2 Lives Snared in Web of Money, Politics : Capitol: Prosecutors say both aides 'played the middle' between donors and lawmakers. Now one is the other's accuser in a corruption trial.

TIMES STAFF WRITER

Karin L. Watson's self-proclaimed goal was to make lots of money. Building on her experience as a political fund-raiser and special consultant to then-Republican Assembly Leader Pat Nolan, Watson dreamed about joining the ranks of the Capitol's most elite and high-priced lobbyists.

Her counterpart was Terry E. Frost, whose political roots instead extended to Democrats and environmentalists. Frost worked his way up the Capitol ladder, from lawmakers' chauffeur to adviser to powerful members such as former Senate Majority Leader Barry Keene (D-Benicia). Frost, too, hoped to emerge from behind the scenes, possibly as a lobbyist.

In 1988 both won the attention they craved but certainly not in a way either could have envisioned.

The pair, whose lives intersected in the boisterous back rooms and watering holes of Sacramento, unwittingly helped the FBI in an investigation of public corruption that has engulfed the Capitol for the past six years.

Now 47, Watson become the star prosecution witness against Frost, her onetime friend, and state Sen. Frank Hill (R-Whittier), who was once her boss. The corruption trial is unfolding at the federal courthouse a few blocks from the Capitol.

The testimony and secretly recorded tapes of Watson and Frost provide insight into the Capitol's venal underbelly in which groups with vested economic interests lavish aides with liquor and expensive meals and gifts such as Giorgio perfume.

Like the 12 earlier cases springing from the undercover probe, the Hill trial, which began May 9, shows how fund raising fuels the political system and how lawmakers are constantly tiptoeing along the line of illegality.

Watson and Frost formed an unlikely twosome. Watson worked for Nolan, one of the Assembly's most right-wing members, with a reputation as a hard taskmaster, who pleaded guilty to corruption charges earlier this year. Frost was more mild-mannered and focused on the legislative process while advising liberal Democrat Keene, whose reputation as a tough boss paralleled Nolan's.

According to prosecutors, they had a similar role, however. They were "to play the middle" between lawmakers and donors. While on the public payroll, they raised money any way they could as long as their bosses had "deniability," the ability to say they did not know money was tied to their action on legislation.

"I will not . . . force people to give contributions," Frost told an FBI informant who was secretly taping a February, 1988, lunch conversation. "I will explain political realities. And then if they say no, that's fine . . . (but) when they come to ask a favor, they can understand why I say no."

Watson said her job was to raise money, cozy up to high-rollers who could help Nolan and trade favors with other legislative staffers such as Frost. Her duties, she said, included "doing the circuit" of Sacramento nightspots as a way to befriend lobbyists and contributors with deep pockets.

"My whole world revolves around making money for myself and others," Watson said during a June 16, 1988, lunch secretly taped by Senate Democratic aide John A. Shahabian, who was the FBI undercover informant pressing for passage of a bill to help a shrimp processing plant locate near Sacramento.

Frost's lawyer concedes that his client "messed up" in some of the taped conversations but says Frost did nothing illegal. Watson admitted she broke the law, pleading guilty to extortion and agreeing to cooperate with prosecutors.

In one secretly taped conversation, Watson warned undercover informant Shahabian that a businessman who was really an FBI agent should be careful when discussing money and legislation. The agent had given then-Assemblyman Hill a $2,500 honorarium, allegedly for his help on the shrimp bill, and then called the next day offering "more money." Hill complained to Watson, who worried that the money-for-votes scenario was becoming too transparent.

"Our members (legislators) will not talk about money and legislation in the same breath," Watson told Shahabian. "Don't ever try it. And explain why. Tell him (the businessman) it is against the law. Tell him we go to jail."

Frost, now 44, got his first taste of the Capitol when he monitored the progress of legislation for the Planning and Conservation League as part of a community college class. Frost, who says he holds no grudge against Watson, recently left a job as a lobbyist.

In February, 1988, he was on Sen. Keene's payroll and was turning into an influential Capitol insider when he had lunch with Shahabian. During the lunch he bragged that he had snagged a $5,000 contribution tied to oil company legislation. It was supposed to be given to Senate President Pro Tem David A. Roberti at a San Francisco event. Roberti, who stepped aside earlier this year as Senate leader, denies receiving such a contribution.

Frost's boast "just strikes me as . . . one staffer trying to be a bigger hotshot than the other staffer," said Roberti, now running for state treasurer. "Those kinds of things do happen around here."

Describing herself as a devoted admirer of Ronald Reagan, Watson gained experience as a fund-raiser for agricultural interests and manager of political action committees. The Phoenix native left politics in the early 1980s to raise her young son but returned in 1985 to join Nolan's staff. She was earning $57,000 a year when she was fired in 1989, three days after she admitted extorting $12,500 for her GOP bosses.

About a year ago, Watson sought a retail job from a friend, Janet K. Russo of Sacramento. Russo, a former lobbyist, testified that Watson confided that she wasn't really guilty but went along with authorities to avoid a lengthy prison sentence.

"She had to cooperate or she would be going away for a long, long time . . . away from her family, particularly her son," said Russo, called by Hill's lawyer to cast doubt on Watson's truthfulness.

Watson, who was hustled in and out of the courtroom by FBI agents, declined a request for an interview.

In the trial, Watson said she wanted to use her position as an aide to launch herself into the more lucrative world of lobbying. At one point, she approached top lobbyist Clayton R. Jackson, who last year was convicted in another corruption-related case, about a job.

Frost, charged with conspiracy, and Hill, facing charges of extortion, conspiracy and money laundering, are seeking to cast doubt on Watson's credibility. Hill's lawyers contend that Watson's memory was clouded by numerous glasses of champagne she sipped while dealing with FBI undercover agents. Watson admits she was drinking but maintains she was sober.

Last week, U.S. District Judge Edward J. Garcia turned down Hill's bid to dismiss the case because of insufficient evidence.

In fact, Garcia warned: "I believe that the jury could reasonably and properly find beyond a doubt that Hill joined a conspiracy to take money for express official action, and that's what he is charged with."

Hill is expected to take the stand Tuesday when the trial resumes.

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