee that he could then pass along to other GOP candidates--$117,000 in the first six months of 1988.

Hill was also among the leaders in collecting honorariums from special-interest groups courting the Legislature. For 1987, he officially reported being paid $20,950 in speaking fees from 16 organizations.

Hill could not be reached for comment Tuesday. Nolan and Watson declined to comment.

Offices Raided

On Aug. 24, the FBI ended its sting operation by raiding the Capitol offices of Hill, Nolan and Watson, as well as Assemblywoman Moore; Moore aide Tyrone Netters, and Sen. Joseph B. Montoya (D-Whittier).

Sources familiar with the federal investigation said all six are subjects of the probe, along with former Democratic state Sen. Paul Carpenter, now a member of the State Board of Equalization.

The head of the FBI’s Sacramento office, Terry L. Knowles, said the federal investigators expect to present their findings to U.S. Atty. David F. Levi later this month or in early November. No one has yet been accused of a crime. However, search warrants obtained by federal investigators for their Capitol raid state that the agents were seeking evidence of violations of the federal anti-extortion statute.

Sources familiar with the federal probe said the undercover or sting phase of the investigation ended when Watson refused to turn informant after being confronted by the FBI at Peachstate’s offices.

At the session, which began in the early afternoon and lasted through the dinner hour, the federal agents showed Watson photographic blowups of her meetings with “Miller” and other documents.

But instead of agreeing to cooperate in a continuing sting, Watson tried to persuade the FBI that her conduct had not violated the law, according to a friend of Watson.

“Her view was that the FBI didn’t understand,” the source said. “They were interpreting these things as bribery. It’s not bribery--people were not buying favors for money. It’s the way legislative fund raising works.

“It’s no secret around the Capitol that the caucus staffs, Republicans and Democrats” were involved in campaigns, the source said.

Aggressive Posture

In the competitive race to win a majority of seats in their 80-member house, the Assembly Republicans took an aggressive posture toward campaign fund raising after Nolan was elected Minority Leader following the 1984 elections.

An internal Assembly Republican Caucus memo obtained by The Times, states: “If we have any hopes of achieving a majority, we must ‘politicize’ the policy staff. We need creative ideas to embarrass Democrat targets.”

Another job of the Republicans’ state-paid staff “included the compilation of information on potential contributors,” the memo said.

Generally, it is illegal to use public resources--such as state employees on state time or state equipment--for political campaigns.

Times staff writer Daniel M. Weintraub contributed to this story.