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.

Republicans in the Legislature were champing at the bit to put the secretary under oath before the bipartisan Joint Legislative Audit Committee in February 2005 when Shelley suddenly, and unexpectedly, announced his resignation.

Afterward, even as the state continued to build its case against Lee, the investigation into the alleged money-laundering involving his campaign did not appear to include direct scrutiny of Shelley. Indeed, sources close to the former secretary of state tell SF Weekly that neither the attorney general's office nor the San Francisco district attorney's office even interviewed Shelley about the matter.

Yet in May of last year, Lockyer went on television after an appearance in Berkeley and — in the remark that upset Lee — declared that "Kevin Shelley was not a participant in this crime. He is absolutely innocent of any personal involvement in the crimes that Julie Lee committed."

Lockyer's spokesman, Nathan Barankin, says his boss stands by those words, even while declining to comment on whether Lockyer's office ever interviewed Shelley. "The standard for being convicted in the court of public opinion is considerably lower than it is for formal court action," he says. District Attorney Kamala Harris' office did not respond to requests for comment on the matter.

Other investigations growing out of the Shelley affair remained arm's length from the former secretary of state. State Controller Steve Westly's office attempted to conduct an audit of SFNRC, but didn't get far; the group failed to cooperate in turning over records. He ultimately recommended that the group's assets be seized, and they were.

The only agency to lay a glove on Shelley was the Fair Political Practices Commission, which fined him $5,000 to settle a claim that he had personally accepted the $2,000 political donation inside the secretary of state's San Francisco office in 2003, records show. Under the law, state office holders are not permitted to accept campaign donations on state property. Shelley paid the fine in April of this year without contesting it. According to a summary of the FPPC's findings, Shelley refused to cooperate with its investigators.

Still, based on what the grand jury was told, Lee's approaching trial could elicit testimony that raises new questions about what, if anything, Shelley may have known concerning the source of the allegedly laundered money.

That possibility appears especially so with respect to Bowman Leong, a one-time business associate of Lee's who served on the Taxicab Commission under former Mayor Brown. In his grand jury appearance, Leong — among those granted immunity for his cooperation against Lee — described how he wanted to gain state contracts for an information technology company he had formed, and agreed to Lee's request that he contribute $25,000 to Shelley with the understanding that she would front him the money.

At the time, there were no limits on the amount individuals could contribute to political campaigns for state office. (A $5,600 limit took effect in 2003.) But it was and remains illegal to make or to knowingly receive a political contribution under false pretenses, as well as to use public money, such as the state parks grant, for political purposes.

Leong, who declined to be interviewed for this article, testified that he personally handed Shelley a $25,000 check during a brief exchange inside the doorway of Shelley's home in February 2002. Although he had gone to the house unannounced, Shelley appeared to be expecting him, he testified. Leong said the men briefly exchanged pleasantries "and then he asked if I had something for him." Leong said he handed Shelley an envelope containing the check, and that Shelley "looked inside and just said, 'Thank you very much.'"

Questioned by Ronald Smetana, the deputy attorney general, Leong described Lee's giving him a check to cover his ostensible contribution before he went to Shelley's house.

Smetana: And what did she say to you when she gave you this check?

Leong: She made a comment that, I remember the comment very distinctly because it just — she just said that, "Do you really expect Kevin [Shelley] to give us this check and not get anything back?"

Smetana: When she said that, "Do you really expect that Kevin would give us this check" —

Leong: I meant she was referring to the half a million dollars that Kevin arranged for the resource center to obtain.

Like former State Insurance Commissioner Charles (Chuck) Quackenbush, who resigned in 2000 under a cloud of official misconduct without being charged with a crime (and who's now a sheriff's deputy in Florida), Shelley has suffered dearly for his woes while in office.

"I think you could say that he got the death penalty in terms of being a politician," says Robert Stern, former chief counsel at the FPPC, who's now the president of Los Angeles' Center for Governmental Studies. "For a high-profile political figure, it doesn't get much worse than losing your career."

For his part, Shelley says that he is happier in private life than he has been in a long while. "I've been able to reconnect with my family and spend much more time with my two sons," ages 5 and 3, he tells SF Weekly.

Shelley says he regrets having been "a difficult boss" and "alienating a lot of the people who worked for me over the years," but insists that he had no reason to believe that there was anything suspect about the contributions Lee raised on his behalf.

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