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FBI Presence Shadows Legislature's New Session

Sacramento's climate is clouded by inquiries tied to the secretary of state and Senate leader.

January 03, 2005|Dan Morain | Times Staff Writer

SACRAMENTO — For the first time since the Capitol's "Shrimpgate" scandal more than a decade ago, California legislators open their session today knowing that the FBI is hovering not far away.

By issuing subpoenas, conducting searches and convening grand juries in Oakland and Sacramento, the feds have made their presence unmistakable as they investigate dealings by the new state Senate leader, Don Perata, and Secretary of State Kevin Shelley, a former legislator. Both men are Democrats.

The scope of the inquiries, which are not connected, is not known. But interviews and documents that have become public suggest that the FBI is examining Perata's business and political activity in Oakland, his hometown, and Shelley's procurement of state money for a nonprofit group when he was an assemblyman from San Francisco.

Shelley's troubles revolve around a politician's stock in trade: delivering "pork barrel" spending to his district and collecting campaign donations from political supporters. And an aspect of the Perata inquiry involves something that hits home hard: family. Like many elected officials, Perata has family members -- his son and daughter -- who work on his campaigns.

Perata, confirmed last month by his fellow senators to be their leader, holds one of the most powerful posts in California government. Under the pressure of a criminal investigation, he will still be expected to help shape the state budget, exercise life-or-death power over legislation and raise campaign money for fellow Democrats.

Shelley, who is responsible for ensuring that California elections are fair and who had been a rising star, is so wounded that his political survival is in doubt, several experts said.

For Democrats, who control both houses of the Legislature, the investigations are an unwanted intrusion at a particularly bad time. Legislators face weighty issues as they return to work today, chief among them how to close the estimated $8.1-billion budget gap.

Adding to the pressure, Gov. Arnold Schwarzenegger is expected to propose a major overhaul of state government, calling for a special legislative session to focus on a state spending cap and legislative redistricting. If he fails to win legislative approval, Schwarzenegger may invoke his power to call a special statewide election to deal with the issues.

Although no charges have been filed, the investigations are "a cloud that hangs over everything," said Republican campaign consultant Wayne C. Johnson.

Assemblyman Mark Leno (D-San Francisco) cautioned that it's too early to know what the investigations might yield. But the situation gives people in politics pause.

"Careers are made and broken on hints and whispers," Leno said. "We live with it daily. One needs to be ever vigilant, alert and knowledgeable."

If the inquiries continue to attract public attention, Shelley and Perata "could become poster boys" for the need for an overhaul of state government, Johnson said.

Johnson managed the campaign for the 1990 ballot initiative that put term limits on state legislators and high officials. Voters approved that initiative two years after the FBI raided Capitol offices in a sting operation aimed at state legislators.

Agents posing as out-of-state businessmen spread money around Sacramento to win passage of phony legislation to create a fictional shrimp processing plant. By the time "Shrimpgate" was over, 14 Democratic and Republican legislators, lobbyists and others had been convicted and sent to prison.

It was last summer that Shelley's difficulties began, after the San Francisco Chronicle reported that as an assemblyman in 2000, he secured $492,500 in state tax money for a political supporter's group. The funds were to pay for construction of a community center -- but no such center was built.

Authorities believe that Julie Lee, the head of the group, and her associates helped divert at least $125,000 to Shelley's campaign for secretary of state. Shelley, who like Lee has denied wrongdoing, returned $125,000 to the state and put an additional $80,000 in an escrow account pending the outcome of the investigation.

Meanwhile, a highly critical Bureau of State Audits report issued last month said Shelley used millions in federal money intended for voter education for apparently political purposes, including hiring consultants who attended partisan events and wrote speeches for him. The audits will be the focus of a legislative hearing set for Jan. 11.

Shelley, a 49-year-old attorney who served six years in the Assembly, declined to comment for this article. But spokeswoman Caren Daniels-Meade said he remains "fully engaged" as secretary of state.

"In the midst of the investigations," Daniels-Meade said in a statement, "he still managed to oversee and guide a flawless presidential election with the highest number of voters in the history of this state."

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