FBI to Continue Capitol Corruption Probe : Sting: U.S. authorities say they are pursuing other leads and will continue to watch legislators closely.

After the indictments of Assemblyman Pat Nolan (R-Glendale) and Sen. Frank Hill (R-Whittier) on political corruption charges, federal authorities have made it clear that they will continue to keep close watch on the Capitol and that they are doggedly pursuing other leads.

Since launching an elaborate sting operation seven years ago, the FBI has established a permanent corruption squad, one source familiar with the investigation said Wednesday. Each of the 14 cases filed thus far has resulted in new leads, while investigators have systematically moved from one indictment to another, developing new cases as they go, the source said.

The FBI agent-in-charge in Sacramento, Richard Ross, described the process generally after the Nolan and Hill indictments were announced Tuesday. He said progress was slow because his agents had to untangle complicated political relationships.

Now that it has the expertise in the way legislation moves through the Capitol, the FBI does not plan to let it go to waste.

Ross said that “in fact, we’ll in a sense be lobbyists for the citizens of California.”

But U.S. Atty. George L. O’Connell, who leaves office Saturday, warned that corruption cases are no substitute for reform of a system that all too often links the outcome of legislation to hefty campaign contributions.

Prosecutions, he said, “are a very blunt instrument to achieve political reform. I think that has to come from the people of California, either through their elected (officials) or other political processes. And that’s really not our job to try and do.”

The eight-count grand jury indictment naming Nolan, Hill and former Senate aide Terry E. Frost illustrates the kind of behavior the federal corruption squad will be looking for.

All three men have said they have done nothing improper and will fight the allegations in court. On Wednesday, Nolan was in the Capitol, attending to his duties. Hill, on the other hand, was not on the job in Sacramento, but his staff said he planned to be at his Senate desk this morning.

The charges against Nolan, in particular, demonstrate the kinds of issues that the federal investigators are likely to focus their attention on.

The indictment lists a series of bills, most of which involve battles between narrow special interests--each with substantial financial stakes in the outcome.

Among the measures is one by Assembly Speaker Willie Brown (D-San Francisco), which pits agricultural cooperatives that raise and harvest crops against large food processors, who buy and pack the produce.

The 1987 bill was designed to create a method to resolve pricing disputes between the two factions. Among the groups who supported it were the California Tomato Growers Assn. and the Olive Growers Council. Opponents included the California League of Food Processors, who wanted to keep government out of price negotiations. The measure was vetoed by then-Gov. George Deukmejian.

The indictment, which does not spell out any details, states that Nolan asked for a campaign contribution from one of the combatants in exchange for official action.

Nolan is also accused of seeking campaign contributions in connection with a bill by Assemblyman Rusty Areias (D-San Jose), which as originally drafted would have put a cap on credit card interest rates.

The measure was backed by the nonprofit Consumers Union and opposed by banks and credit card companies. In the end, the bill was watered down, requiring only disclosure of interest terms and fees, and it was signed into law.

The indictments of Nolan, Hill and Frost stem from a sting operation begun in 1986 in which FBI agents posing as businessmen sought legislation to help their bogus companies build a shrimp processing plant near Sacramento. In addition to the three named in the latest charges, 11 others--including three former state senators--have either been indicted or convicted on political corruption charges.