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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.

Wednesday, Nov 22 2006
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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.

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.

About The Author

Ron Russell

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