By Christian Berthelsen, Jim Herron Zamora, Todd Wallack, Chronicle Staff Writers
Originally published in the San Francisco Chronicle
January 23, 2005

Part Two

Perata's Influence

What is clear is that in at least three cases, during the time Staples was paying Perata, Perata used his influence to support the interests of Staples' clients.

One example is Falcon Waterfree Technologies.

Falcon manufactures water-less toilet systems and sought to have the Oakland Unified School District buy and install the toilets. Though it hired Staples as a consultant, one school official said it was Perata who pushed the district to use its technology, phoning school officials and mentioning it to at least one board member at a social event. "Tim Staples had a proposal for waterless toilets and Perata wanted to see if the district was interested," said Siegel, the Oakland School Board member.

"It really struck me that Don Perata was just trying to do a favor for a friend or supporter. We weren't looking for new toilets. We didn't need them. We didn't buy them. It was odd, but that's how Don works."

Falcon has received a subpoena from federal investigators, but company officials have declined to comment.

Another example is Knowaste LLC.

The Canadian company manufactures systems to recycle disposable diapers, stripping out fibers and other re-usable parts to make products from shoe insoles to oil filters to packing material.

It struggled to build demand for its offerings in the United States, however, and approached lawmakers about sponsoring legislation to tax diaper sales to pay for their recycling.

After a previous version was vetoed by Gov. Gray Davis, Perata agreed to sponsor the bill. He also recommended that the company hire Staples, which it did, according to Fiona Hutton, a company spokeswoman. The precise nature of Staples' work for the company or the amount he was paid was not disclosed. The spokeswoman for Knowaste would not comment on whether the firm has been subpoenaed. Perata eventually withdrew the bill, which Republicans portrayed as an unfair tax on parents and senior citizens.

After introducing the card clubs to Staples, Perata took the clubs' side in a lawsuit seeking to stop an Indian casino in San Pablo, writing on his Senate stationary to the judge hearing the case in February 2004: "As the California State Senator of the 9th District, my district includes San Pablo and Richmond, California. I strongly oppose transferring title to the Casino San Pablo property to the Lytton Band of Pomo Indians for the purpose of Nevada-style gaming in the heart of my district." He wrote a similar letter to the mayor of Richmond, where another casino was being considered. And he consistently opposed approval of the competing casino's gaming compact in the Legislature.

Casino opposition

Perata presented Staples to the card clubs' lobbyists, according to people in the meeting, as someone with grassroots connections who could help generate opposition to the San Pablo casino. But two representatives of the card clubs said Staples appeared to do little to advance their cause.

The card clubs were not required to publicly disclose how much they paid Staples, because the contract was not connected to an election.

The tribe developing the casino, the Lytton Band of Pomo Indians, is moving forward with the casino, and Gov. Arnold Schwarzenegger has signed the state's gaming compact with the tribe. Perata remains an opponent as it awaits a vote by the Legislature.

Jason Kinney, a spokesman for Perata, noted Perata opposed the San Pablo casino from the start because it was near urban centers, and said it was not "illegal, inappropriate or even unusual" for the senator to have private business dealings outside of his Senate work. He would not say whether any of Perata's personal income from Staples was related to the card clubs, which have not received subpoenas as part of the federal investigation.

It is these kinds of interrelationships that attracted the attention of the FBI and federal prosecutors, who obtained grand jury subpoenas for several businesses and agencies that have done business with Perata associates.

The apparent starting point was Lily Hu, a former member of Perata's legislative staff and now an Oakland lobbyist. While no public records show she made payments to the senator, a person familiar with the investigation says the FBI is investigating whether she used Nick Perata's company, Exit Strategies, as a conduit to funnel money to Perata.

Broad federal interest

The federal subpoenas issued to potential witnesses indicate that investigators' attention has spread beyond Hu. They ask recipients for any records pertaining to Perata's network of political associates -- Staples, Perata's son and daughter, as well as companies they own, and a Sacramento political consultant, Sandi Polka.

FBI agents searched Nick and Don Perata's homes on Dec. 15. Another person familiar with the investigation has said investigators were specifically looking for documents related to Hu in the search of the senator's home.

Hu received work from at least one company that Perata helped in his capacity of senator.

Signature Properties was selected by the Oakland Port Commission in 2003 to develop a 2,000-unit, mixed-use project on 60 acres of waterfront, after Perata sponsored legislation enabling the Port of Oakland to sell the land to Signature and its partner, Reynolds & Brown of Concord.

Signature hired Hu as a consultant, after it won the deal. The company said it retained her as a "community outreach" liaison as it finalizes its development plans, as well as to secure a variety of outstanding approvals and permits. It would not say what she was paid.

Signature agreed to buy the land for $18 million and pay $16 million in cleanup costs. Hu's lawyer, Doron Weinberg, said: "We are absolutely confident that in the end it will be clear that Lily Hu's relationship with her clients and her work as a lobbyist were legitimate and entirely above board."

In some cases, Perata's political "family" includes his adult children.

Nick Perata's direct political mail business, Exit Strategies, has been paid $790,994 over the past five years by Don Perata's campaign fund and other political committees he helped launch.

Perata's daughter, Rebecca Perata-Rosati, has been paid more than $107, 000 for work on campaigns associated with Perata, including the transportation measures he has championed and his own campaigns.

After years working for the state Senate, Sandi Polka, the consultant, set up a firm across the street from the Capitol named Polka, Perata, Rosati and Staples -- doing business with Perata's son, son-in-law and Staples' son. The firm was paid $29,045 from a political committee that Perata was actively involved in and that promoted an unsuccessful March 2002 ballot measure that would have loosened legislative term limits, campaign finance records show.

Records show that in August 2002 BART began paying Polka $10,000 per month under a consulting contract for a "public education program" on seismic issues, just as the transit agency was preparing to champion a bond issue on the November 2002 ballot to pay for seismic retrofitting work. Polka has been paid $115,000 to date under the contract, which BART officials said ended in July. BART was among those subpoenaed in November for records relating to Polka and other Perata associates.

Polka did not return a call seeking comment.

As questions emerged this year over Perata's outside income, his once- assured ascension to the Senate pro tem post was thrown into turmoil, though he eventually prevailed. And when senators were sworn in on Dec. 6, they unanimously selected him to lead the upper house.

As leader of the Senate, Perata quickly made clear he is bringing his political team along with him, regardless of the federal investigation that is looking at the relationship between his activities and theirs.

The day after his election as president, at a retreat for Senate Democrats in Sonoma, Perata introduced his new team of political strategists to guide the caucus. Prominent among them was Polka.

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ALL IN 'THE FAMILY'

The FBI is investigating state Sen. Don Perata and several close associates who sometimes refer to themselves as the Perata Family. Members of the group have received political work from the lawmaker, and in some cases Perata has reported receiving income from two members of the group.

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Timothy G. Staples

College friend Owner of Ascendent Solutions and Staples Associates

From Perata

$382,000

Staples has been paid at least $382,000 by political committees affiliated with Perata in the last four years.

To Perata

$300,000

Paid Perata Engineering roughly $100,000 annually from 2001 to 2003. The two men have said the payments were for business development consulting unrelated to Perata's campaign or government work. Perata said he discontinued his business relationship with Staples and his companies in early 2004.

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Nick Perata

Sen. Perata's son; Owner of Exit Strategies

From Perata

$790,000

Since 1999, the senator's campaign fund and other political committees he helped launch have paid Exit Strategies more than $790,000.

To Perata

$138,000

Nick Perata and Exit Strategies paid the senator at least $138,000 during the same period. The payments were originally described as compensation for business consulting, but the senator later amended his state disclosure forms to indicate the payment was for rent.

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Sandi Polka

Perata friend and political consultant Partner in the consulting firm Polka, Perata, Rosati and Staples

From Perata

$108,400

The firm has been paid by campaigns associated with Sen. Perata. Polka subcontracts campaign mail work to Nick Perata.

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Becca Perata-Rosati

Sen. Perata's daughter; Runs communications firms Vox Populi and BPR

From Perata

$107,000

The companies have received $107,000 from committees associated with Sen. Perata for public relations work. Lily Hu

A former aide to Sen. Perata and a top Oakland City Hall lobbyist. Her client list includes garbage haulers, developers, billboard companies. One of her clients, Signature Properties, is planning an Oakland waterfront development. Perata sponsored legislation that helped Signature acquire the land.

[Source: Campaign finance records, economic disclosure reports and Chronicle interviews.]

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