Political Funds Probe Targets 4 in Santa Ana

A long-running investigation into allegations of political corruption in Santa Ana is nearing completion, sources close to the probe said Monday.

For the last two months, a federal grand jury in Los Angeles has been looking into questions about the circumstances surrounding campaign contributions from two businessmen who were seeking City Council help with their requests.

The federal sources, who asked not to be identified by name, said the businessmen are not targets of the probe. They said the investigation focuses on Santa Ana Councilmen Ted R. Moreno and Tony Espinoza, and two of their political allies who unsuccessfully ran for the City Council.

Federal authorities said they plan to seek grand jury indictments.

The investigation, which began two years ago, centers on two proposals that came before the council: an application for a liquor license to sell beer and wine at a service station mini-mart and a request from a businessman seeking city help in a land deal, the sources said.

Federal authorities say they are investigating whether Moreno offered promises of help on both deals in exchange for contributions to his campaign and those of his associates.

Authorities also are trying to determine whether Espinoza solicited campaign money in exchange for help with the liquor license.

It is legal for donors to give money to candidates believing the contributions will influence their votes, and it is legal for politicians to solicit campaign contributions. But federal law prohibits a politician from promising a vote or other legislative support in exchange for a donation.

Santa Ana city records show that the seven-member City Council ultimately turned down the liquor license request, which Moreno and Espinoza supported. Neither councilman took part in the final land vote, which the council ultimately approved.

Federal officials said they also are examining the actions of Hector Olivares and Roman Palacios, political allies of Moreno and Espinoza. Olivares and Palacios ran for the Santa Ana City Council on a Moreno-backed slate in 1996 in an attempt by Moreno to form a majority voting bloc.

Moreno, who is currently running for mayor against incumbent Miguel A. Pulido Jr., did not respond to repeated requests over the last week for comment. Neither did Espinoza, Palacios nor Olivares.

Federal officials said the grand jury must decide whether indictments are warranted on any of a variety of possible charges, including extortion, money laundering, conspiracy to launder money and defrauding the public through false campaign statements and mailers.

Moreno, a real estate agent, was first elected to the council in 1992. In running for office, he has portrayed himself as a champion of everyday folks challenging the power elite of Santa Ana.

“I’ve always touched a nerve with the people who are tired of the status quo, and [my critics] don’t like that,” he said in an interview two weeks ago, before details of the federal investigation surfaced. “They’ll punish the community, they’ll do anything to get to me.”

One of the deals under scrutiny involves Jack Blackburn, executive director of Cooper Fellowship Inc., a Fountain Valley nonprofit corporation that runs alcohol and drug rehabilitation centers. He is a former bingo hall operator who pleaded guilty in 1980 to charges of laundering campaign contributions on behalf of those trying to recall two Anaheim elected officials.

At issue is a 1996 effort by Blackburn’s group to sell a 15-acre parcel at 2828 N. Bristol St. to the Santa Ana Unified School District or to obtain rezoning that would allow the property’s sale to a developer for construction of a higher-density residential community. Federal sources are probing whether Moreno promised to help in exchange for campaign contributions. Blackburn eventually contributed about $10,000--half in cash and half in gold South African Krugerrand coins, the sources said.

In an interview late Friday, Blackburn said two FBI agents contacted him at his home two to three months ago to question him about Moreno. He said he refused to answer their questions.

A copy of a subpoena obtained by The Times shows he was summoned to appear before the grand jury in U.S. District Court in Los Angeles on June 16. One of his attorneys, Al Stokke, declined to comment.

Neither Moreno nor Espinoza voted on the development when it was approved by the council earlier this summer.

In the other deal, service station owner Vaskin “Victor” Koshkerian was seeking approval for an alcohol permit for a mini-mart at his Grand Avenue Chevron station. Sales of beer and wine would have added as much as $200,000 in annual revenue to his business, authorities said. Koshkerian also owns two stations in Anaheim.

Authorities said they are investigating whether Moreno and Espinoza agreed to support his application for the permit in return for $31,000, which was split among the campaigns of Moreno, Palacios and Olivares.

Koshkerian declined comment on the investigation.

Times staff writer Nancy Cleeland contributed to this report.