Nolan, Hill Indicted in Legislator Sting : Politics: State lawmakers are the first Republicans to be charged in the FBI’s ongoing political corruption probe. Both are accused of soliciting illegal payments.

Nearly five years after Assemblyman Pat Nolan of Glendale and Sen. Frank Hill of Whittier were secretly videotaped taking checks from an undercover FBI agent, a federal grand jury on Tuesday indicted the two lawmakers on charges of using their public offices to solicit illegal payments.

With the indictment, Nolan and Hill became the first Republican lawmakers to be charged in an ongoing investigation of political corruption in the Capitol. The probe has already led to the conviction or indictment of three former Democratic state senators as well as seven others.

Also named in Tuesday’s indictment is a former high-ranking Democratic Senate aide and current lobbyist, Terry E. Frost, who is accused of conspiring with the two GOP lawmakers to extort payments from an undercover FBI agent posing in an elaborate federal sting operation.

Both Nolan and Hill quickly issued strong statements declaring their innocence on all charges.

Frost told a reporter that he was embarrassed and shocked. “I can’t believe they would do this to me,” he said.

The three are free pending arraignment, which is expected in several weeks.

Nolan, 42, who is charged with six counts of racketeering, extortion, conspiracy and money laundering, is accused of soliciting a series of bribes from unnamed individuals who were seeking his support on bills before the Legislature. The bills range from a measure that opened California to out-of-state banks to a proposal he opposed that would have aided the development of a new resort complex in the desert city of Indian Wells.

Hill, 39, is charged with three counts of extortion, conspiracy and money laundering. In his case, all the charges stem from him taking a $2,500 honorarium in 1988 from an FBI agent masquerading as a Southern businessman.

In announcing the indictment, both U.S. Atty. George L. O’Connell and the Sacramento FBI’s agent-in-charge, Richard Ross, said that the cases close the books on the original sting operation, dubbed Brispec (for Bribery-special interest). However, Ross said the political corruption probe is not over yet because Brispec “opened new doors.”

The sting was launched more than seven years ago in an effort to root out public corruption in the Capitol.

In explaining why it has taken them so long to seek the indictment against Nolan and Hill, O’Connell said his office made a decision to delay the cases while finishing up other indictments, so that the investigation could be pursued in a logical manner.

Ross emphasized the complexity of proving such cases and spoke of the difficulty of “breaking the shell of conspiracy” in political corruption cases.

“There’s no crime scene. There are no witnesses but the participants,” Ross said. “This isn’t a hit and run. This isn’t a bank robbery.”

But the long delay has prompted charges of unfairness by legislators from both parties.

Following the indictments, both Nolan and Hill lashed out at prosecutors for waiting so long before giving them a chance to clear their names.

A defiant Nolan, with his pregnant wife, Gail, standing by his side, said his first daughter was born not long before his Capitol office was searched by the FBI in August, 1988. This summer she will be 5.

He accused O’Connell of indicting him “just to fulfill a political quota.”

“Just one week before he is forced to leave office, George O’Connell apparently wants to make his resume politically correct by balancing his prosecution of several Democrats with two Republican indictments,” Nolan said.

The indictments came during the final days in office of O’Connell, a veteran prosecutor and Republican political appointee of President George Bush. Asked to resign by Democratic Atty. General Janet Reno, O’Connell will leave office Saturday.

O’Connell said the charges against Nolan and Hill were not connected to partisan politics or his own imminent departure from office. He said that the case against them was strong.

Sources familiar with the federal investigation say that the Nolan indictment was delayed for several days because of complications in Gail Nolan’s pregnancy.

Hill, who had long assured colleagues that he would never be indicted, was said to be shocked when he learned of the indictment early Monday evening.

All of the charges against Hill are based on his taking a $2,500 check in 1988 from an undercover FBI agent, who was seeking support for a bill that would have helped his bogus company build a shrimp processing plant near Sacramento. At the time Hill was an assemblyman.

Karin L. Watson, a former Assembly Republican consultant, in 1988 arranged meetings for Hill and Nolan with the undercover FBI agent in a hotel room equipped with sophisticated recording equipment. Legislative aide Frost allegedly introduced Watson to the undercover FBI agent.

The sting became public Aug. 24, 1988, when FBI and Internal Revenue Service agents armed with search warrants raided the Capitol offices of Nolan and Hill, as well as then-Sen. Joseph B. Montoya (D-Whittier) and Assemblywoman Gwen Moore (D-Los Angeles). Montoya was later convicted of political corruption charges. Government prosecutors said that there was no evidence to charge Moore, who in 1986 and 1988 carried legislation for the shrimp processing company.

A year after the FBI raid, Watson pleaded guilty to a single felony--using her legislative job to extort $12,500 from the undercover agents. In return for her cooperation, prosecutors said they would recommend that she serve a six-month sentence in a halfway house.

At the time of the 1988 Capitol raid, Nolan was at the peak of his political power. As leader of the Republican minority in the Assembly, he had helped the GOP increase its representation in the Legislature. The 1986 elections had left the Republicans just five members short of a majority.

Determined to take control of the lower house and become Assembly Speaker, Nolan launched an ambitious effort to match the Democrats and raise the money needed for victory in 1988.

But Nolan’s aggressiveness in raising money may have been his downfall. The grand jury contends that between 1986 and 1988 Nolan used his office as a criminal enterprise and repeatedly solicited bribes from special interests seeking his help with legislation.

In the case of the sting bill, Nolan collected two checks totaling $10,000 from an FBI agent calling himself George Miller, an executive of Peachstate Capital, one of a series of bogus companies set up by federal investigators.

The indictment alleges that the sting bill was not an isolated incident and that Nolan and aide Watson actively solicited bribes in connection with a number of other bills.

In one case in 1988, Nolan allegedly asked for and received $10,000 in campaign contributions in connection with a bill that would have aided the developers of a resort in the affluent desert community of Indian Wells.

The bill, by Sen. Robert Presley (D-Riverside), dealt with plans to build a five-hotel complex in the city’s redevelopment area. The measure was supported by the Sunrise Co. and opposed by the Marriott Corp. The indictment does not identify who paid the $10,000 to Nolan’s campaign committee.

Nolan voted against the Indian Wells bill, which eventually was vetoed by then-Gov. George Deukmejian.

One bill cited by the grand jury in the racketeering charge against Nolan was a hotly contested 1986 measure that for the first time opened California to out-of-state banks. The bill, by then-Assemblyman Charles M. Calderon (D-Whittier), was supported by several New York-based banking giants and opposed by the California Bankers’ Assn. The measure was signed into law.

Nolan is also charged with soliciting a bribe in connection with a 1986 bill by Assemblyman Rusty Areias (D-San Jose) that would have set limits on credit card interest rates. The measure won approval, but only after the interest rate caps were removed.

The grand jury also charged that Nolan used his office to solicit bribes in connection with a bill by Assembly Speaker Willie Brown (D-San Francisco) that imposed new deadlines on banks for clearing their customers’ checks. Another bill affected “agricultural bargaining,” but prosecutor O’Connell declined to spell out any details of that legislation.

The indictments of Hill and Nolan are another giant step in one of the most successful and wide-ranging political corruption investigations in California history.

The charges once again raise questions about the way business is done in the Capitol, where legislators depend heavily on campaign contributions from special interests in order to win reelection. Public officials are free to raise as much money as they can, but they cross the line into illegality when they promise official action in return for the money.

Since the federal prosecutors and the FBI launched their sting in 1985, the probe has led to the conviction or indictment of three state senators, a member of the California Coastal Commission, three legislative aides, and two lobbyists, as well as the sheriff of Yolo County and his chief deputy.

Convicted and serving time in prison are former Sens. Joseph B. Montoya and Alan E. Robbins. Former Sen. Paul Carpenter was convicted of taking payments from an undercover FBI agent, but the jury verdict was overturned on appeal. Forced out of his last elected office, a seat on the State Board of Equalization, Carpenter is now awaiting a retrial. He was named along with Capitol lobbyist Clayton R. Jackson in an unrelated 12-count indictment.

Times staff writers Virginia Ellis and Jerry Gillam contributed to this report.

Corruption Probe: A Chronology

The federal probe of state government corruption began in 1986 when FBI agents posed as businessmen willing to dispense cash and political donations for help in passing a special interest bill benefiting a bogus shrimp processing company. Here are some of the key events:

Aug. 24, 1988: Agents with search warrants raid the Capitol offices of Assembly members Pat Nolan, Frank Hill and Gwen Moore and state Sen. Joseph Montoya, plus two legislative aides.

May 17, 1989: Montoya and former top aide Amiel A. Jaramillo are indicted on multiple felony counts. The L.A.-area Democrat is later convicted on seven counts and sentenced to 6 1/2 years. Convictions on five counts are overturned in September, 1991, but his sentence is unchanged. Jaramillo pleads guilty to making a false statement on a loan application; he receives 90 days in jail.

Nov. 28, 1989: Karin L. Watson, an aide to Nolan, pleads guilty to extorting $12,500 from undercover FBI agents.

March 15, 1990: Former state Sen. Paul Carpenter, a State Board of Equalization member, is indicted on four counts of extortion, racketeering and conspiracy. Convicted in September, 1990, the Norwalk Democrat is sentenced to 12 years. Convictions are reversed in April, 1992. Retrial is scheduled for June 14, 1993.

Oct. 24, 1990: U.S. attorney says Moore won’t be indicted, but two former legislative aides are: Tyrone Netters and Darryl O. Freeman. Both are convicted on all counts in October, 1991.

Nov. 19, 1991: State Sen. Alan Robbins resigns, saying he used his office for personal gain. He pleads guilty to racketeering and income tax evasion, implicating Carpenter, Coastal Commissioner Mark Nathanson, lobbyist Clayton Jackson and public relations executive Jennifer Goddard. Robbins is given five years.

May 7, 1992: Nathanson indicted on eight counts; one is later thrown out. In October, more charges are filed.

Feb. 26, 1993: Carpenter, and Jackson are named in a 12-count indictment. Trial is scheduled for October.

April 27, 1993: Hill, Nolan and former legislative staffer Terry Frost are named in an eight-count indictment charging racketeering, extortion, conspiracy and money laundering.

Compiled by Times researcher NONA YATES

Corruption Probe

Two GOP state legislators and a former aide were indicted Tuesday by a federal grand jury in Sacramento, part of a 7 1/2-year investigation of political corruption in state government.

Assemblyman Pat Nolan of Glendale

Charges: Six counts of racketeering, conspiracy to commit extortion, extortion and money laundering.

Possible penalty: Each count carries a maximum penalty of 20 years and a fine.

Response: “I am one innocent man who is going to fight back with everything I’ve got.”

Sen. Frank Hill of Whittier

Charge: Three counts of conspiracy to commit extortion, extortion and money laundering.

Possible penalty: Each count carries a maximum penalty of 20 years and a fine.

Response: “I want to make a clear and unequivocal statement that I am innocent of these charges.”