Fall Gal

A money-laundering scandal may have helped bring down former Secretary of State Kevin Shelley. But indicted political maven Julie Lee stands to pay the ultimate price.

Andrew Lee finished fourth in the race for the seat won by Fiona Ma. But he soon wound up working for the newly elected Shelley in the secretary of state's San Francisco field office. Shelley promoted him to a civil-service-protected position under circumstances that the California State Personnel Board later concluded smacked of favoritism.

Now living in Sacramento, Andrew Lee still works for the secretary of state's office, albeit part time, having recently returned from disability leave after a work-related back injury. He is understandably among his mother's most vociferous defenders. "My mother is an honest, hardworking, and selfless person ... who has been the victim of character assassination," he says. "I can say she has no reason to break the law, and never has."

Julie Lee's problems emerged in July 2004, when a California Parks and Recreation auditor called to ask how SFNRC was spending the grant money. The group had reported spending tens of thousands of dollars for pre-design work on the center, and Reiko Hatch, the auditor, wanted to see receipts to verify it.

Instead, as Hatch later told a grand jury, she and a colleague got the runaround from Lee.

Parks & Rec might never have bothered with the matter had it not been for a tip from a disgruntled Shelley staffer aimed at causing problems for the famously difficult-to-work-for secretary of state. What gave the story of SFNRC's alleged abuse of state funds wings, as the Chroniclereported within weeks of Hatch's phone call, were allegations that some of the money may have wound up in the Shelley campaign.

That August, authorities aggressively zeroed in on Lee. With the cooperation of Jeffrey Chen, the FBI tape-recorded phone conversations between Chen and Lee that prosecutors used to indict her.

Her attorney, Donald Bergerson, says his client's worst offense may be that she is "a little politically naive and got involved in helping someone [Shelley] whom she believed in. She didn't believe then and doesn't believe now that she did anything wrong."

Bergerson says that the trial will demonstrate that Lee is a "scapegoat and a placeholder for others' misconduct," and questions the zeal of prosecutors in focusing their energies exclusively on his client. "I would say that the powers that be appear to have gone around the elephant in the room in order to crush the mouse."

He suggests that it was Jeffrey Chen, the anticipated star witness against Lee — who did not respond to interview requests for this article — who did most of the communicating with Shelley with respect to campaign contributions.

Sources say Chen and Lee met in 1999 and became fast friends after Chen expressed interest in doing volunteer work for Lee's various civic endeavors. Chen filed the incorporation papers for SFNRC. He handled the filings for Andrew Lee's board of supervisors bid. Lee helped Chen establish a client base for his law practice among her friends, and even helped him find an office near her own.

The grand jury testimony is not flattering to Chen. For example, one of his business partners, Steve Chen (no relation), testified that it was Jeffrey Chen who persuaded him to participate in the alleged scheme to give money to Shelley, purportedly at Lee's behest. Steve Chen donated $25,000 to the Shelley campaign, and was later repaid with funds that came from the grant, prosecutors say.

In his immunized testimony before the grand jury, Jeffrey Chen acknowledged a role in the alleged scheme, but portrayed his involvement as little more than doing the bidding of Lee. He contends that he never knew that SFNRC invoices submitted to the state for work purportedly done on the center were falsified. "It's her organization basically, and we just follow along with what she says," he told the grand jury.

But some observers who know both Lee and Jeffrey Chen, and who believe Lee is unjustifiably being left to take the fall alone in the Shelley affair, express doubts.

"Do I think that Jeffrey Chen was Julie Lee's puppet? Give me a break," says Rose Tsai, the community activist. "He's no babe in the woods."

While authorities were investigating Lee in 2004, Shelley's political career was unraveling in a barrage of negative publicity. Much of it suggested that the secretary of state was — or would soon be — the target of multiple probes.

Attorney General Lockyer's office, which had no particular reason to involve itself with the Lee matter except that it pertained to a state office holder, began a probe of the scandal. His office also looked into a claim that Shelley had accepted a $2,000 campaign contribution from a constituent inside Shelley's state office in San Francisco, a violation of campaign finance law.

Meanwhile, embittered staff members who had complained of Shelley's boorish treatment — mostly temper tantrums in which several staffers described being publicly berated and humiliated — came out of the woodwork. The result was a scathing report by the state Personnel Board questioning Shelley's behavior and management style. More significantly, opponents accused his office of misusing millions of dollars in federal voter outreach funds under the Help America Vote Act of 2001 for partisan political purposes. A federal commission found that Shelley's office had misused $2.9 million of the voter outreach funds. In May of this year, California was ordered to give back $536,000 to the federal government and replenish state election funds with the remaining $2.5 million.

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