5 Extortion Verdicts Against Montoya Upset : Corruption: Convictions for racketeering, money-laundering are upheld. Sentence will be reviewed.

In a setback for the FBI’s corruption probe in the state Capitol, a federal court of appeals Friday overturned the conviction of former Sen. Joseph B. Montoya on five counts of extortion.

The U.S. 9th Circuit Court of Appeals ruled that the jury received flawed instructions on the federal extortion law, but upheld Montoya’s conviction on two remaining counts of racketeering and money-laundering. The court refused to release Montoya from prison but ordered the trial judge to consider reducing the Whittier Democrat’s 6 1/2-year prison sentence.

“We are pleased that the five extortion convictions have been reversed,” said Jan Lawrence Handzlik, Montoya’s attorney. “Extortion requires something more than the receipt of voluntary campaign contributions by an elected official. We continue to believe that the two remaining convictions should be reversed.”

The court ruling casts a shadow over the six-year investigation that resulted last year in the guilty verdicts against Montoya and, in a separate trial, the conviction of former Sen. Paul Carpenter on charges of extortion, racketeering and conspiracy.

The decision, which applies a higher standard of proof in extortion cases, could lead to a reversal of Carpenter’s conviction and, according to legal experts, make it tougher to bring charges against three other state legislators under investigation: Sen. Alan Robbins (D-Tarzana), Assemblyman Pat Nolan (R-Glendale) and Sen. Frank Hill (R-Whittier).

In essence, the appellate panel found that the trial judge had failed to instruct the jury that Montoya could be found guilty of extortion only if there was an explicit promise to act in exchange for a payment.

U.S. Atty. George L. O’Connell, whose office prosecuted Montoya, sought to make the best of the decision and indicated that it will not impede the ongoing probe.

“The bottom line for this Sen. Joseph Montoya case is that he is going to stay right where he is,” O’Connell said. “He stands convicted on the racketeering and the money laundering and it is our belief that this will likely have no effect on the ultimate sentence.”

Under complex federal sentencing guidelines, some legal experts said it is unclear whether Montoya’s prison sentence will be reduced, and if so, by how much. So far, he has served 14 months in the federal penitentiary at Boron.

O’Connell said his office might retry Montoya on the extortion charges if the appellate decision results in a substantially reduced sentence. Both the prosecutor and Montoya’s attorney said they will consider appealing portions of the ruling.

Montoya was caught in an FBI sting in 1988 when he accepted a $3,000 “honorarium” from an undercover agent posing as a Southern businessman. Montoya, who was videotaped taking the money, promised he would “be there” to vote on legislation that would have helped the phony businessman’s shrimp company.

The jury found Montoya guilty of extorting the payment from the agent as well as attempting to extort other payments from lobbyists, an insurance executive, a sports agent and the National Football League Players Assn.

The jurors also found that Montoya’s efforts to extract money from citizens constituted a racketeering enterprise and that, by cashing the $3,000 check from the FBI agent, the senator was guilty of money-laundering.

The court’s decision to throw out Montoya’s conviction on all five extortion counts stems from a ruling of the U.S. Supreme Court this year in the case of McCormick vs. the United States that changed the standard required for conviction in federal extortion cases.

The Supreme Court ruled that, in order to convict a lawmaker, a jury must find there was “an explicit promise or undertaking by the official to perform or not perform an official act.” In other words, public officials could only be found guilty of extortion if there had been a quid pro quo-- a deal in which the official promised to take action in return for a payment.

In Montoya’s trial--which took place before the McCormick case was decided--Judge Milton L. Schwartz instructed the jury that they did not have to find such an explicit promise.

Despite its ruling, the appellate court indicated that Montoya’s conviction on at least some of the extortion counts would have been upheld even with the new standard for jury instructions established by the McCormick case.

“Our review of the evidence indicates there was sufficient evidence from which a jury could have found beyond a reasonable doubt that the payment was made in exchange for a promise of official action,” said the court. “The deficiency is that the jury was not required by the instructions to make such a determination.”

That finding gave some comfort to prosecutors as they contemplate retrying Montoya and bringing similar corruption charges against other legislators.

“We think the Montoya decision has demonstrated loudly and clearly that California lawmakers can be prosecuted on racketeering and money-laundering charges and on (federal) extortion if the jury is properly instructed,” O’Connell said.

On a separate issue, the appellate court went even further than the U.S. Supreme Court, which had applied the tougher standard for an extortion case only to political campaign contributions.

The three-judge panel ruled that the requirement of an explicit quid pro quo also applies to honorariums, saying there was “no rational distinction” between campaign contributions--which can only be used for political purposes--and honorariums, which go directly into lawmakers’ pockets.

The reversal in the Montoya case is good news for Carpenter, a former member of the State Board of Equalization, who has appealed his conviction. Unlike Montoya, he is free pending the outcome of his case.

“I am cautiously optimistic,” said Carpenter’s attorney, Merrick Scott Rayle. “I predicted the court would rule exactly as it did. . . . Sen. Carpenter’s defense case was much stronger than Sen. Montoya’s case.”

O’Connell, of the U.S. attorney’s office, would not discuss any of the investigations pending in the corruption inquiry. But just how the court rulings may affect future prosecutions will be demonstrated in a Capitol political corruption case now being heard by a federal jury here.

In that case, the government has charged two former legislative aides, Tyrone Netters and Darryl Freeman, with extorting money in exchange for help in passing legislation sought by dummy companies, set up by the FBI as part of the sting.

Both prosecutors and defense attorneys said they had anticipated the tougher standard and have drafted jury instructions that would meet the test of the McCormick and Montoya rulings.

“We expected Montoya’s conviction to be reversed and perhaps Carpenter’s as well,” said E. Richard Walker, Freeman’s attorney. “However, the issue there had to do with jury instructions. We’re writing instructions in accordance with McCormick so we would not be in that situation.”

BACKGROUND

Sen. Joseph B. Montoya became the first sitting legislator in 35 years to be convicted on felony corruption charges when he was found guilty in February, 1990, on seven counts of extortion, racketeering and money-laundering. Montoya, snared in a federal sting investigation, was videotaped accepting a $3,000 “honorarium” from an undercover FBI agent over breakfast near the Capitol. The sting, which began in 1985, led to the conviction of former Sen. Paul Carpenter and two legislative aides. Two former legislative aides are on trial in Sacramento on charges that they also tried to extort money from undercover agents.