Knotty questions over nonprofit's family ties

By Evan Halper and Nancy Vogel

Nov. 16, 2007 12 AM PT

Times Staff Writers

SACRAMENTO -- —

When California companies feel squeezed by their state tax bill, Bill Leonard may be able to help: He is an elected member of a powerful board that can slash a corporation’s taxes by millions.

Leonard, who often votes with business interests, can’t accept much support from them at election time because of a $250 limit on donations to the board’s members. But businesses pump hundreds of thousands of dollars into a tiny Sacramento-area nonprofit where Leonard’s wife and his chief deputy both draw income.

Pacific Gas & Electric, Eli Lilly and Co., Amgen, the manufacturing lobby, distillers of alcoholic beverages and other businesses with multimillion-dollar matters before the Board of Equalization all have donated. A chunk of the money has been used to pay Leonard’s wife and his deputy to organize an annual gathering of lawmakers, lobbyists and their families at a luxury resort in Maui. This year’s event, which Leonard attended, wrapped up Friday.

“This seems like a way for large corporations to launder contributions to a member of the board,” said Lenny Goldberg, president of Californians for Tax Reform.

“It is improper and it should be illegal.”

Leonard, the only Board of Equalization member at this year’s conference, said he saw no problem with tens of thousands of dollars in corporate money going to his family’s bank account. The San Bernardino Republican says his wife, Sherry, has a right to earn a living.

“If a company wants to be inappropriate and come to me and say, ‘I helped your wife’s business, and by the way we have a tax matter coming up,’ I would throw them out of my office,” Leonard said. “I can’t imagine something like that happening. . . . Just because I chose to run for public office, is my wife forced to be a homemaker?”

Leonard’s deputy, Barbara Alby, and Sherry Leonard shared payments totaling $77,000 for organizing the Maui conference in 2005 and 2006, public tax records show. They will be paid roughly $40,000 for arranging the event -- the sole function of their foundation -- this year.

Alby said there was nothing wrong with sitting on the board of a group that solicits money from companies with business before her office.

Alby said she and Sherry Leonard are not directly involved in asking for donations, a task she said is handled by the other three directors of the nonprofit, the Pacific Policy Research Foundation. Alby and Sherry Leonard complete the foundation’s five-member board.

“I don’t know where the conflict is,” Alby said.

The former state senator who wrote the ethics laws that govern the Board of Equalization sees things differently.

“These board members are like judges,” said Quentin Kopp, now a retired judge. “I can’t imagine a judge presiding over a trial in which one of the parties was making these kind of payments.”

The law requires board members to recuse themselves from tax appeals involving any donor that has given them more than $250 in campaign money, or to return the contribution. Kopp said he regrets that the law he drafted does not apply to family or staff income derived from interests with matters before the board.

“I didn’t include it, but I wish I had,” he said.

Kopp says holding board members to strict ethical standards is important because the stakes are high. The value of property owned by Pacific Gas & Electric Co., for example, is calculated each year by the board and is the basis for its tax bills. As a Board of Equalization member, Leonard, who is also a former legislator, votes on the size of those valuations.

PG&E; paid $15,000 to the nonprofit in 2006 and $15,000 this year. Such donations cover the cost of bringing panelists to the conference and renting facilities, in addition to paying Alby and Sherry Leonard.

PG&E; sent a senior government-affairs employee to the Maui conference last week, said spokeswoman Darlene Chiu.

“This foundation provides a forum and addresses issues that PG&E; is interested in,” Chiu said.

PG&E; disclosed its contribution in a public filing, but the Pacific Policy Research Foundation declined to disclose its donors, and state law does not require it to do so.

The Times learned of other donors through interviews with participants in this year’s Maui event, held at the beachfront Fairmont Kea Lani in upscale Wailea. Company representatives who attended were required to make a contribution to the foundation of at least $5,000, in addition to covering their own expenses for the trip, according to the nonprofit’s president, Tom Bordonaro, who served in the Legislature with Leonard.

Among the firms that did so was liquor company Diageo, which had much at stake in the Board of Equalization’s August decision to raise taxes on flavored alcohol drinks, such as the company’s Smirnoff Ice. The board increased the tax from 2 cents to 31 cents per bottle; Leonard, breaking with the majority to side with liquor companies, voted against the tax.

Also attending the Maui conference was Jack Stewart, president of the California Manufacturers and Technology Assn. Many of the members of his association, such as Hewlett-Packard Co., Intel Corp., the Boeing Co. and Chevron Corp., have had tax matters before the board in the last couple of years.

Leonard, one of two Republicans on the tax panel, has voted for business interests on key matters. Against the advice of the tax board’s staff, Leonard cast a vote that forced the state to give nearly two dozen manufacturing companies, including Hewlett-Packard and Intel, tens of millions of dollars in tax rebates -- even though the companies had paid no income taxes for the years in question.

In Maui, donors to the foundation were able to rub shoulders with Leonard all week. He joined 16 members of the Assembly and Senate at the conference, which left every afternoon free for golf, tennis, snorkeling, cocktails and other leisure activities.

Many legislators use campaign funds to cover the costs of the trip for themselves and their families. But many of the businesses that contribute to the Pacific Policy Research Foundation routinely pick up the tab for the dinners, drinks and greens fees of state officials attending the Maui events, according to lobbying reports filed by the companies.

This year’s Maui attendees discussed “energy in the climate change era,” “healthcare reform” and “jail diversion for mentally ill offenders,” according to the agenda. Speakers included a Chevron vice president, PG&E;’s director of state government relations and the lobbyist for Environment California.

One day of the conference was left unscheduled for “networking,” the agenda shows, and the six-day gathering ended with a reception on the hotel’s Polo Lawn.

“I really think we should have more of these conferences,” Leonard said. “Once legislators get sworn in, they stop talking. This is about the only occasion where the doors are closed, they can listen to experts and learn something.”

evan.halper@latimes.com

nancy.vogel@latimes.com

(BEGIN TEXT OF INFOBOX)

Gone to Maui

Sixteen state legislators attended a conference in Maui this month that was sponsored by the nonprofit Pacific Policy Research Foundation:

* Sen. Dick Ackerman (R-Irvine)

* Sen. Roy Ashburn (R-Bakersfield)

* Sen. Jim Battin (R-La Quinta)

* Assemblywoman Patty Berg (D-Eureka)

* Assemblyman Charles Calderon (D-Montebello)

* Sen. Ron Calderon (D-Montebello)

* Assemblyman Paul Cook (R-Yucca Valley)