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Election Aid Tied to Orange County Bond Deal

August 21, 1986|JEFFREY A. PERLMAN | Times Urban Affairs Writer

Three months before the Orange County Board of Supervisors awarded a lucrative airport bond underwriting contract to a prominent New York brokerage house, an official of the firm promised Supervisor Bruce Nestande financial help in his campaign for secretary of state, Nestande and the official acknowledged this week.

Three months after the board's decision, which was preceded by lobbying by current and former White House advisers, on behalf of rival firms, Nestande received more than $13,000 from Smith Barney, Harris Upham & Co., the brokerage house selected as the lead underwriter.

Nestande said he was offered campaign funds by former presidential adviser Steven Rhodes, now a Smith Barney vice president, before county supervisors awarded the firm the lead underwriting role in the sale of $270 million in revenue bonds to finance expansion of John Wayne Airport. Rhodes is a long-time Nestande political associate and served in the White House as local government liaison during President Reagan's first term.

Worked for Reagan

Later, Nestande was called by Deaver, formerly President Reagan's deputy chief of staff who now is a Washington-based lobbyist whose clients include Smith Barney. Deaver and Nestande were members of Reagan's Sacramento staff when Reagan was governor.

Nestande said none of these discussions influenced his own support for Smith Barney, and that he did nothing to sway his fellow supervisors.

An official of the state Fair Political Practices Commission said such contacts between a public official and a campaign contributor are not illegal unless the contributions are made in exchange for direct action on a specific issue.

No such exchange has been alleged, and Nestande and Smith Barney officials strongly denied any wrongdoing.

Deaver was unavailable for comment on the Orange County matter.

Under Investigation

The former Reagan aide is under investigation for allegedly violating prohibitions against contacting government colleagues on behalf of his business clients shortly after he left the White House last year.

In an 11th-hour bid to counter Smith Barney's lobbying effort, Merrill Lynch hired presidential political consultant Stuart K. Spencer and speech writer Ken Khachigian. The supervisors chose Merrill Lynch for the secondary role of co-manager of the bond sale.

Although between $500,000 and $1 million in management fees and sales commissions were at stake, there was almost no discussion when county supervisors voted unanimously for Smith Barney on March 6.

Nestande said in an interview this week that Rhodes offered to raise funds for his statewide campaign sometime in December or January.

"I said sure, but wait until this bond thing is settled because I didn't want the fund-raising to get mixed up in that . . . ," recalled Nestande, a Republican.

'He Always Came Through'

Rhodes agreed, saying: "I've known Bruce Nestande for years. . . . When I was in the White House, I used to call on him all the time, sometimes at the request of the President, to obtain his help in lobbying various congressmen on legislation of particular interest to the President. He always came through. So, of course, I wanted to help him financially. But also, I did not want to put him in an embarrassing position, so I waited until after Smith Barney was selected as the lead underwriter for the airport bonds. I organized a fund-raiser for him here (at Smith Barney's New York headquarters) and I asked the other fellas (Smith Barney executives) to contribute. They did."

Of the $13,000 that Nestande reported receiving from Smith Barney in his most recent campaign disclosure statement, $1,372 came from the firm and the rest from corporate officers.

Meanwhile, Nestande said that during a telephone conversation with Deaver about unrelated matters, Deaver reminded him that Rhodes, a mutual friend, was now working for Smith Barney. "I didn't even know that Smith Barney is one of Deaver's clients until you just mentioned it," Nestande told a Times reporter. "I told Mike (Deaver) that Rhodes and I had already talked several times, and that was the end of it."

Although Nestande said he did not try to influence his fellow supervisors, Assemblyman Richard Robinson (D-Garden Grove) recalled that he had written a letter to the supervisors--at Nestande's request--urging them to open up the bidding process on the airport bonds. Robinson said he concluded that anything promoting competitive bidding among underwriters would be good for the public interest.

Denies Making Request

Nestande, however, said he never asked Robinson to write any such letter and knew nothing about it.

"I don't know what you're talking about," Nestande said. "I've never seen that kind of letter."

Orange County Tax Collector-Treasurer Robert L. Citron recalled that he had argued that Merrill Lynch should get the lead underwriting role because of that firm's experience, and because it had successfully underwritten housing bonds for the county.

Citron said several supervisors' aides had told him he was wasting his time because "Smith Barney already had it locked up, and they said it was because of the firm's White House connections."

'Couldn't Buck It'

"Merrill Lynch hired Stu Spencer (and Ken Khachigian), but it was too late," Citron said. "They came into the picture on the Friday before the Tuesday board vote. They couldn't buck it."

A Merrill Lynch executive who requested anonymity said the firm went to Spencer and Khachigian only because it wanted to match the political clout ascribed to Deaver and Rhodes.

Other supervisors said they were lobbied heavily on the bond matter by Rhodes, Spencer and Khachigian. None received campaign contributions from either Smith Barney or Merrill Lynch.

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