Votes for Tax Cuts Help Carpenter Contributors : Member of Equalization Board, a Target of FBI Inquiry, Sees Role as ‘Taxpayer’s Ombudsman’

Paul B. Carpenter, a member of the State Board of Equalization and a target of the FBI investigation into Capitol corruption, has frequently voted to cut state taxes for companies that contribute to his political treasury, a study of public documents shows.

Since Carpenter was elected to the board in January, 1987, he has participated in 34 votes affecting firms that have given him $56,400 over the last three years, according to state records. In 25 of the cases, Carpenter voted to approve tax breaks for his political supporters--in one instance as much as $6 million.

Six other cases involving contributors are pending before the board, including a $250-million tax appeal by insurance interests that have donated $46,500 to Carpenter.

This pattern of casting votes that assist contributors illustrates how Carpenter, an adroit fund-raiser and former state senator, has helped politicize a relatively obscure administrative agency that assesses $30 billion annually in state taxes on utilities and businesses.

By providing the pivotal swing vote on the five-member board, Carpenter has launched an assault on the agency’s longstanding practice of aggressively pursuing business, sales and property taxes.

He also has directed a major expansion of the agency’s once-small legislative unit into a $500,000-a-year, 11-person bureau. This has allowed him to maintain “a close working relationship with many old friends, both in and out of the Capitol,” Carpenter wrote in a recent fund-raising letter to potential contributors. And he helped initiate an extensive shake-up of management executives that included replacing four of the board’s top five administrators.

“There definitely has been a change since Carpenter came on,” said one staff lawyer, who like more than a dozen board employees interviewed insisted on anonymity out of fear for their jobs. “They are doing things board members never did before. . . . For their own political motivations they have a need to accomplish something. You don’t get elected by saying you’re anti-taxpayer. You get elected by saying you are pro-taxpayer.”

Carpenter is under investigation in the FBI corruption probe for his actions as a state legislator in 1986. The FBI also is looking into Carpenter’s fund-raising activities and voting record as a Board of Equalization member, according to sources who said they were recently contacted by federal investigators.

The 60-year-old Downey Democrat gave up his Senate seat after 13 years in the Legislature because he “had topped out in terms of his power and ability,” said a former Carpenter aide who asked not to be identified. The tax board position boosted Carpenter’s annual salary from $37,105 to $85,402.

Carpenter has declined requests for interviews. Last year, in statements published by the Daily News of Los Angeles, Carpenter referred to many of the Board of Equalization auditors as “troglodytes” (cavemen) whose sole mission is to maximize tax revenues.

“They would tax the smile on the Mona Lisa, if they could figure out a way,” he said.

Aides say Carpenter sees himself as a “taxpayer’s ombudsman” out to reform an unwieldy tax-collecting bureaucracy that does not enforce the state tax code fairly.

Carpenter sees no conflict of interest in awarding tax breaks to companies that contributed to his political campaign, said his spokesman, Jerry Goldberg. He said that Carpenter’s votes are based on the merits of each individual tax case and not on whether he received a contribution.

“Paul comes from the Howard Jarvis viewpoint,” said Goldberg. “He was the first Democrat to come out for Proposition 13. He felt that tax assessments were too high long before he ever got a donation or sat on the board.”

But Carpenter’s tax agenda was assailed on Oct. 4 in Palm Springs when he addressed the annual convention of the California Assessors Assn. Five minutes into Carpenter’s speech, Butte County Assessor Ted Cleveland marched out of the Gene Autry Hotel banquet room to protest recent actions by the tax board.

‘Worst Type of Politician’

“Why should I sit there and listen to someone who I have absolutely no respect for?” Cleveland said in an interview. “I think (Carpenter) is the worst type of politician--one who takes money and then allows those funds to influence his actions.”

Officers of the assessors association said they are angry that some corporations and utilities that make political contributions benefit from the board’s decisions. Last year, economically starved county and local governments lost $20 million in utility tax revenues alone when the board voted to lop $2 billion off its staff’s recommended property assessment values, the assessors said.

The board’s anti-tax revolt was triggered in 1987 by Carpenter, who joined with Conway H. Collis, a fellow Los Angeles Democrat, and Ernest J. Dronenburg Jr., a San Diego Republican, to form a new alliance on the five-member board. Collis said the majority bloc is determined to reverse the “anti-taxpayer bias” that was pervasive among the board staff.

Before he and Carpenter were elected, the board “was simply a rubber-stamp for whatever the staff did,” Collis said. “It was a process at every step of the line that was stacked against the taxpayer, large and small.”

Fund-Raising Continues

As the new majority seized control of the board, Carpenter and Collis continued to raise huge sums of money to bankroll their political campaigns. The board members, who serve four-year terms, will be up for reelection in 1990.

Carpenter collected $531,620 in contributions to get elected in 1986 and has since added $214,320 in donations to his campaign fund. Although Collis has received more money--$948,950 since 1986--than any other regular board member, he has, with few exceptions, refrained from voting on tax cases involving his political supporters and refuses contributions from utilities.

Collis said the exceptions were “oversights” and he has since followed a strict policy of not accepting money from utility companies, whose property assessments are set annually by the board, and not voting on matters involving his political donors.

By contrast, supporters who contributed $116,000 to Carpenter have appeared before the tax board 48 times since he was elected. Carpenter’s voting record shows that he approved tax reductions in 25 of these cases, voted against tax cuts in nine cases, was absent seven times and abstained in one case. Six cases are still pending.

Carpenter, unlike other board members, neither refrains from voting on matters involving political contributors nor refuses to accept money from the same firms that have tax matters pending before the board, Goldberg said.

Other Stances Described

Gray Davis, who as state controller sits as an ex-officio member of the board, does not vote on board matters involving companies that contribute to his campaign. William M. Bennett, a Northern California Democrat and a board member since 1970, does not accept campaign contributions of any kind.

“I just don’t believe in it,” Bennett said. “The problem is we are having individuals of uncontrolled political ambition elected to the board. They are trying to solicit and raise funds from taxpayers with business before the board. We have had decisions--whether by coincidence or by design--that benefit the contributors. I don’t have any doubt what people are buying, and neither do they.”

Carpenter has no reluctance to discuss board business with potential contributors.

In an invitation to a “very exclusive” $500-per-person cocktail party on Aug. 24, Carpenter wrote: “At this event, I hope to accomplish two things: First, help reduce my campaign deficit and, even more importantly, to have the opportunity to explore your thoughts on how the board can be more responsive to California business leaders and taxpayers. . . . Your support is important to me as I go about my work on the Board of Equalization.”

Fund-Raiser Successful

Carpenter did not show up until the end of the two-hour reception and missed meeting many of his supporters, said sources who attended the event. Nevertheless, campaign records show that the fund-raiser was a success. Carpenter netted about $15,000 in contributions. The fund-raiser was held at Frank Fat’s restaurant, a popular political hangout near the Capitol, on the same night the FBI culminated its sting operation by raiding the offices of four state legislators.

Several companies and organizations that contributed to the fund-raiser have an interest in tax cases before the board, records show. These include Pacific Telesis, Shell Oil Co., California Beer & Wine Wholesalers Assn., California Automatic Vendors Council, Trailer Train Co. of Chicago and Pacific Gas & Electric.

PG&E; received a $6-million tax break last year when Carpenter, Collis and Dronenburg voted to set the utility’s property value at $16.4 billion--$600 million below the level recommended by the board’s appraisers and $500 million under the company’s own request. PG&E; gave campaign contributions of $2,500 to Carpenter and $950 to Collis.

Carpenter explained why he voted to reduce PG&E;’s property assessment in a letter to Plumas County Counsel Robert Schulman. He wrote: “Property tax assessments are paid directly by the rate payers of a utility district through their monthly utility bills. Therefore, your request that PG&E; be given a high assessment is a request to raise the utility bill of every PG&E; customer in Plumas County. Certainly, if that is the wish of the residents of Plumas County, I am more than willing to abide by that decision.”

Popularity Conceded

Although county assessors concede that Carpenter’s rationale may be popular among taxpayers, they insist it is improper for a political viewpoint to influence his vote. Board regulations require members to assess the “full value” of property based on strict formulas.

“We feel it is not right to politicize the process of taxation,” said Los Angeles County Assessor John Lynch. “Carpenter is incapable of realizing that his partisan mind-set should have been left at the doorstep when he took a seat on the Board of Equalization. He does not understand that the board is a low-profile job politically. You are not the public hero.”

Carpenter has voted in 15 cases to grant lower utility tax assessments than the values recommended by the board’s staff. These utility firms have contributed $19,150 to Carpenter since 1986. He sided with the staff appraisers and against the utilities on only three occasions.

Similarly, Carpenter has voted to award other tax breaks to political supporters that include BKK Corp., Pacific Telesis, General Telephone and the California Automatic Vendors Council.

BKK won a $292,834 tax break last year when Carpenter, Collis and Dronenburg overruled the board staff and decided that the waste handled by the refuse disposal firm was not subject to the state hazardous substances tax law.

Appeared to Support Staff

When the BKK case was initially heard in October, 1986--three months before Carpenter joined the board--members appeared to support their own staff’s position but agreed to give attorneys for the company 30 days to submit additional arguments, said one board official familiar with the case. In April, 1987--four months after Carpenter joined the board--BKK was awarded the tax cut.

“The next thing I knew the board granted it,” the official said. “I never knew why. There was not another board meeting. The company never submitted anything. Nothing ever happened. Then they got the refund. It was weird.”

BKK has contributed $16,000 to Carpenter’s political treasury since 1986.

In addition to deciding sales and property tax cases, the Board of Equalization also has broad powers to interpret tax measures passed by the Legislature. The impact of these little-watched decisions can be dramatic.

Earlier this year, for example, Merced city officials noticed an unexpected drop in their sales tax revenues. They discovered that the board had awarded a tax break to Pacific Bell, which has its Yellow Pages directories printed by a Merced company. The tax break--worth more than $2 million to the phone company--cut the city’s revenues by $500,000 a year.

Part of 1986 Measure

The board, against the advice of its staff, had included the Yellow Pages as part of a 1986 measure intended to help California printers compete with out-of-state firms in producing mail-order catalogues. By doing so, the board also ignored warnings from a printing industry lobbyist who predicted that the exemption for telephone directories would mean a windfall of as much as $8 million for only a few firms.

Even Gov. George Deukmejian said he was “not aware” when he signed the bill into law that the tax board would apply it to telephone companies. In a recent letter to Merced Mayor Marvin Wells, Deukmejian pledged to help “ensure that this exemption does not apply beyond the original intent of the legislation.”

Carpenter, who introduced the motion in favor of the telephone companies, has received a total of $6,600 in political donations since 1986 from Pacific Telesis, parent of Pacific Bell, and General Telephone.

In another regulatory case, the board implemented legislation to decrease taxes on certain cold foods sold from vending machines. The board extended the tax exemption intended for cold foods to include hot coffee.

Although Carpenter missed that vote, his office helped persuade the board’s staff to develop an argument for extending the tax break to hot drinks, board records and interviews show. Carpenter has received $1,500 from the California Automatic Vendors Council since 1986.

Jack Crose, a lobbyist for vending machine owners, said he did not contact Carpenter on the hot coffee case, but he believes that individual vending machine owners did. He said he normally suggests that his clients make contributions to gain access to board members.

“The Board of Equalization thing is new,” Crose said of receiving solicitations from board members. “In the last few years . . . the board (has been) almost as politicized, when it comes to contributions, as the Legislature.”

CARPENTER’S VOTES How Board of Equalization member Paul B. Carpenter has voted on tax matters involving contributors to his political fund.

Vote Company Contributions Position on since 1/1/86 tax break 1/8/87 Dow Chemical Co. $2,250 Award 1/20/87 Trailer Train Co. $750 Award 3/4/87 Shell Oil $2,500 Deny 3/4/87 Union Oil $3,000 Award 4/8/87 BKK Corp. $16,000 Award 5/6/87 Chevron Oil $500 Deny 5/28/87 ATT (2 cases) $1,800 Award, Deny 5/28/87 General Telephone $1,600 Award 5/28/87 MCI Telecommunications $500 Award 5/28/87 Pacific Telesis $5,000 Award 5/28/87 Pacific Gas & Electric $2,500 Award 5/28/87 Southern California Edison $5,000 Award 5/28/87 San Diego Gas & Electric $2,750 Award 5/28/87 Southern Pacific $1,000 Award 6/3/87 Atlantic Richfield $4,500 Award 6/16/87 Van Camp Arabians $250 Award 8/7/87 General Telephone $1,600 Award 8/7/87 Pacific Telephone $5,000 Award 8/7/87 Print Pac $650 Award 10/7/87 Shell Oil (2 cases) $2,500 Deny, Deny 10/8/87 Union Oil $3,000 Deny 10/8/87 Chevron Corp. $500 Deny 10/20/87 Litton $2,500 Award 12/21/87 Southern Pacific $1,000 Award 1/6/88 Trailer Train Co. $750 Award 5/31/88 ATT (2 cases) $1,800 Deny, Deny 5/31/88 General Telephone $1,600 Award 5/31/88 MCI Telecommunications $500 Award 5/31/88 Pacific Telesis $5,000 Award 5/31/88 Pacific Gas & Electric $2,500 Award 5/31/88 Southern California Edison $5,000 Award 5/31/88 San Diego Gas & Electric $2,750 Award 9/13/88 Motion Picture Producers $1,350 Award 9/13/88 Paramount Pictures Corp. $500 Award 9/13/88 Reel Sound Inc. $500 Award 9/13/88 Walt Disney Co. $1,000 Award