Palacios Accepts Bargain, Admits Role in Extortion

Revealing that he has secretly cooperated with investigators for the last few months, former Santa Ana City Council candidate Roman Palacios pleaded guilty Friday to one felony charge in an elaborate extortion and money-laundering scheme aimed at gaining control of the council.

As part of a plea bargain, Palacios, 37, acknowledged that he conspired to extort $31,000 in campaign money from a Santa Ana service station owner seeking favorable votes on a liquor license request facing council approval.

Palacios was indicted Tuesday along with Councilmen Ted R. Moreno and Tony Espinoza and Hector Olivares, who, like Palacios, ran on a Moreno-backed slate in 1996 and lost. Federal authorities said the plea agreement was arranged before the indictments were returned.

The plea turns Palacios into a key prosecution witness, especially against Moreno, who is running for mayor this fall and faces the most charges. The 24-count indictment portrays Moreno as the mastermind of a scheme to extort thousands of dollars in contributions and launder the funds through the campaigns of his handpicked City Council candidates.

The plea also stunned a town that is still reeling from the shock of Tuesday’s indictments.

“Oh, no, I just can’t believe it,” said Enriqueta Ramos, a trustee of Rancho Santiago College. “I think we’re all in shock in the Hispanic community. It feels like we’re in mourning.”

But she and others were not persuaded that the Palacios plea raised doubts about the other defendants.

“As far as I’m concerned, they’re still allegations against the others,” said Teresa Saldivar, president of the Santa Ana Downtown Business Assn. “As a community . . . it’s disappointing and so discomforting, but I would like to see us sit this one out and wait.”

The indictment itself hinted at a likely plea deal by naming Palacios on only one count but listing him as an unindicted co-conspirator on a dozen money-laundering charges.

His cooperation should help him obtain a more lenient sentence, as is typical in plea bargains. Terms of his agreement, though, were sealed. He faces a maximum of 20 years in prison at his sentencing, set for Jan. 11.

Remorse Cited

Edward W. Hall, attorney for Palacios, said his client’s plea sprang from genuine remorse.

“He feels extremely badly that he’s disappointed his friends, family members and supporters and hopes they stand by him as he proves he can be trusted and that he’s a good person,” Hall said.

Palacios’ zeal to work on behalf of the community led to this “misguided effort” and participation in the extortion scheme, the lawyer said. His client is prepared to testify against the alleged co-conspirators, Hall said.

Subdued and silent after his brief appearance in a closed hearing before U.S. District Judge Linda McLaughlin, the 37-year-old manager of a church-affiliated immigrant education organization refused to comment. With his head bowed, he stood next to Hall as the attorney spoke for him.

Hall said Palacios does not believe assertions that the prosecution of the four politicians is politically motivated and that the indictment was timed to be returned just before the November election.

The remaining defendants are expected to be arraigned Monday in federal court in Santa Ana.

Moreno, 31, is named in all 24 counts, which accuse him of conspiracy to extort, conspiracy to launder money, extortion, money laundering and defrauding the public through false and misleading campaign reports and public statements.

Espinoza, 30, and Olivares, 31, are accused of conspiracy to extort. Olivares also is charged with conspiracy to launder money and 12 counts of money laundering.

Mark Rosen, attorney for Olivares, called Palacios’ guilty plea an act of self-preservation and not necessarily a threat to his client.

“He’s a guy who just decided not to risk conviction, and he’s under a lot of pressure from the prosecutor,” Rosen said.

Espinoza’s attorney, James Asperger, declined to comment, and Espinoza could not be reached. Neither Moreno nor his attorney, Edward Munoz, could be reached.

Prosecutors expect Palacios to cooperate fully, said Assistant U.S. Atty. John Hueston. “Mr. Palacios acknowledged his own involvement in the conspiracy, as well as the knowing participation of the other three defendants.”

Some civic leaders like Ramos believe that Moreno often endured insulting behavior by other council members while trying to provide for his constituency.

“We spend millions of dollars on art without first taking care of needs like food, clothing and security,” she said, reiterating an often-used Moreno refrain. “I understood his frustrations because they treated him like he was nothing.”

Times staff writer Nancy Cleeland contributed to this report.