Roos Bank Loan Was Backed Up by Campaign Funds

SACRAMENTO —  Political campaign funds under the control of Assembly Speaker Willie Brown evidently were used to help his top lieutenant, Assemblyman Mike Roos (D-Los Angeles), keep a $50,000 bank loan that Roos invested in a condominium project owned by convicted political corrupter W. Patrick Moriarty, according to bank records and campaign reports.

A state law that took effect in January, 1982, prohibits the use of campaign funds for personal gain. Both lawmakers were co-authors of the law.

Roos, the Speaker’s second in command, eventually realized a $50,000 profit on his condominium investment even though the project itself went bankrupt.

Interviews Refused

The records do not reflect whether Brown knew that the political funds were considered by the bank to be security for Roos’ personal loan, and there is no indication in the records that Brown, like Roos, personally profited from the arrangement. Both Brown and Roos refused requests for interviews. Brown said he would not discuss the matter--”not at all, not ever.” His press secretary said the Speaker would withhold comment until after the Moriarty probe is completed.

The federal government, as part of its investigation into Roos’ dealings with Moriarty, has subpoenaed bank records of Brown’s campaign committee, The Times has learned.

Between December, 1981, and August, 1982, the money that the bank considered to be collateral for Roos’ loan from the California Canadian Bank in Orange was in the Democratic Legislative Fund, which Brown controls. The fund contains money collected from contributors and other members of the Assembly to help Democratic candidates.

This is how the transactions worked:

- On June 24, 1981, Roos, with the help of Moriarty, obtained a $50,000 loan from the bank. As collateral, according to bank records, Roos used $50,000 from his own campaign fund.

- In December, 1981, Roos reported to the secretary of state on campaign finance disclosure forms that he sent $50,717.02 to Brown’s Democratic Legislative Fund. That amount apparently included the $50,000 used as collateral and the interest that money had earned. Brown, on his disclosure forms, reported receiving the money on Dec. 28, 1981.

Funds Stayed in Bank

However, the money never left the bank. It remained in California Canadian with the same account number. The name on the account, bank records show, was changed by mail to Democratic Legislative Fund, a campaign account controlled by Brown.

The new account’s signature card bore the name Willie L. Brown Jr., although the writing appears to be different from Brown’s signature on other documents. Brown twice reported on campaign disclosure forms that he received interest from the $50,000 in the account.

The signature card also displayed the Speaker’s state identification number supplied by the Fair Political Practices Commission and the address of his San Francisco law office.

Bank documents show that the Roos loan--which the lawmaker had at California Canadian Bank from June, 1981, to June, 1983--was always fully secured, even while Brown reported having control of the account. The security arrangement was required, according to former bankers, because Roos’ legislative salary (then $28,000 a year) plus daily expenses and personal wealth were insufficient to qualify him for a $50,000 loan.

Roos reported on required financial disclosure statements that the $50,000 loan he obtained from California Canadian was unsecured.

- Eights months later, on Aug. 20, 1982, as the campaigns for the fall elections were beginning to heat up, bank records show that the $50,000 in California Canadian Bank, plus the interest it had earned, were moved to Brown’s campaign account at Union Bank in San Francisco.

- California Canadian still required collateral for the Roos loan, however. At the same time that Brown’s money was moved out, Roos’ father, Walter Roos, transferred $50,000 from his Commerce Union Bank account in Memphis, Tenn., to California Canadian Bank, according to bank records.

- Shortly after the November election, on Dec. 7, 1982, Brown sent the Roos campaign $60,000 from the Willie Brown Campaign Committee.

- On Feb. 3, 1983, Roos replaced his father’s collateral money with $50,000 in Roos campaign funds.

- On June 13, 1983, bank records show that Roos paid off the loan.

The bank made the loan to Roos at the request of Moriarty, according to bank records. Moriarty has been sentenced to seven years in federal prison for mail fraud stemming from bribery, kickbacks to bankers and illegally laundering campaign contributions.

Roos currently is under investigation by the U.S. attorney in Los Angeles and the Orange County district attorney’s office in a joint probe of Moriarty’s banking and political activities.

Decision to Indict

A decision on whether to indict Roos has been bounced to higher-ups in the Justice Department in Washington because Los Angeles U.S. Atty. Robert C. Bonner and his chief assistant, Richard E. Drooyan, who is the lead prosecutor in the Moriarty case, both previously worked in a law firm in which Roos’ attorney, John Quinn, is a senior partner.

Since the investigation began about three years ago, 11 men have been indicted and nine have pleaded guilty or been convicted of a variety of crimes.

The 64-unit Moriarty condominium project, in which Roos ultimately doubled his money, went bankrupt after only one unit was sold. In a lawsuit, potential buyers charged that they were bilked out of $183,000. Other investors in the project included former Democratic Assemblyman Bruce Young, former Los Angeles City Fire Chief John C. Gerard and former Public Utilities Commissioner William T. Bagley.

On Sept. 2, 1982, Moriarty wrote a check for $100,000 to Roos as a return on the assemblyman’s $50,000 investment. That was just days after Roos helped Moriarty win final legislative approval of a pro-fireworks bill that could have meant huge profits to Moriarty’s Red Devil fireworks company.

Both Voted for Bill

Both Brown and Roos voted for passage of the controversial fireworks measure. The bill later was vetoed by then-Gov. Edmund G. Brown Jr., and the condominium project ultimately went bankrupt.

California Canadian Bank loaned Moriarty most of the money for the condominium development and also large sums for other projects. When the Orange County businessman’s empire finally crumbled, the bank was left holding more than $20 million in bad loans.

Brown received $23,000 in Moriarty-related campaign contributions in 1981 and 1982, mostly from a “sham” company controlled by former Moriarty confidant Richard Raymond Keith, who was convicted of fraud and income tax evasion as part of the Moriarty investigation.

Keith told The Times that he illegally laundered the $23,000 to Brown on behalf of Moriarty. Brown has denied knowing that money came from Moriarty who, under his own name, gave Brown $2,500 in 1983.

Moriarty associates have told The Times that Moriarty was personally close to Brown. They said Moriarty and Brown spoke regularly on the telephone in 1981, 1982 and 1983.