Worlds of Politics, Law Often Mix for Speaker : Capitol: Willie Brown’s legal and speaking fees from corporations far outstrip his public salary. He denies any conflict of interest. The FBI probes some dealings.

From his home base in San Francisco and his seat of power in the Capitol, Assembly Speaker Willie Brown repeatedly has entangled his public duties with the private interests of his law clients, interviews and public records show.

In the decade since he became Speaker, the Democratic leader has moonlighted as a private lawyer collecting more than $1.4 million from clients that include some of the world’s richest corporations. He also became a celebrity speechmaker, receiving more than $500,000 in honorariums during the same period, primarily from corporations and trade associations with interests before the Legislature and from business associates.

Brown, whose modest law office is two floors below his Assembly district office in San Francisco, says he can separate the interests of his clients and benefactors from those of the public he serves. But lately, Brown has been fending off more than the usual amount of criticism over his private dealings because a former client, Norcal Solid Waste Systems, is the target of an FBI investigation.

Sources familiar with the case say investigators have focused on the San Francisco garbage company’s conduct during the period from 1983 to 1988 when the firm paid Brown an estimated $250,000. As part of the statewide probe that began more than a year ago, the FBI is trying to determine whether Brown used his political office illegally for his own gain, these sources say.

Earlier this year, Brown denounced news reports that linked him to the ongoing FBI investigation of corruption in the Capitol.

“If Willie Brown or any other member of the Legislature is indicted, then we ought to write the stuff, but prior to that, we’re not going to screw around with his or her reputation,” Brown told reporters. “You and I know that if they had anything on Willie Brown, they would have long since destroyed Brown.”

The Speaker has said he takes specific steps to avoid a conflict of interest, by abstaining from votes that affect only his clients and by complying with state law that bars him from representing his clients before state agencies.

A Times review of the Speaker’s law practice shows that clients have benefited from his extensive political contacts and influence over state government--considered second only to that of the governor.

* Brown has used his power as Speaker to name at least six law clients or business associates to influential state commissions, and has taken a role in legislation that could help other clients.

* The Speaker pressured the state treasurer’s office to send business to one of his clients, according to former acting Treasurer Elizabeth M. Whitney, who also made this charge to FBI agents investigating Brown. The client, an investment banking firm, was responsible for putting the Speaker’s law firm into the municipal bond business.

* As Speaker, Brown helped force the state to divest itself of holdings in companies that do business in South Africa. But in 1988, roughly two years later, lawyer Brown used his out-of-state contacts to help British American Tobacco, which has extensive ties to South Africa, in its $5.2-billion hostile takeover of Farmers Group insurance of Los Angeles. Foes of the takeover tried to block it in part by citing BAT’s South African ties.

* In San Francisco, where his campaign endorsement usually translates into votes, Brown backed a measure on the local ballot last November tailored to help a client, Catellus Corp. The company became the largest private land owner in California with holdings of 1 million acres when it was created by the combined Southern Pacific and Santa Fe railroads.

If it had passed, the measure would have exempted Catellus from some of the city’s limitations on development in its planned $2-billion Mission Bay office and housing complex on 300 acres south of downtown.

“Mission Bay will be one of the most important additions to San Francisco in decades,” Brown said in the argument in the city’s official voter handbook. He signed it “Speaker of the Assembly.” Catellus paid Brown $4,000 a month in 1990 for his counsel on Mission Bay. The measure failed.

Brown refused to be interviewed for this article. Of late, he has stopped discussing his clients at all.

Brown is not the only lawyer in the Legislature to make money on the side, but none have a legal practice that matches his. Except for a prohibition against representing their clients before state agencies, nothing in the law bars California lawmakers who are lawyers from earning income from their private practices.

Elected to the Assembly in 1964, Brown had begun his legal career as a general practitioner four years earlier, representing clients accused of prostitution, a variety of street crimes and, later, a man dubbed “the king of nude encounter parlors” in San Francisco’s North Beach. In the 1970s, Brown attracted a few developers and corporations to his law practice as his contacts increased at City Hall and his influence grew in the Capitol, where he chaired two powerful fiscal committees.

Once his Assembly colleagues elected him Speaker in December, 1980, Brown’s practice soared, with his clients increasingly a blue chip roster of some of the richest companies doing business in the state.

His precise income cannot be determined from public sources. The law merely requires him to list clients who pay him $10,000 or more in a year. He does not have to say how much more they actually pay him. Nor does he have to name clients who pay him less than $10,000.

Still, public documents show Brown has made at least $1.4 million from his law firm since he became Speaker. One former client paid him $7,500 a month for more than a year, according to sources familiar with his clients. Other clients paid Brown $3,000 or $4,000 a month for extended periods, according to records and interviews.

By the end of last year, Brown also had reported receiving $569,000 in speaking fees and $180,000 in gifts since becoming Speaker, including $50,000 from clients and people with whom he has had direct business dealings. All told, his outside income is more than five times what he earned in his service as Speaker. His public salary rose last December from $40,816 to $63,000 a year.

Brown’s admirers defend his right to maintain a private law practice, saying his pay as Speaker is not enough to keep so talented a politician in office.

Friends vouch for his legal prowess and honesty, contending he is too smart and too good a lawyer to use his powers as a public official to benefit a client. Local officials who deal with lawyer Brown say he does not try to unduly influence them.

“The white community wants every black politician to be Joe Louis,” said San Francisco Mayor Art Agnos, referring to the self-effacing style of the one-time boxing champion. “Willie Brown infuriates people because he won’t submit to the stereotypic yoke that people try to place on him.”

But critics contend that by representing private clients, Brown fuels the public perception that the Capitol is for sale. As Speaker, he can affect the budget of any state agency and alter the fate of almost any bill. As one of the nation’s most prominent Democrats, he can raise huge sums of money and direct contributions to political allies.

“There is a self-policing aspect that Willie doesn’t acknowledge,” said a prominent Democrat, who like many critics spoke on the condition that he not be identified. “Because it isn’t illegal, doesn’t make it right.”

Some of those who have spoken publicly about ethics in government say it is unhealthy for lawmakers to have outside income and that it cannot help but invite conflict of interest. Robert Stern, former general counsel for the state Fair Political Practices Commission, notes that elected officials such as members of Congress and the Los Angeles City Council are paid more than state legislators. “The trade-off is paying them more and saying no outside income versus paying them less and letting them earn outside income. I’d rather pay them more,” he said.

Brown himself has advocated paying lawmakers the same as Municipal Court judges--now slightly more than $86,000--and banning outside income. But Brown never successfully pushed for the necessary legislation, which would have ended his own lucrative legal practice.

“It’s obvious that the reason people hire him is because he is Speaker,” said Ruth Holton of California Common Cause, which advocates a ban on outside employment for legislators, similar to one enacted by Congress. “He has a lot of power. It’s convenient for clients to keep him on their payroll.”

As a lawyer, Brown does not fit the popular image. His clients have other law firms to handle the details of contracts and court motions. He rarely appears in court and apparently hasn’t gone before a commission in years. With rare exceptions, his name does not even show up in the files of regulatory agencies.

His strength, say clients and colleagues in San Francisco, is his knowledge of the system. He can tell clients what motivates officials, what concessions they should make to sway a key vote or how to avoid a political fight. And he supplies one service perhaps better than any lawyer in San Francisco: access to those in power.

A former client who had business with the city of San Francisco used one word to explain why he used to let local officials know that Brown represented him: “Intimidation.”

“There is no question that when people hire Mr. Brown, they are hiring the Speaker of the Assembly,” the chief of a San Francisco city department said. “Of course, you return his phone calls.”

Not all his clients get their way. But Brown, because he is one of California’s most powerful politicians, is also one of its most influential lawyers. What follows are examples of the service he has provided.

The Speaker of the California Assembly has introduced Calvin Grigsby at political gatherings as his “personal investment banker.” Brown reported receiving at least $10,000 in 1985 and 1986 from Grigsby’s San Francisco firm, which underwrites state and local government bond issues and is the second largest investment banking house in California.

In 1985, Grigsby Brandford & Associates hired Brown to write an opinion regarding a $120,000 bond issue for the Paso Robles schools. The job was small, but valuable for Brown. It qualified him for a listing in the Directory of Municipal Bond Dealers--considered necessary by many government entities when they select a bond counsel.

But Brown did more than write a legal opinion for Grigsby, according to Elizabeth Whitney, top deputy to late Treasurer Jesse M. Unruh and acting treasurer after Unruh’s death in 1987. Brown twice urged Whitney to steer more bond business to Grigsby’s company, Whitney told The Times and the FBI.

The first time was in November, 1985, when she was Unruh’s top deputy. As Whitney was preparing to meet Grigsby, she said, Brown called and told her: “I’d like for you to be helpful.” Whitney relayed the message to Unruh, who started giving Grigsby’s firm a share of state bond deals for the first time.

Two years later, when Whitney was acting treasurer, Brown called again and complained that Grigsby had “never gotten one bit of bond business out of the treasurer,” she said. At the time, Brown did not list Grigsby as a client.

Whitney responded to Brown by letter in December, 1987, citing bond deals that Grigsby had participated in and noting that he and his partners had been added to a deal “where they will be making at least $175,000.”

Whitney remained acting treasurer in 1988 while Gov. George Deukmejian tried to win legislative approval for a replacement. At the time, according to Whitney, Brown said he would support her efforts to hold onto the job at least through the 1990 elections.

But Whitney and Grigsby had an explosive confrontation at a San Francisco restaurant in December, 1988, in which she refused to give Grigsby’s firm the largest share of an upcoming state bond issue. After the incident, Whitney said, Brown stopped returning her calls. Whitney lost her job soon after the Legislature confirmed Deukmejian’s second nominee for the treasurer’s post, Tom Hayes, with the Speaker not voting.

In an interview, Grigsby said he was unaware that Brown spoke to Whitney on his behalf, but asked: “What’s wrong with that? He is a law firm. We are an investment banking firm.” Businessmen often put in good words for trustworthy colleagues, he said. Grigsby noted that he has helped many black lawyers in addition to Brown break into the bond business.

“He has always been proud that we are a black business in his district,” Grigsby said of Brown. “He always puts in a plug for us.”

Grigsby charged that during her tenure, Whitney gave business to insiders and discriminated against minority firms, which she denies. Grigsby noted that after Brown worked for him, the Legislature passed a bill directing that minority firms get a percentage of state bond business.

BAT Industries of Great Britain turned to Brown in 1988 when it launched a hostile takeover of Farmers Group insurance and needed approval in states where Farmers did business. The company’s U.S. subsidiary hired Brown because of his political ties to other states, said the firm’s Sacramento lobbyist, former Republican state Sen. Dennis Carpenter.

“He wouldn’t advise them (company officials) in California,” Carpenter said. “But he helped them with strategy in other states. He knows political people all over the country and he made introductions.”

Neither Carpenter nor BAT executives said they could recall the states in which Brown helped. But in several states, including Oregon and Illinois, opponents objected to the takeover because of the corporation’s extensive holdings in South Africa.

With 4,800 workers, BAT is the eleventh largest non-South African employer doing business in that country. It has not signed the “Statement of Principles,” in which companies pledge to desegregate the workplace, pay blacks the same wages as whites and advance blacks into management positions.

The takeover fight ended when BAT increased its offer to Farmers and Farmers accepted. In 1989, Brown again lent his counsel to BAT when takeover artist Sir James Goldsmith attempted to buy the firm.

Before he became a consultant to BAT, Brown played a leading role in forcing the state investment and employee pension funds in 1986 to divest holdings in companies doing business in South Africa.

The world’s 36th largest corporation, BAT paid Brown at least $20,000 in legal fees in 1988 and 1989. In addition, BAT subsidiaries paid Brown a $1,000 speaking fee and $6,100 in travel expenses for trips to the Kentucky Derby in 1989 and 1990.

Since 1988, Brown has worked for Pier 39, a development of shops, arcades and restaurants on a pier at Fisherman’s Wharf. Owned by the billionaire Bass family of Fort Worth, Tex., Pier 39 claims to be the largest single tourist attraction in San Francisco. The Bass group hopes to add a $22-million aquarium called Underwater World at the foot of the pier in the bay. Brown has reported receiving a minimum of $30,000 for his role.

A major obstacle arose in 1987 when the influential California Academy of Sciences announced its opposition, contending that its Steinhart Aquarium in Golden Gate Park would lose patrons to Underwater World.

Lawyer Brown gathered officials from Steinhart and Pier 39 to his law office in 1988 and proposed a compromise by which Pier 39 would pay to offset Steinhart’s losses. Pier 39 agreed to provide Steinhart $1.2 million during the first six years of Underwater World’s operation.

As he had in the past, Speaker Brown introduced the California Academy of Sciences annual funding bill in March, 1989. The measure passed, providing a $500,000 state subsidy for improvements at academy facilities. Brown asked for $2 million more in 1990, but the measure died in the state Senate.

Steinhart director John McCosker insisted that Brown never suggested the subsidy bills were linked in any way with McCosker’s position on Underwater World.

Last year, a Brown appointee cast a vote in favor of the project.

A big hurdle had been the Bay Conservation and Development Commission, a state agency that regulates building on the bay shore.

Speaker Brown’s appointee to the commission, David Jenkins, a former longshoreman, was one of Underwater World’s main supporters. Jenkins said he knew from press accounts that Pier 39 was a Brown client, but never spoke to Brown about it. He said he backed the project because it promised both jobs and family entertainment.

“If he made a buck off it, great,” Jenkins said.

The project won approval last year on a 16-5 vote, but lawsuits have stalled construction.

Some of the most important legislative battles in Brown’s years as Speaker have been over health care. As a lawyer, Brown has counseled hospitals and others in the health-care industry.

In 1981 and 1982 and continuously since 1987, Brown has represented Davies Medical Center, a hospital in San Francisco with big expansion plans. Lawyer Brown has reported receiving at least $60,000 from Davies. Speaker Brown has named Davies executive George Monardo to commissions that have influence over hospitals.

During the 1970s, Davies repeatedly failed in efforts to obtain approval from a state health planning agency to build its own helicopter pad, medical office and parking structure. Brown, while representing Davies, put Monardo on a commission created to study a health planning law--the same law that was used to thwart Davies’ construction plan.

In its 1983 report, the commission took a cautious approach, recommending streamlining but keeping the existing procedures in effect for the immediate future. But in a spirited minority report, Monardo asked that the law requiring state approval for major hospital projects be eliminated, thus freeing hospitals to build additions or buy whatever new equipment that a competitive medical marketplace would allow.

In 1984, the Legislature agreed to phase out regulation of hospital construction--in effect, taking Monardo’s recommendation, but delaying its effective date. Brown voted for the measure. Davies is continuing to pursue its expansion. Because Brown at the time of the vote did not list Davies as a client and because the bill affected an entire industry, the Speaker’s vote does not appear to violate the Political Reform Act’s narrowly crafted conflict-of-interest prohibition.

The bill phasing out the regulation had the backing of another of the Speaker’s benefactors, National Medical Enterprises, which owns and operates 18 hospitals in California, plus several nursing homes, psychiatric hospitals and drug-abuse recovery units.

The health-care provider, although not a client, paid Brown $28,000 in speaking fees between 1983 and 1989, more than any other single corporation or interest group. During those years, National Medical advocated an end to regulation of hospital construction and sponsored a bill to create a new licensing category for hospitals that specialize in the care of Alzheimer’s patients. National Medical has such a facility in Los Alamitos. Brown voted for the measure, which passed.

Brown recently appointed Monardo and John Bedrosian, a National Medical Enterprises vice president, to a legislative commission to study health-care policy and financing. Brown has appointed at least four others who have paid him substantial legal or speaking fees to state boards, records show.

Neither Monardo nor officials of National Medical returned phone calls.

Since 1984, Brown also has sat on the board of directors of American Shared Hospital Services, a San Francisco firm that provides diagnostic services to hospitals. The company, which was partners with National Medical from 1985 to 1989, paid Brown $10,000 last year in director’s fees, according to a company official and the Speaker’s financial reports.

Dr. Ernest Bates, president of American Shared, said his firm has never sought any help from Brown in Sacramento, called Brown “totally ethical” and said his insights as a director are invaluable.

The FBI is focusing on Brown’s dealings with Norcal Solid Waste, the nation’s fourth-largest garbage company with contracts in 80 cities including an exclusive contract to collect San Francisco’s garbage.

Garbage company executives hired Brown in 1983 to help them win support from San Francisco officials for their plan to develop a new landfill for the city’s refuse in a pasture known as Lynch Canyon in Solano County, across the Bay. He remained on the company payroll until 1988.

Although Solano County officials supported the plan, voters in a countywide referendum revolted in November, 1984, and turned down the dump. That forced Norcal and San Francisco to come up with another strategy: The city of Vallejo, which needed a new dump, would annex the land and agree to the project. The proposed landfill then would need approval from the state Solid Waste Board.

“Once Vallejo annexes Lynch, landfill permitting is almost a certainty as Willie Brown has promised to push (the project) through State,” said a 1986 memo written by John Cribbs, then an aide to Roger Boas. As San Francisco’s chief administrative officer at the time, Boas was in charge of dealing with Norcal.

Brown has emphatically denied he ever agreed to help win approval for a Lynch Canyon permit. “Of course not,” he told reporters in January. “You know better than that.” Company officials deny wrongdoing.

In an interview, Cribbs said the memo merely recited what he had been told about the Speaker’s role by a source in Solano County. Cribbs added that he told two FBI agents the same thing last year. As it turned out, the annexation failed, Lynch Canyon was not developed and San Francisco agreed to send its garbage to Alameda County.

Sources familiar with the investigation say a grand jury in Sacramento is trying to determine whether Norcal unduly influenced public officials in Solano County or elsewhere. In the years that Brown represented Norcal, the Legislature considered a series of bills that would have made it possible for county governments and regional agencies to overcome local objections to proposed landfill sites.

The FBI has subpoenaed bill records from several committees to determine whether Brown might have played a role in the legislation, sources said. But the bills generally were unsuccessful and there is no indication that Brown tried to influence the outcome.

Brown, complying with state law, reported that two Norcal subsidiaries paid him a minimum of $60,000 over the six years, though sources told The Times he received a substantial up-front retainer and monthly fees for a total over the years of $250,000.

Norcal’s legal problems date back to 1989 when the state Fair Political Practices Commission opened an investigation to determine whether Norcal attempted to conceal the source of more than $80,000 in political donations between 1984 and 1987. The FPPC cleared Norcal in 1989, but the agency’s files provide a glimpse into how company executives viewed the political process.

“If I don’t contribute anything, I can’t even go and talk to the dog catcher,” Manuel C. Conte, then Norcal’s president, told FPPC investigators. By giving to an officeholder, Conte said, “at least he’s going to listen to my side of the story. That’s the only thing I request.”

Brown’s Clients Include Top Development Firms

Assembly Speaker Willie Brown’s bread-and-butter law clients are developers in San Francisco, but he occasionally takes on other causes:

* Olympia & York Development, 1980-present. Said to be the world’s largest real estate developer, this Toronto firm is developing the $1.5-billion Yerba Buena redevelopment project in downtown San Francisco. It also owns 19% of the stock in Catellus Corp., another Brown client. O & Y hired Brown in 1980 as it competed with other firms to develop Yerba Buena. Wilbur Hamilton, then city redevelopment director, had suggested the names of local lawyers to O & Y President Albert Reichman, but told him he was favorably inclined toward Brown because Brown is African-American. In an interview, Hamilton said he was simply providing a service, noting that out-of-town developers need local counsel who know their way around the city. Meyer S. Frucher, an O & Y executive in New York, said he keeps Brown on retainer for his political insights and for affirmative action reasons. “San Francisco is a particularly complicated place. Willie is a particularly knowledgeable fellow,” Frucher said.

* Schou-Gallis, 1981. This family-run ship chandlery business operated from a three-story building in downtown San Francisco. As a high-rise boom hit San Francisco in the late 1970s, the family decided to relocate its business and build a skyscraper on its land. Its proposal languished at the city Planning Department. Eric Schou, looking for help, contacted attorney Brown, who suggested the names of a few lawyers, himself included. Schou said it was Brown he wanted. “ ‘You’re a smart guy,’ ” Schou recalled that Brown quipped. Within days, Schou said, city planners not only remembered Schou’s name, they pronounced it correctly. Today, a 21-story high-rise stands where the brick building once was.

* Markborough Properties, 1989. This publicly traded Toronto real estate firm was spun off last August by Hudson’s Bay Co., Canada’s oldest firm. Markborough in 1988 proposed building a 34-story high-rise downtown. When city planners wanted it lowered by 10 floors, the matter turned contentious. Timothy A. Tosta, Markborough’s chief local lawyer, realized that his relationship with Planning Director Dean Macris was strained, and said he hired Brown as an intermediary. In 1989, with Brown on the team, Markborough knocked two floors off its design, and won approval. Macris, who recalled no conversations with Brown about the project, attributed its approval to the improved design.

* Harbor Bay Isle, 1983-present. Brown’s longtime friend Ronald H. Cowan owns this large housing development and business park on the island of Alameda next to Oakland. Harbor Bay is not readily accessible to a freeway. On Cowan’s behalf, Brown met with Oakland port officials to discuss building an expressway from Harbor Bay’s business park across sensitive wetlands to a nearby freeway. Oakland Port Commissioner Ronald Brady recalled that Brown suggested ways to allay environmental concerns of state regulatory agencies. “I think it was Willie Brown as Speaker,” Brady said, when asked which hat Brown was wearing.

* Ralph Marchese, 1985. Marchese’s firm plans and builds facilities for hospitals, and hired Brown to consult on a $35-million medical office building at Pacific Presbyterian Medical Center in San Francisco. The two also were partners in the lease of a downtown office in 1987, court records show. Last year, Marchese advocated the creation of a health care policy commission in which the Speaker would name half the 30 members. The measure narrowly cleared the Assembly over Republican objections. Brown voted for it. Marchese acknowledged that he advised Brown on appointments to the commission, which includes two other business associates of the Speaker.

* Kelly, Ryan, McAuliffe & Delli Santi, 1990-present. In January, this Los Angeles law firm announced a formal relationship with Brown. Brown is “of counsel” to the firm, allowing it to use his name. He receives payment for such services as consulting with its clients. Peter Kelly, former chair of the California Democratic Party, is a named partner, as is Philip S. Ryan, long a friend and associate of Brown’s. When FBI agents raided the Capitol in 1988 after an elaborate sting, Ryan represented Assemblywoman Gwen Moore (D-Los Angeles), who was cleared without being charged. Ryan also has represented one of Brown’s fund-raisers, Adrienne Gaines, in an ongoing federal probe of Norcal Solid Waste Systems, a past Brown client. Gaines consulted for Norcal when the garbage company won a $121-million contract to run San Bernardino County’s landfills. Brown’s law office, his campaign office and the San Francisco branch of Kelly, Ryan share the same office, which is two floors down from Brown’s Assembly district office.

BACKGROUND

Speaker Willie Brown’s decision to maintain a law practice breaks with his three most recent predecessors who took no significant outside income while serving in the Assembly’s top post. “I gave up practicing law the first year I entered the Legislature to avoid conflict-of-interest situations,” said Lt. Gov. Leo T. McCarthy, who was Speaker from 1974 until Brown succeeded him in 1980, emphasizing that he is not critical of Brown. Of 117 legislators now serving, 11 reported incomes from law practices in 1990. Of those, only Brown and Assemblyman John Burton (D-San Francisco) reported any clients that paid them more than $10,000 in 1990. An effort to bar lawyer-legislators from representing clients before local agencies failed soon after Brown became Speaker in 1981. Common Cause, which advocates a ban on outside employment, failed to garner support last year for a prohibition similar to one enacted by Congress that bars lawyer-legislators from maintaining most private practices, according to Ruth Holton, lobbyist for the group.