Key Witness Outraged by Plea Deal in Fraud Case : Courts: Ex-cabdriver who aided prosecutors by tape-recording conversations with defendants charges political favoritism. Treasurer Fong, D.A. Garcetti deny any misconduct.

Despite a belated courtroom protest by the flabbergasted chief witness in an insurance fraud case, prosecutors and a judge moved ahead Thursday with a plea-bargain agreement that will result in no jail time for a lawyer and a chiropractor who pleaded no contest to charges that they illegally manipulated insurance claims stemming from an auto accident.

The witness, an ex-cabdriver who made 45 surreptitious tape-recordings of the defendants at the request of prosecutors, believes political influence-peddling was at the heart of the plea bargain.

To amplify his claim, witness James Corbett showed The Times an internal district attorney’s memo he recently uncovered that reveals that state Treasurer Matt Fong discussed the case with Dist. Atty. Gil Garcetti and other prosecutors last year.

Garcetti and a spokesman for Fong, who was treasurer-elect at the time of the two conversations, responded Thursday that nothing untoward occurred.

Fong inquired about the case, his spokesman acknowledged, as a favor to his godfather, David M. Shaby Sr.--the father of one of the defendants, lawyer David M. Shaby II.

“There wasn’t any discussion on how to settle the case,” said Chief Deputy State Treasurer Ron Rogers. “It was a matter of a godson checking up on behalf of his godfather.”

The younger Shaby, an attorney who has served as a reserve police officer and a judge pro tem in the Culver City Municipal Court, agreed to enter his no contest plea Thursday in Los Angeles Superior Court contingent on a sentence of three years probation.

The chiropractor, Dennis Singh, was sentenced to three years probation, including six months of being electronically monitored at his new residence in Utah.

And star witness Corbett? He couldn’t even get arrested.

The tall, lanky Corbett, outraged that neither Singh nor Shaby was going to jail, unsuccessfully demanded to be taken into custody Thursday as he was being escorted from Judge Curtis Rappe’s courtroom by sheriff’s deputies. Corbett, 37, had entered the courtroom during Singh’s sentencing and refused Rappe’s request to be seated after being informed by the judge that he had arrived too late to make a statement.

As he was being hustled out of the courtroom, Corbett screamed that the plea bargain smacked of political corruption and pleaded repeatedly for the deputies to arrest him.

However, the law enforcement officers refused, instead placing the angry witness on an elevator and leading him out of the Downtown Criminal Courts Building.

In a subsequent interview outside, Corbett said he had been assured repeatedly by Deputy Dist. Atty. Mark Kim and other prosecutor’s personnel that the tapes provided a “slam-dunk” case against the two defendants for which they would in all likelihood be required to serve time behind bars.

The Philadelphia native said he went to prosecutors in the first place because he was shocked by the defendants’ efforts to involve him in unlawful activities after a 1992 Hollywood traffic accident in which he suffered minor injuries.

Corbett was wired for sound by district attorney’s investigators and had a series of meetings with Shaby and Singh before they were arrested in July, 1993, and charged with grand theft and insurance fraud for allegedly submitting false bills and making false statements to the insurer of the driver whose car struck Corbett’s cab.

The defendants each pleaded no contest to single felony counts: Singh to insurance fraud and Shaby to unlawfully accepting compensation in exchange for an insurance case. If they successfully complete their probation, they can petition the court to have the offenses downgraded to misdemeanors.

Singh was also ordered to undertake 750 hours of community service and pay a $5,000 fine. Shaby, due to be formally sentenced Aug. 4, was ordered to provide 200 hours of community service and pay fines totaling $40,500.

Shaby said later that he still feels “100% innocent” and believes he was “set up” by Corbett.

Prosecutor Kim and his boss, David H. Guthman, who heads the district attorney’s Auto Insurance Fraud Division, said the sentences were in line with those in similar white-collar fraud cases.

Guthman said a stiffer sentence was not sought because investigators were unable to find evidence tying the defendants to additional unlawful activities.

Guthman was the author of the internal office memo concerning the Fong contacts that Corbett said he found while looking over preliminary hearing transcripts in Kim’s file.

The memo states that Guthman contacted Fong at Garcetti’s request in January after Garcetti met Fong at a dinner party and asked about the case. Fong, the memo stated, said he was acquainted with Shaby’s father, who had approached him and told him about the prosecution.

“I briefly described the case to Mr. Fong, and was available to respond to his questions,” wrote Guthman. “He was concerned that this inquiry not be interpreted as an attempt to interfere.”

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Garcetti, in a telephone interview Thursday, said he did not “remember anything about the case per se.” He added that law enforcement officers and elected officials “are always calling me about particular cases. I don’t see anything untoward about that.”

State campaign finance records show that Shaby’s father, David M. Shaby Sr., a Culver City contractor, has contributed more than $7,000 to Fong for his election races for state treasurer, a post he was elected to in November. Defendant Shaby also contributed $600 to Fong’s election bid nearly a year after being arraigned in the insurance scam.

Fong spokesman Rogers said the state treasurer’s interest had nothing to do with the contributions. “[Shaby Sr.] is a godfather to Matt and Matt feels very close to him.”

Corbett countered that any inquiries by a state constitutional officer were unwarranted. “Political influence of this kind is very subtle in nature,” he said. “Plausible deniability is built into it, it’s very hard to prove.”

Guthman, for his part, expressed amazement at the relationship between Fong and Shaby Sr. “Son of a gun,” he said. “The godfather? You know, hey, next I’m going to see a horse’s head.”