Laundering Money With Don Perata

After running the state legislature and making Arnold play ball, the Don really just wants to be a state tax bureaucrat. Say what?

Say you’re Don Perata. The president of the state Senate. The second most powerful man in California politics. You’ve got the world at your feet, and when your term expires in 2008, you’ll be looking for another office that will reflect your monumental ambition and ego. Which epicenter of power and influence do you set your eyes on?

Why, the Board of Equalization, of course. The state body that administers property and sales taxes — all the sexy, invigorating issues of the California tax appellate program. After years building an unbreakable political machine, ruling California Democrats with an iron fist, and crafting multi-billion-dollar state budgets with the Governator, Perata has apparently decided that his career will not be complete until he gets a chance to educate and assist taxpayers and feepayers to comply voluntarily with state tax laws while minimizing their compliance burden. Just reading about it gets me hot.

But other people might be forgiven for considering that an odd career path for the man who dominates Democratic Party politics in California. Yet last year, the Don set up “Taxpayers for Perata,” a committee to collect funds to run for the Board of Equalization in 2010. Some might also be forgiven for wondering why Perata needs to set up a committee to run for an obscure office four years in advance of the election. However, this apparently makes perfect sense to dozens of the state’s most powerful companies and political action committees, which have donated hundreds of thousands of dollars to Perata’s latest campaign war chest.

Why does Perata need so much dough right now? It might have something to do with the Federal Bureau of Investigation. In late 2004, the FBI launched a massive investigation into allegations that Perata illegally received kickbacks funneled through Lily Hu, an Oakland lobbyist and Perata associate. Federal investigators are also examining the business practices of Perata’s son Nick, his business partner Timothy Staples, and Sandy Polka, a longtime associate and spokeswoman for Perata’s “Board of Equalization campaign.” The investigation is ongoing, and Perata has created a legal defense fund to pay for all the lawyers and private investigators working to clear his name. Those guys don’t come cheap, and the senator needs a lot of cash handy. But while Perata cronies like Signature Properties or Harbor Bay Isle Associates have no problem doling out money to keep their chief benefactor out of jail, other companies might find it a little dicey to be publicly contributing to the defense fund of a politician being investigated by the FBI.

That’s where Perata’s Board of Equalization committee comes in. According to documents filed with the Secretary of State, the Don has transferred $274,000 from his Board of Equalization war chest into his legal defense fund. Telecommunication firms, public utilities, credit-card companies, health insurance providers, and Sacramento political action committees have donated a small fortune to a committee that was supposedly set up to elect Perata to an obscure state office. That same money is actually being used to help the president of the state Senate defend himself against a federal corruption probe.

Neither campaign spokeswoman Sandy Polka nor legal defense fund spokesman Jason Kinney returned phone calls seeking an explanation for this odd turn of events, so we’ll have to figure it out on our own. Of course, it’s entirely possible that Perata genuinely desires to run for a podunk, inconsequential office after running the state for six years; maybe he’s just borrowing against the fund to paper over some short-term liquidity problems. But it’s also possible that he never intended to run for the Board of Equalization, and merely set up the committee to sucker people who would never have given money to his legal defense fund. If that’s the case, there must be an awful lot of angry, powerful donors out there. Yet another possibility is that these companies knew exactly what they were doing; and that the campaign committee was a shell game all along, a way for companies to contribute to Perata’s defense fund without being publicly associated with his legal problems.

We’ll probably never know the answer, as almost none of the donors contacted for this story returned calls seeking comment. Those who didn’t include spokespeople for T-Mobile USA (which gave $1,500), Blue Shield of California ($2,000), Visa USA ($2,000), 24 Hour Fitness ($2,500), the California Association of Health Facilities ($5,000), the California Dental Association ($5,600, the maximum donation), the First American Title Insurance Company ($5,600), and Southern California Edison ($5,600). And who can forget Mercury General Corporation ($5,600), the car insurance company that funneled tens of thousands of dollars to Perata around the time that he drafted a bill that would have raised car insurance rates for the East Bay’s poorest drivers? (A scheme that, for all its malevolent beauty, was thrown out by those philistines in the state courts.)

Those donors who did talk danced around the issue. Brian Hertzog, a spokesman for Pacific Gas and Electric (which gave $5,600), claimed that utility executives are largely indifferent to what the Don did with their money. “Every company that makes political contributions does so with the full awareness that the use of those funds is ultimately up to the candidate,” he said. “We’re no different.” Asked whether the utility would give money directly to Perata’s defense fund, Hertzog demurred: “Any time we make a contribution, we’re going to a case-by-case basis.”

Carol Leveroni, the executive director of the California Association for Nurse Practitioners ($2,500), adopted a similarly fatalist attitude. “Because he’s been a supporter of nurse practitioners in the past, our political action committee made a decision to make a contribution to him,” she said. “Beyond that, we have to trust that he will use the funds within the laws of campaign fund-raising. We don’t follow it after that.”

Fair enough. But according to the latest filing from his legal defense fund, Perata still owes $84,887 in outstanding bills. So anyone who still nurtures hopes that Perata’s sober influence will guide our state’s tax collection policy into the 21st century, just be warned that he’s been known to dip into the till. In other words: If you give money to Don Perata’s campaign committee, you’re really bankrolling his unsavory legal defense fund. And the FBI is watching.

But just so’s we’re clear, the Don has done nothing illegal — at least not until the FBI proves otherwise. He can set up a committee to run for an office that anyone who knows his career could not possibly expect him to be satisfied with. He can set up the committee four years before the election, long before any other politician would do so. He can take almost three hundred thousand dollars contributed for the express purpose of helping him run for office, and he can quietly redirect it to a fund set up to help him fight a federal investigation on charges that he accepted kickbacks and laundered illegal proceeds. And he never has to return the money. It’s all perfectly legal. It’s even a work of art, if you like that sort of thing.

Judging from the ease with which Don Perata still dominates the East Bay’s political landscape, plenty of people do.

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