Ex-State GOP Leader Target of Bribe Probe : Gaming: Sources say investigation centers on card room legislation. He denies any wrongdoing.

Deploying an assemblyman as an undercover agent, the state attorney general’s office has been investigating an alleged bribery attempt by a former California Republican Party chairman who was seeking legislative help for a proposed card casino.

The investigation, according to documents and interviews, focuses on El Monte attorney Michael B. Montgomery, a politically connected Republican who represents two businessmen battling for exclusive rights to operate a card room in Colma, a tiny San Francisco suburb.

No one has been charged in the case, and Montgomery denies wrongdoing.

The centerpiece of the probe is a series of secret audio and video recordings of conversations between Montgomery and Assemblyman William E. Hoge (R-Pasadena), whose complaint to Atty. Gen. Dan Lungren prompted the investigation.

During those conversations, the two men discussed a plan for Hoge to introduce legislation intended to block a rival gaming project. Records and interviews show they also discussed an offer from Montgomery to let the assemblyman obtain a stake in his clients’ proposed card club--a stake that Montgomery acknowledges could be worth $1 million to $2 million.

Evidence gathered in the five-month probe recently was turned over to Sacramento Dist. Atty. Jan Scully for possible prosecution.

In an interview, Montgomery said his conversations with Hoge regarding the proposed legislation and a possible interest in the card room did not constitute an attempt to improperly influence a legislator.

“I’ve never offered anybody a bribe,” said Montgomery, an attorney who served in the 1980s on the state Fair Political Practices Commission.

Montgomery allegedly offered Hoge an interest in the casino and told him that it could be financed through a loan that would be paid out of the casino profits, according to government records and interviews.

But Montgomery said that it was Hoge who asked for an interest in the casino and that the assemblyman was expected to pay for it. “You know it’s enough of a benefit to be able to get in on the ground floor,” he said.

Hoge, in a written statement to The Times, confirmed that he had aided the law enforcement agency in its investigation but refused to divulge the details of his involvement.

“I initiated an attorney general investigation of what I believed was an attempt to influence my vote on a legislative matter,” he said. “I have enthusiastically worked with and will continue to enthusiastically work with all law enforcement agencies.”

Chief Deputy Atty. Gen. David Stirling confirmed that his agency has been conducting the investigation of Montgomery and forwarded the results to the Sacramento district attorney’s office.

Scully said the case is under review by her attorneys but declined further comment.

Montgomery’s clients, Colma restaurateur Don Smith and golf course owner Thomas Atwood, are not the targets of the investigation, officials said.

Smith said he was unaware that Montgomery had contacted Hoge and was surprised to learn of the probe. He added that Montgomery “knows what the rules and regulations are.”

Smith praised Montgomery for his knowledge of the gaming industry in California, saying, “He’s done a good job.”

Atwood could not be reached for comment.

The state investigation is another jolt to the Capitol, where lawmakers are still recovering from a lengthy FBI sting operation that resulted in the conviction of five elected officials. It also comes as a bitterly divided Legislature grapples with a proposal by Lungren to establish a Nevada-style commission to regulate gambling in California and weed out corruption in the highly lucrative gaming industry.

How the latest sting operation will play into the debate is unknown, but it offers a rare insight into the intensity of the competitive maneuvering, both in public and behind the scenes, that swirls around the establishment of new card rooms.

Through government documents and interviews with Montgomery and others close to the Colma transaction, The Times was able to piece together much of the information gathered by investigators.

The two key figures in the probe are Montgomery, a lawyer experienced in handling card-room applications, and Hoge, an assemblyman whose personal interest in gambling has given him a prominent role in the legislative debate over the regulation of the industry.

While not a registered lobbyist, Montgomery, 58, is a familiar face around Sacramento and Southern California political circles.

Over three decades Montgomery has held a variety of local government jobs, beginning with his election to two terms on the South Pasadena City Council. Later, he was a director of the Irwindale redevelopment agency and legal counsel to redevelopment agencies in Huntington Park and Walnut. In 1972, he ran unsuccessfully for secretary of state.

Besides a term in the late 1970s as state Republican Party chairman, Montgomery served in the mid-1980s as a member of the FPPC, which serves as an ethical watchdog over state and local elected officials and candidates. Recently, he completed a stint on the Pacific Fishery Management Council, a post to which he was nominated by Gov. Pete Wilson.

Hoge, 49, easily won a hotly contested race in November for his second term in the Legislature. In the campaign, Hoge was attacked for accepting contributions from gambling interests.

Two months later, Hoge said, he went to officials in the attorney general’s office alleging that Montgomery had asked him to use his influence to derail a rival’s gaming registration application, which was being reviewed by Lungren’s office.

At issue was a potentially lucrative franchise to be the exclusive operator of a card room in Colma, a hilly town of cemeteries and shopping malls where voters in 1993 decided 122 to 114 to authorize the establishment of a casino. After an intense competition, the City Council decided to award the franchise to an investor group headed by Rene Medina, owner of a gamblers’ bus shuttle to Nevada, and to designate Montgomery’s clients as the runner-ups.

But at the same time the council imposed one critical condition: If Medina and his partners failed to get a card club license from the state by a specific date, then Montgomery’s clients would become eligible for the franchise. However, when Medina did fail to meet the initial deadline, the council decided to give him more time.

Montgomery said he considered the extension of the deadline so unfair to his clients that he decided on two courses of action: He would file a lawsuit in San Mateo Superior Court, and he would seek help from Hoge, his assemblyman and a fellow Republican.

But what transpired next is in dispute. Sources familiar with the investigation said Hoge told authorities that near the end of last year Montgomery presented him with a proposal over coffee at a fast-food restaurant in Pasadena. According to the account, Montgomery said he was prepared to give several things in return if Hoge would intervene successfully to block issuance of the gaming registration to the Medina group.

According to documents and interviews, Montgomery offered Hoge box seats at the Tournament of Roses Parade, box seats at Santa Anita Park and, finally, a stake in the Colma card room, should Montgomery’s clients win the franchise. Montgomery allegedly assured Hoge that his offer was legal, but Hoge went to the attorney general’s office in January.

Montgomery denied that he ever asked Hoge to intervene in the registration process or that he offered him an interest in the card room. He said that he may have told Hoge he knew someone who could provide box seats, but that he would have done the same for any legislator.

When Hoge went to the attorney general, sources said, he was advised that any investigation would need his cooperation. Initially, Hoge declined, saying he was not interested in getting involved unless Montgomery contacted him again.

But several weeks later, Hoge went back to the investigators announcing he had gotten a second unexpected visit at his Capitol office from Montgomery and was ready to go undercover.

At the direction of state agents, Hoge recorded several telephone conversations with Montgomery over the next four months and videotaped one meeting in the legislator’s district office. (Similar taped conversations proved crucial in federal corruption cases against lawmakers. Former state Sen. Alan Robbins in 1991 cooperated with federal authorities by wearing a hidden recording device and taping conversations.)

In the initial tape-recorded conversations, Montgomery allegedly repeated his request that Hoge intercede with the arm of the attorney general’s office that conducts background investigations of potential gaming operators, and he amplified his offer of an interest in the casino.

Montgomery told Hoge, according to government records and interviews, that he would receive a “one point” interest and that the assemblyman could pay for it by writing a note to the casino operators, who would in turn use profits to pay off the note.

Officials in the attorney general’s office later moved to set up a more elaborate sting operation. They decided that Hoge, rather than intervening with the bureaucracy, should sound out Montgomery on a legislative remedy for his problem. They also directed Hoge to question Montgomery more thoroughly on the proposal for a card-room interest.

In a recorded phone conversation in March, sources say, Hoge suggested that he could author legislation that would have the effect of disqualifying the Medina group and putting Montgomery’s clients first in line for the Colma card-room franchise. The legislation would have disqualified anyone who had ever been charged with a gambling offense from holding a card-room registration.

The bill, which was never introduced, could have affected Medina, who, according to his attorney Harry Orr, was arrested on a misdemeanor charge of possession of gaming birds in the late 1980s but never convicted. Medina said he recently was awarded a conditional registration by the state to operate his Lucky Chances casino.

In an interview, Montgomery insisted that he was the one who initiated the idea of the legislation but that it was Hoge who broached the subject of an interest in the card room.

“He [Hoge] was my assemblyman, and I mean he was constantly criticized by the local papers for being a tool of the gaming industry,” Montgomery said. “I went to him as the logical guy to put the bill in.”

He said Hoge then asked him how he could obtain an interest in the card room. Montgomery denied that he ever offered a loan arrangement, saying he only told Hoge he could get him on the initial subscription list.

“He asked if an interest would be available, and I said I would put him on the list of opportunity, but everybody would have to buy their own interest,” he said.

Montgomery said he then suggested that Hoge have his lawyer call to work out the details. But he said the call never came.