FBI Probe of Boatwright Is Told : Investigation: State senator’s partnership in condominium with lobbyist for ethanol firm is reportedly among financial dealings being checked.

In a widening probe of alleged Capitol corruption, the FBI is investigating an influential Northern California senator and his personal business dealings with a lobbyist, according to sources close to the case.

Federal agents are investigating Sen. Daniel E. Boatwright’s financial dealings, including his partnership in a Santa Cruz condominium with a lobbyist who represented an Orange County ethanol firm, the sources said. At the time of the partnership, Boatwright was carrying legislation to provide a special tax break that would have benefited the ethanol company. Later, Boatwright sold the lobbyist his share in the condo.

Boatwright, a Democrat from Concord, becomes the seventh legislator known to come under investigation in the probe that led to the conviction in February of Sen. Joseph B. Montoya (D-Whittier). After Montoya resigned from the Senate, Boatwright was named to take over his post as chairman of the Senate Business and Professions Committee.

In a brief interview in the Capitol, Boatwright said he had no knowledge of the federal investigation and declined to discuss the Santa Cruz condo or his transactions with lobbyist Gary R. Neese. “I have nothing to say,” Boatwright said before walking away.

The investigation of Boatwright apparently is the first case that has been developed entirely apart from an FBI sting investigation in which undercover operatives secretly tape-recorded conversations with legislators and staff members. Boatwright, a lawyer serving his 18th year in the Legislature, has held a series of key positions in both houses, including chairman of the Assembly Ways and Means Committee and of the Senate Appropriations Committee.

A spokesman for the U.S. attorney’s office in Sacramento would not discuss whether there is an investigation of Boatwright, saying, “We will not confirm or deny any kind of investigation.”

In March, a federal grand jury indicted former Sen. Paul Carpenter (D-Norwalk), now a member of the State Board of Equalization, on extortion and racketeering charges. His trial is set for August. Still under investigation are Assemblywoman Gwen Moore (D-Los Angeles), Assemblyman Pat Nolan (R-Glendale), Sen. Frank Hill (R-Whittier) and Sen. Alan Robbins (D-Tarzana), who were all tape-recorded or videotaped by the FBI during the sting investigation.

The investigation of Boatwright centers on whether he used his Senate position for personal gain in violation of federal racketeering law. Federal agents are focusing on Boatwright’s sponsorship of the ethanol legislation while he and Neese were joint owners of the Santa Cruz condo. They also are looking at Boatwright’s role in a 1987 bill that helped a group of Sacramento-area auto dealers receive financial assistance from the government, according to sources close to the investigation.

The new allegations have prompted investigators to re-examine a previous FBI investigation into the senator’s activities. That earlier investigation, dating back to the mid-1980s, concluded without any finding that he had violated the law. Federal agents also are reviewing the records of a lawsuit filed by the Internal Revenue Service against Boatwright claiming that he owed $112,000 in back taxes on undeclared income from a shopping center investment. In that case, Boatwright won a 1986 court decision and did not have to pay back taxes.

The association between Boatwright and Neese goes back to at least June, 1984, when the lobbyist and his wife, Vicki, acquired a 75% share of a condo the senator owned, Santa Cruz County records show.

Boatwright had purchased the property near Manresa State Beach for approximately $225,000 in 1983, the records show. But it is unclear how much the Neeses paid for their share in the condo.

By 1985--while Neese and Boatwright were partners in the condo--Neese was working as a lobbyist for Tropicana Petroleum Ltd., an ethanol firm then based in Brea.

“Gary was my lobbyist . . . “ said Tropicana President Richard B. Vind in a telephone interview from his Orange County office. “He advised me on the proper ways to draft legislation, and the ins and outs of who to talk to. It’s a zoo up there.”

Vind said he employed Neese through 1987. Although Neese did not register as a lobbyist, others involved in the ethanol issue said he made frequent trips to the Capitol to promote Tropicana’s interests.

Neese did not return repeated telephone calls from The Times.

During the mid-1980s, Boatwright was Tropicana Petroleum’s leading champion in the Legislature.

Boatwright, then chairman of the influential Senate Revenue and Taxation Committee, sponsored a 1983 bill designed to provide a tax break for the fledgling ethanol industry. Advocates of the alternative fuel--a blend of gasoline and alcohol--hoped that it would become a popular substitute for gasoline in automobiles.

Boatwright’s bill became law, but a fluke in the drafting of the measure prevented the tax break from taking effect.

In 1984 and 1985, Boatwright again won passage of bills that would have provided the tax break, at one point worth an estimated $8.8 million to the ethanol industry.

Both bills, however, were vetoed by Gov. George Deukmejian, who objected to granting a special tax break to the industry.

The failure to get the tax break, Vind said, subsequently forced him to disband his California operations.

During the period that Boatwright was carrying the ethanol bill, he also was receiving income from a law firm linked to Tropicana Petroleum.

In each of the years from 1984 to 1987, Boatwright reported receiving more than $10,000 from the Los Angeles law firm of Demetriou, Del Guercio & Lovejoy. The firm represented the California Alcohol Fuels Council, which was headed by Vind. In earlier interviews, Boatwright denied any conflict of interest in receiving the money for serving as outside counsel to the firm.

Tropicana and Vind also have contributed generously to Boatwright’s campaign coffers, giving at least $5,200 from 1984 to 1989, records show.

In May, 1987, the Neeses acquired Boatwright’s remaining 25% interest in the Santa Cruz condo, records show, although the sale was not recorded until the following December. Four months later, American Savings & Loan of Stockton foreclosed on the property and took over the title.

In his required financial disclosure statement, Boatwright reported both of the condominium transactions but did not identify the Neeses as his partners or the purchasers of the condo.

In 1989, Neese registered as a lobbyist in a partnership with former Assemblyman Bruce Young (D-Norwalk). Young was convicted of mail fraud in an earlier corruption scandal in the Capitol but his conviction was later overturned on appeal.

Times Staff Writer Paul Jacobs also contributed to this article.