This brochure is an authentic reproduction of such portions of the California Senate Journal of April 4, 1939, wherein official observation was directed to the LEGISLATIVE INVESTIGATIVE REPORT submitted by Edwin N. Atherton & Associates through H. R. Philbrick References in the California Senate Journal of April 4, 1939, relating to legislative action of the day are deleted since they bear no relation to THE PHILBRICK REPORT The Philbrick Report is herewith made available to facilitate considera- tion by the public to the practices in "LOBBYING IN CALIFORNIA". December 12, 1949. Premier Publications, Ltd. 700 Ninth Street Sacramento (14), California April 4, 1939] Senate Journal 1055 CALIFORNIA LEGISLATURE FIFTY-THIRD SESSION SENATE DAILY JOURNAL IN SENATE Senate Chamber, Sacramento, Tuesday, April 4, 1939. The Senate met at ten o'clock and thirty minutes a.m. Hon. Ellis E. Patterson, President of the Senate, in the chair. Secretary Joseph A. Beek at the desk. Roll Call. The roll was called, and the following answered to their names : Senators Biggar, Breed, Brown, Carter, Collier, Crittenden, Cunningham, DeLap, Deuel, Fletcher, Foley, Garrison, Gordon, Hays, Hollister, Holohan, Jespersen, Keat- ing, Kenny, Law, Mayo, McBride, McCormack, Metzger, Mixter, Myhand, Nielsen, Parkman, Phillips, Pierovich, Powers, Quinn, Seawell, Shelley, Slater, Swing, Tickle, and Westover— 38. Message from the Governor. The following message from the Governor was received and read : , State of California, Governor's Office, Saoramento, April 3, 1939. To. the Honorable Members of the Senate and the Assembly, Sacramento, California: I am herewith transmitting to you a report made to my predecessor on December 28, 1938, by Mr. H. R. Philbrick and associates of their Secret Serv- ice investigation of corrupt practices in connection with the work of the Legis- lature during past years. The District Attorney and Grand Jury of Sacra- mento County, pursuant to a joint resolution adopted in the 1937 session of the Legislature, conducted investigations of charges made during that session that corrupt practices were influencing legislation and it was in connection with that Grand Jury's work that this Philbrick investigation and report were made. You will note that this report concludes with certain recommendations for legislative action by way of amendments to our primary and general elec- tion laws, and the -qualifications of candidates for service in the Legislature. I believe this report and its recommendations merit your serious attention in considering needed amendments to our primary and general election laws, to prevent corrupt or improper practices which undermine and defeat truly repre- sentative government. I shall later recommend specific amendments for that purpose. Yours sincerely. CULBERT L. OLSON, Governor of California. 1086 Senate Journal [April 4, 1939 LEGISLATIVE INVESTIGATIVE REPORT. Submitted by H. R. Philbrick, December 28, 1938. Table of Contents. Subject Sec. I Introduction I II Activities of Lawyer-Legislators — Background II William B. Hornblower II Earl D. Desmond II William Moseley Jones II . Ralpb Louis Welsh II Ralph E. Swing II Charles W. Lyon II Kennett B. Dawson II Melvyn I. Cronin II Findings , II Exhibits 2-4 II III Activities of Non-Lawyer Legislators — Background III Gene Flint III Charles A. Hunt III Findings it I Exhibit 1 III IV Activities of Lobbyists — Background IV Arthur H. Samish IV Sil Oliva IV Byrce Florence IV Walter J. Little IV Manlev A. Harris IV J. A. Pittis IV O. R. Stevens IV J. M. Jefferson IV Findings IV V Preelection Influence — Background V Arthur H. Samish V California Chain Store Association V Liquor Interests — Campaign Contributions V Commercial Fishing Interests — Campaign Contributions V Findings V VI Exhibits-General — Exhibit A — Concurrent Resolution of Senate and Assembly VI Exhibit B — Petition to Superior Court of Sacramento County VI Exhibit C — Order of Superior Court of Sacramento County VI Exhibit D — Letter to Governor Frank F. Merriam from District Attorney Otis D. Babcock VI Exhibit E— Statement of Governor Frank F. Merriam VI Exhibit F — Appointment of George M. Naus, Special Prosecutor VI I. Introduction. Objectives of the Investigation. In the closing days of the 1937 session of the California Legislature, a charge of attempted bribery was made on the floor of the Senate. As a consequence, the Senate and the Assembly joined in the passage of a resolution urging that the Dis- trict Attorney of Sacramento County and the Attorney General of the State make an investigation of reports of corruption in the Legislature. The District Attorney of Sacramento County, pursuant to that request from the Legislature, immediately launched an inquiry and impaneled the grand jury. An indictment was returned, accusing Assemblyman Gene Flint of Los Angeles of the crime of bribery. After the voting of the indictment, Mr. Otis D. Babcock, the district attorney of Sacramento County, employed the firm of Edwin X. Atherton and Associates — first, for a brief period of specific investigation into the Flint case and related April 4; 1939] Senate Journal 1087 matters ; later, for an extended period of general investigation into reports of . / {} corruption in the Legislature. Subsequently, Mr. (Jcorge M. Naus was associated /V^fe ->^-> as special prosecutor, for the purpose of presenting evidence to the open sessions ' » of the grand jury. The financing of the investigation, described in the letter . _ accompanying this report, was originally undertaken by the county of Sacramento Q *~T f from the district attorney's special fund. When that fund was exhausted, financing \ ' ' was provided by Governor Frank F. Merriam, at the request of District Attorney Babcock. Except in the case of Assemblyman Flint, who had been indicted at the time of the employment of this firm, the objective of the investigators was not primarily criminal prosecution. The investigators were employed some time after events, potentially involving any of the 120 members of the Legislature in any of the 58 counties, had taken place, and word of an impending inquiry had been broadcast. Therefore, the investigators established as their objective an attempt to bring to light the general conditions prevailing in the Legislature. To do this, the effort was made to discover, if any existed, the methods of corruption; the scope of the corrupting influences ; the persons responsible, whether legally or morally ; the inadequacies or breakdown of existing statutes intended to restrict corruption ; and sufficient illustrative detail to make clear to the public and to the Legislature, itself, possible means of correcting conditions inimical to public welfare. In the course of the investigation, evidence warranting criminal action has been produced. A part of that evidence -has been acted upon by the grand jury or by the district attorney. A part of the evidence in this report is called to your attention! for possible reference to the grand jury and district attorney of Sacra- mento, for such future action as they may deem advisable. This report also directs attention to many matters aincovered in the course of the inquiry where investi- gative action was indicated, but which could not be developed fully because of the time limitation necessarily involved. Sections of evidence, through the testimony of witnesses, have been presented to the grand jury in a series of public hearings. Necessarily, the limitations of this procedure have made it impossible to present either in detail or in summary all of the evidence accumulated during the investigation. This report seeks to present a summary, with sufficient explanatory detail of all investigative findings, whether or not presented before the grand jury. No attempt is made to duplicate the voluminous detail of the grand jury transcript, but pertinent sections are referred to where necessary in the course of the report. Summary of Findings. Ample evidence has been produced by this investigation to show that corruption, direct and indirect, has influenced the course of legislation, notably in the sessions of 1935 and 1937. Public reaction to partial reports on the investigation is indi- cated by the fact that several members of the Assembly, whose activities were scrutinized, were retired to private life in the recent elections. Corruption is not necessarily bribery. The term is a general one suggesting \ loss of integrity — a taint. The instances of bribery evidence encountered in the \ investigation were relatively few. They were, also, relatively unimportant in the | light of more widespread methods of corruption. A detailed dollars and cents record has been produced by the investigation show- ing that huge sums of money have been spent to influence legislation. The prin- cipal source of corruption has been ''money pressure." The principal methods of exercising money pressure have been through fees paid to lawyer-legislators and through expenditures of lobbyists. The princ ipal •offe n der among lobbyists ha s bee n Aythnr H Sflmish of San Francisco, through whose accounts has been traced a total /y of $496,13B.62_ during the years 1935-38. All of this money was provided by indi- viduals, businesses and organizations directly interested in legislation. As long as lobbying of the type and on the scale practiced by Mr. Samish is \ countenanced there will be corruption in the Legislature. For he seeks to estab- lish, and the evidence shows has in some instances established, a secretive "fourth ' branch" of government — in effect a super-government overriding the legislative, executive and judicial branches. Such a system breeds corruption for its single standard is not merit, nor responsibility to the public, but the size of a fee paid to a lobbyist, and expended in part by him — directly or indirectly— with members of the Legislature to perpetuate his influence. While the public, when encountering a corrupt member of the Legislature, has the recourse of repudiating him at the next ensuing election, the public, when encountering a corrupt or corrupting lobbyist, has no recourse under present law unless he carelessly trespasses into the field of open-and-shut bribery. In following the thread of corruption through the investigation, the evidenc • fell loeically into four "sections : First, "activities of lawyer-legislators"; second, "activities of nonlawyer-legislators" ; third, "activities of lobbyists"; fourth, "pre- election influence of legislators." Each of these divisions is treated in detail in ensuing sections of the report, and is here summarized as introductory to specific recommendations: 3— s.t a4 1088 Senate Journal [April 4, 1939 1. Lawyer-legislators have solicited and accepted or have been proffered and accepted employment from interests directly concerned with legislation. The lawyer- legislators had f nl 1 knowledge of the interests of the employers. After accepting such employment, lawyer-legislators have showli a marked tendency to vote for and otherwise act in the interests of their clients, as distinguished from impartial 1 representation of the interests of the public. Such a weak showing of service, apart from legislative service, has been made by certain lawer-legislators as to make clear that they were employed because of their legislative influence. Attor- neys associated with lawyer-legislators have exploited their influence. Lawyer- , legislators have extended their income possibilities from the Legislature, itself, to 'administrative agencies of government where they command favorable attention because of their official position. During the period 1935-38, ■ fees from - clients interested in legislation show in the accounts of Assemblyman Willia m rL Hornhlojy.er. San Francisco, $£8,233 — from fish and game, motor vehicles, horfce racing, building-loan, Arthur H. Samish and other interests; Assemblyman Ch arles AY. Lyon, Los Angeles, $26 l 437.i}(V— from Arthur H. Samish, liquor industry, horse racing, gambling interests, milk industry, fish and game interests ; and in the accounts of other lawyer-legislators in smaller total sums. In connection with the problem of divorcing the lawyer (private servant) from the legislator (public servant), the difficulties are augmented by the fact that a legislator's salary is $1,200 a year — obviously not a sustaining income. This factor of low salary also enters into the situation regarding nonlawyer-legislators. 2. Nonlawyer-legislators have solicited money for votes, with strong circumstan- tial evidence, such as in the £lint_ case, that there was actually a passage of money. Individual legislators with no material source of legitimate income, other than their $1,200 a year legislative salary, have been able to accumulate substantial sums during a session of the Legislature. In the notable case of Assemblyman Charles JIunt, Los Angeles, approximately $5jOJKMn__cjir4Tjujy_ was traced to his possessio'n immediately after the 1935 session. Certain legislators boldly have taken the position that their election meant not an opportunity for public service 1 or political career, but for private enrichment. From this type of lawmaker have come "cinch bills," introduced for the purpose of forcing an individual, busi- ness or organization to pay money to a legislator or lobbyist or both for the purpose of defeating the bill. Corruption of this type, the investigation found, is not widespread, but is limited to a small number of venal lawmakers. The amount of their questionable income is relatively small and is significant only in that it proves an opportunity exists at the Legislature for exchange of votes or influence for money. 3. Lobbying, of the type represented by Mr. Samish, as distinguished from open legislative representation, has been a major corrupting influence. Lobbyists of the corrupting type ' -endeavor to gain influence over legislators, through campaign contributions, direct financial assistance, fees in the case of lawyer-legislators and other means. The amount of money in the hands of lobbyists for campaign pur- poses is indicated by the disclosure that Mr. Samish. from one client-industry. j obtained a politic al fund in excess of $07.000 between .1935 and 1938 — quite distinct ; from Mr. S'aTnTsh's own compensation from the client, lie could spend the political fund without accounting, and, in fact, kept no disbursement records. Gaining influence, the lobbyists of this type then offer that influence for sale to high bidders. The operations of this type not only tend for corrupt legislators, but also perpetuate among business men the erroneous belief that they can not go directly to the Legislature and obtain just treatment. Business is led to believe that it must secretively patronize the "back rooms" of lawmaking, where lobbyists hold forth. Th,e extent, of these twin dangers is indicated by the detailed financial statement of Mr. Samish in the report's section on "Activities of Lobbyists." 4. Pre-election influence of legislators is a general practice, in the form of cam- paign contributions or of tangible, personal favors to prospective members of the Senate or Assembly. Investigation showed that in some cases there is an expressed obligation involved in the acceptance of campaign monev. while in others there is an assumption that the legislator accepting funds will be favorably inclined toward the contributor. A continuing employment, under the guise of a legal fee, of course, tends to perpetuate an obligation. The failure of most large scale contributors to legislative campaigns to maintain adequate records of contributions and the failure of legislators to heed the Purity of Elections Law requirement that contributions be ■reported is an indication that neither party relishes the prospect of public scrutiny of the transactions. Recommendations of Investigators. ' The following recommendations are submitted for consideration of the grand jury, the district attorney and the Legislature: 1. Indictment of C. P. Creghn. auditor of the International Alliance of Theatrical Stage Employees, for perjury .before th" grand iury. (See section on "activities of lftwyei -legislators" under subdivision "William Moseley Jones." April 4, 1939] Senate Journal 1089 2. Reference to the State Bar and the Los Angeles County Bar Association of the testimony before the grand jury of William H. Neblett, Louis B. Mayer and William C. Silliman. This testimony reflects either perjury on the part of Mr. Neblett, an attorney, or unethical conduct in relationship to a client. (See section on "activi- ties of lawyer-legislators," as above.) 3. Enactment of State law requiring lawyer-legislators to file at the beginning of each session, and to maintain through the session, a sworn statement of all clients having any interest in legislation. The nature of the attorney's employment should be set forth, together with the amount of the fee. 4. Elimination by statute or regulation the practice of lawyer-legislators before State boards and commissions. 5. Enactment of a State law requiring every member of the Legislature to main- ^ tain full and complete income records. These should be available on court order to any law enforcement agency. (While the Supreme Court ruling that Arthur H. Samish should produce his income tax records before the grand jury is an important precedent for grand jury investigations, the fact remains that income tax returns do not reflect sufficient detail as to enable analysis of income and disbursement possibly influencing legislation.) 6. An alternative to No. 5 could provide that the income record of members of the Legislature should be filed with the Secretary of State and thus become a pub- lic document. 7. Enactment of a State law requiring the legislative Counsel, or some similarly qualified agency, to analyze each bill introduced, stating its effect on any groups or industries, in order to discourage "cinch bills." 8. Provision for effective registration of all lobbyists, whether or not they appear before legislative committees. The term "lobbyist" should be defined to include all persons who solicit and/or accept money for the purpose of influencing legislation. The registration should include a statement of the lobbyist's client or clients, a state- ment of his fee, and a record of the specific purpose of his employment. 9. Statutory requirement that a public record be maintained of all money expended by individuals or corporations for "educational" campaigns, where the motive is to accomplish a legislative program. These records, as the statements required in No. 8, should be transmitted by the Secretary of State to the Attorney General and the district attorneys of the several counties. 10. Enactment of a statute requiring all contributors to political candidates or campaigns file a detailed statement of contributions with the Secretary of State. 11. A companion statute, requiring a complete report of campaign expenditures not only by all candidates but by all others in behalf of a candidate. II. Activities of Lawyer- Legislators. Background. In the 1937 session of the California Legislature, 32 attorneys served as members of the Assembly and 13 attorneys served as members of the Senate — a total of 45 lawyer-legislators out of the 120 members of the Legislature. It is obviously a financial and physical impossibility for an attorney to entirely divorce himself from his practice when he goes to Sacramento to serve in the Legis- lature. Nor would such a divorce necessarily be in the best interests of the State. An attorney who, in his private practice, specializes in reclamation law can, in his capacity as a Legislator, render a valuable and specialized service to the State. It is natural that such a lawyer-legislator should display a keen interest in reclamation district legislation. The purpose of this investigation was to determine the truth or falsity of reports that certain members of the Legislature were using their official position as a cloak for what actually constituted lobbying. That is. it was the purpose of the. investiga- tion to determine whether certain lawyer-legislators were receiving fees for influenc- ing legislation, rather than for performing nonlegislative services in their private capacities as attorneys. This phase of the investigation called for an attempt to determine the dividing l ; ne between legitimate legal service, for a proper fee, and illegitimate activity in the Legislature, for an improper fee. In examining the records of Certain lawyer-legis- lators, the investigators put each fee to the test of these three questions : 1. Was the client paying the fee directlv interested in specific legislation? 2. Did the lawyer-legislator receiving the fee act in the interests of the client in voting upon or otherwise influencing specific legislation? 3. Did the lawyer-legislator perform actual legal services, commensurate with the fee. distinct and apart from the Legislature? If the answer to the first two questions was "no." and to the third question "yes,'' the investigator felt justified in concluding that there had been no . legal or moral infraction. On the contrary, if the answer to the first two questions was "yes." and to the third question "no." the investigators felt justified in concluding that the lawyer-legislator had been paid for influencing legislation or for his potential influ- ence in the Legislature. 1090 Senate Journal [April 4, 1939 Obviously, the first atop in this phase of the investigation was to determine as exactly as possible what fees were received by the lawyer-legislators under investi- gation. Investigation. Assemblyman William 1$. Hornblower, San Francisco. Rank records disclosed that between 1032 and 1938 Assemblyman Hornblower received fees totaling $58,233 from clients specifically interested in 'legislation at Sacramento. The following compilation is a summary of payment's made to Assem- blyman Hornblower and credited to his checking account in the Crocker First National Hank of San Francisco, Wells Fargo Hank and American Trust Company of San Francisco. It does not punx>rt to be a complete statement of Assemblyman HOrnblower's income. The only items here scheduled are those paid to Assembly- man Hornblower by corporations or individuals who, it would appear, had or have an interest in pending or proposed legislation. Checks on local banks, which are not regularly recurring items, and cash deposits have no earmarks which enable us to identify them. Therefore, the totals in this schedule do not represent a complete statement of the money received by Assemblyman Hornblower in connection with all of his legislative transactions. For purposes of comparison with specific legislation on which Assemblyman Hornblower was active, the items are classified under subdivisions of Fish and Game. Motor Vehicles, Horse Racing, Building and Loan, Arthur H. Samish, and Miscellaneous. Fish aml Gamp . A)MM< Tofal Feb. 10, 19&3 Custom House Packing Corporation $50 00 $50 00 Sept. 25, 1934 Cypress Fisheries, Inc 250 00 Nov. 20, 1934 125 00 Jan. 7. 1935 100 00 475 00 Aug. 11, 1936 French Sardine Company of California. Inc. 50 00 Nov. 23, 1930 500 00 550 00 Feb. 10, 1933 K. Hovden Company 50 00 50 00 April 27, 1934 Hovden Food Products Corporation 250 00 Sept. 4, 1934 250 00 Oct. 10, 1934 250 00 Dec. 27. 1934 100 00 S50 00 June 4, 1937 Kelco Company 250 00 Mar. 22, 1932* 3,000 00 3,250 00 Feb. 10, 1933 Del Mar Canning Company 50 00 Feb. 1 , 1934 250 00 Sept. 8, 1934 500 00 Nov. 20, 1934 125 00 Nov. 26, 1934 _ 125 00 Jan. 7. 1935 200 00 1,250 00 June 3, 1937 Frank Larco 25 00 25 00 Dec. 10,1934 S. Larco Fish Company 100 00 Jan. 7. 1935 50 00 Sept. 6, 1935 „ 500 (Ml Sept. 11. 1935 , 500 00 July 14,1937 ■ 110 00 1,160 00 Feb. 10,1933 Monterey Canning Company 50 00 June 1, 1935 400 00 Aug. 23, 1935 765 00 1,215 00 Jan. 13. 1934 Monterey Sardine Canning Association— 850 00 850 00 Nov. 4.19351 Monterey Sardine Industries, Inc 1,250 00 Dec. 9. 19351 750 00 Dec. 9. 19351 500 00 2,500 00 Feb. 10. 1933 San Carlos Canning Company 50 00 Jan. 13, 1934 250 00 Mar. 31, 1934 150 00 Sept. 4. 1934 500 00 Oct. 23. 1934 — 250 00 July 24, 1935 500 00 Jan. 30, 1936 1,250 00 2,950 00 Feb. 10, 1933 San Xaxier Fish Packing Company 50 00 50 00 Feb. 10, 1933 Sea Pride Packing Corp., Ltd 25 00 25 00 Sept. 7. 1933 Sheffier Bros., Inc 250 00 Nov. 8, 1933 1 153 00 403 00 July 14. 1934 The Point I.obos Canning Company 100 00 100 00 Total Fish and Came .$15,753 00 * Testimony of R. J. Wigg, July 19, 1938. t Grand Jury Hearing Records. April 4, 1939] Senate Journal 1091 Motor Vehicles. \ mount Total Oct. 29, l!)3. r > California Association of Highway Patrol- men $100 00 May 3, 1937 2") 00 Dec. 21. 1937 500 (M) $025 00 Oct. 1933 tot Motor-Car Dealers Association Dec. 31, 1938 ( Salary $150 per month— 9.450 00 9.450 00 inclusive "~ -C — Total Motor Vehicles .$10,075 00 Horse Racing. Amount Total Dec. 27, 1934 California Jockey Club, Inc $5 00 Dec. 9, 1935 5,000 00 May 22, 1936 5,000 00 Jan. 2, 1937 1,250 00 May 4, 1937 5,000 00 June 3,1937 1.000 00 Dec. 23, 1937 2.500 00 $19,755 00 Mar. 4,1937 W. P. Kyne 1,250 00 1,250 00 Total Horse Racing $21,005 00 Building and Loan. Aug. 19351f PacificStates Savings and Loan Companv, to Dec. 31, salary, $100 per month $4,100 00 $4,100 00 1938, inc. " Total Building and Loan $4,100-00 ^ Arthur -HL Samish. Oct. 1935 § A. HkSamish, $100 per month retainer.— $3,900 00 $3,900 00 to Dec. 31, - —*" 1938, inc. Total Arthur IL Samish $3,900 00 Miscellaneous. Oct. 1934, to William Cadigan, $100 pei^ month retainer $3,400 00 $3,400 00 date - Total Miscellaneous $3,400 00 Grand Total of Fees. Fish and Game $15,753 00 Motor Vehicles 10,075 00 Horse Racing 21,005 00 Building and Loan 4,100 00 Arthur H. Samish 3,900 00 Miscellaneous 3,400 00 $58,233 00 Legislator, Salary. As Assemblyman, 1933 to 1938, inclusive $7,200 00 Grand Total developed income ^ $65,433 00 t From records Motor Car Dealers Association. 1 From records of Pacific States Savings and Loan Association. § From testimony of A. H. Samish. Fish and Game. The income schedule disclosed that Assemblyman Hornblower received fees total- ing $15,753 from commercial fishing interests of California. Those fees must be analyzed, first, from Assemblyman Hornblower's general position on fish and game legislation ; second, from Assemblyman Hornblower's specific position on specific legislation. For many years As semblyman .H ornblower has heen_a member of. the_Fish and C ame Comnii tJ^_oJ_th e"yAsseinT )l.v. He ope nly became_ JJi£_cji ampion of commercial fishin g in7eresT i~jIn_H"eir frequent controversies AvTth conservationist s^ The "most bifte?Ty~foTlgfrrbf these controversies has centered around the reduction (for purposes of fish meal, fertilizer or oil) of sardines or pilchards. Some commercial fishing interests have wanted almost unlimited reduction tonnage. Conservationists, latterly joined by canning companies which pack sardines for food, have wanted carefully restricted tonnage for reduction. Assemblyman Hornblower assumed a position as 1092 Senate Journal [April 4, 1939 the legislative leader of fish reductionists. Not only did he represent their point of view in the Legislature, but also he ap neared_J.r£qnenily-he&rje^Jlie Fish and On me Conimission, in which is lodged authority to allot sardine reduction tonnage. His voice before the Fish and (lame Commission was a powerful one, not alone because of his expert knowledge of the subject, but further because Fish and Game Com- mission members and officers, i n turn, had to appea r_before Assemblyman Horn- blower and other legislators seeking supporting appropriations. Keeping in mind that a substantial part oT Assemblyman TIornTTlower's income was derived from commercial fishing interests, his general position in the Legislature was clearly in support of the positions taken by those commercial fishing interests. On specific legislation, the investigation produced evidence of four specific cases of legislation in which there was a significant parallel between the legislative activi- ties of Assemblyman Hornblower and the interests of commercial fishing groups or individuals who paid substantial fees to Assemblyman Hornblower: 1. The Kelco Case. The income record of Assemblyman Hornblower shows he received $3,250 from the Kelco Company. The Kelco Company, operating at Los Angeles and San Diego, discovered new methods of processing kelp. In order to protect their investment in plant and equipment, they felt it necessary to have long term leases on kelp beds in the state-owned tidelands. But Chapter 343 of the Statutes of 1021 provided that the Fish and Game Commission could lease up to a total of 25 square miles of kelp bed to an individual for a period not to exceed two years. Mr. R. J. Wigg, an officer of the Kelco Company, testified he conferred with Mr. Isadore Zellerbach, then president of the Fish and Game Commission. Mr. Zeller- bach said that, while the commission was willing to cooperate with the Kelco Com- pany, it would be necessary to amend the 1021 statute, in order to legalize kelp bed leases in excess, of two years. Mr. Wigg said that Mr. Zellerbach suggested the company employ Assemblyman Hornblower, a "member of the Assembly who had been extremely active in fish and game affairs." At the 1031 session of the Legislature, immediately following the conference between Mr. Wigg and Mr. Zellerbach, Assemblyman Hornblower introduced on January 1(>, Assembly Bill 353, authorizing kelp bed leases for a period of 15 years. A companion bill was introduced in the Senate on January 10 by Senator William E. Harper of San Diego, in whose home district the Kelco Company operated. The Harper Bill passed the Senate, was sent to the Assembly Fish and Game Committee on which Assemblyman Hornblower was a dominant member and was recommended "Do pass." The bill did pass the Assembly, and subsequently was signed by the Governor. In his testimony before the grand jury, Mr. Wigg produced correspondence with Assemblyman Hornblower which showed that, as soon as the bill was signed, Assemblyman Hornblower dropped the role of the lawmaker for that of the fee- collecting lawyer. He wrote to Mr. Wigg : "Now that the Governor has signed the bill, we may proceed with the execution of your leases." Investigation disclosed that the leases between the Kelco Company and the Fish and Game Commission actually were prepared by the then attorney for the commis- sion, rather than by Assemblyman Hornblower. However, Assemblyman Horn- blower was paid at that time $3,000 by the Kelco Company. In 1037 the Fish and Game Commission made a study of the kelp leases. As a result, the 1031 leases were canceled, and new leases were "-entered into between the Kelco Company and the Fish and Game Commission. For his services at this time, Assemblyman Hornblower received from the Kelco Company $250. •There is no explanation of the tremendous difference between the $3,000 fee and the $250 fee, other than that Assemblyman Hornblower, for the original fee, per- formed some other service than drawing the leases. Assemblyman Hornblower's connection with the Kelco matter further fails to meet the rest of the question — "Did the lawyer-legislator perform actual services — commensurate with the fee — apart from the Legislature V" — because for many years prior to the 1931 incident, the Kelco Company had been represented by the Los Angeles law firm of Swanwich, Donnelly and Proudtit. As far as could be deter- mined from the examination of Mr. Wigg before the grand jury, the company had no further need of actual legal representation. 2. Point Santa Cruz Bill. The income record of Assemblyman Hornblower shows that he was paid $2,5(X> by the Monterey Sardine Industries. Inc. This organization represents Monterey Bay commercial sardine fishermen. In (be 1035 session of the Legislature. Senate Bill T)21 was introduced, pro- hibiting commercial taking of sardines within the twenty fathom line off Point Santa Cruz. Sportsmen actively supported the measure as a conservation move, and the bill passed the Senate. It was referred to the Assembly Fish and Game April 4, 1939] Senate Journal 1093 Committee. There, Assemblyman Hornblower was active in defeating the bill when it came up for committee consideration May 28, 1935. Testimony before the grand jury showed that on May 27, 1935 — the day before the meeting of the Fish and Game Committee — directors of the Monterey Sardine Industries, Inc., met and adopted this resolution : "Motion brought by N. G. Crivello and seconded by E. Tardio that if Bill 521 is killed, Manager N. G. Crivello has the full power to act for the corporation in accordance to the board to pay the second party any amount limit no more than $2,500. The board of directors having all unanimously agreed. Meeting adjourned 5.10 p.m. (Signed) Acting Secretary Bruce Ferrante." The resolution was signed by directors S. Cardinale, N. G. Crivello, F. Tardio, K. Takeguichi, N. Mercurio, Bruce Ferrante. Mercurio told investigators that "the party of the second part" was Assemblyman Hornblower. Under authority of this resolution, three checks were issued to Assemblyman Hornblower in an amount totaling $2,500. The delay in payment to Assemblyman Hornblower may be accounted for by the fact that Monterey Sardine Industries, Inc., did not have sufficient funds to pay the $2,500 until it received proceeds of the fishing season late in 1935. In his testimony before the grand jury, Assemblyman Hornblower contended that the $2,500 was in payment for legal services in the form of appearing in behalf of Monterey Sardine Industries, Inc., before the Fish and Game Commission. While the records of the commission show Assemblyman Hornblower appeared numerous times for commercial fish reductionists, there is nothing in the record showing that Assemblyman Hornblower appeared for Monterey Sardine Industries, Inc., an organization of fishermen. On the contrary, the records showed that Monterey Sardine Industries, Inc., was represented by Mr. Argyle Campbell, an attorney of Monterey. 3. Larco Fish Company. The income record of Assemblyman Hornblower disclosed he was paid $1,185 by Frank Larco and the S. Larco Fish Company. The Larco Fish Company is the leading commercial fishing interest in the Santa Barbara area, comprising District 18. For many years, the Fish and Game Commission and conservationists have sought by legislation to prevent the use of dragnets by commercial fishermen. Regulations now prohibit dragnets in practically all of the State's districts, except District 18 — where the Larco Fish Company operates. Assemblyman Hornblower's legislative record shows he led in defeating any measure which threatened to close District 18 to dragnet fishing, or would other- wise restrict commercial fishing. Directly south of Santa Barbara, the Santa Ynez River flows into the Pacific Ocean. For years sports fishermen have wanted to declare the mouth of 'the Santa Ynez a game refuge. At the 1937 session of the Legislature, Senator James J. Hollister of Santa Barbara — in keeping with a campaign pledge — introduced Senate Bill 57 which would have prevented dragnet fishing in a newly created district, three miles north and south of the Santa Ynez River. In addition, the bill provided that no dragnets or purse seine nets could be used in District 18, which is the area including Santa Barbara. The Hollister Bill passed the Senate and was referred to the Assembly Commit- tee on Fish and Game. There Assemblyman Hornblower voted for a successful motion to table the bill'. On May 12, Assemblyman Alfred W. Robertson of Santa Barbara moved to withdraw the Hollister Bill from committee and the motion was made a special order to Assembly business for May 14. Assemblyman Hornblower voted "no". on the motion to withdraw the bill. At the last several sessions of the Legislature, Mr. Chico Larco, the head of the Larco Fish Company, has shared hotel quarters with Assemblyman Hornblower and has entertained members of the Legislature. 4. Del Mar Canning Co. The income record of Assemblyman Hornblower shows fees totaling $1,250 from the Del Mar Canning Company. According to the statement of Mr. Edward David, head of the Del Mar Canning Company, this firm was one of a group of small independent canners— -principally located at Monterey — who- employed Assemblyman Hornbolvver "to draft a law anil work for its enactment," whereby these canners could reduce 5,000 tons of sardines for each 10, 000-ton plant unit in their respective plants. Such a law was prepared and introduced. It was defeated in committee, prin- cipally through the efforts of certain Southern California canners who were not parties to the employment of Assemblyman Hornblower. Mr. David said that Assemblyman Hornblower was to receive $2,000 for his efforts. In view of the failure of the legislation, all of the canners embarking on the pi-oject did not pay. 1094 Senate Journal [April 4, 1939 Turning from these specific cases of legislation, in each of which Assemblyman Ilornblower's conduct as a lawmaker paralleled the line of interest of clients paying him substantial fees, the investigators found that Assemblyman Hornblower has become one of the principal owners of a sardine reduction plant at Richmond, called the California Fish Products, Inc. The second principal owner of this corporation is Angelo Lucido, who also is manager of the San Carlos Canning Company. Assemblyman Hornblower's financial records show he received fees totaling $2,950 from the San Carlos Canning Company. Assemblyman Hornblower did appear before the Fish and Game Commission in the interests of the San Carlos Company, seeking additional reduction permits. At the time, Mr. Lucido and San Carlos had more reduction permits than any other individual canner or reductionist. Motor Vehicles. The record of Assemblyman Hornblower's income shows he received $9,450 from the Motor Car Dealers Association of San Francisco and $625 from the California Association of Highway Patrolmen. (It also shows receipt of fees totaling $3,900 from Arthur H. Samish, secretary of the Motor Carriers Association. While this income might have a relationship to motor vehicle legislation, the interests of Mr. Samish are so varied that the item will be considered in another subdivision of the Hornblower investigation. ) While the income record of the period covered by this investigation showed payment of fees totaling $9,450 by the Motor Car Dealers Association to Assembly- man Hornblower, investigation disclosed he had received a fee of $150 a month over a long period of time. M r. Tod Bates, of the Motor Car Dealers A s sociation, testj - fied Assemblyman Hornblower ha TTbeen a ttorney for the Ass ociation for ten or tw elve years. On that basis, it is safe to estimate Assemblyman Ho?nblower"ha s rec eived the sum of $18,000 from the Motor Car Dealers Associati on. 'Obviously, tne Association is vitally interested in motor vehicle legislation. That has been particularly true in recent sessions of the Legislature, because of new statutes dealing with motor car taxation. Assemblyman Hornblower has been for years either a member of or chairman o f t he Motor Vehicle Committee of the Assembly. He was chairman of that committee in the ly3? session. As such, he was the key man in the Legislature on motor vehicle legislation. For several years, the Motor Car Dealers Association has had a legislative com- mittee. This committee has examined proposed bills and recommended support or opposition. Naturally, its recommendations were presented to Assemblyman Horn- blower, both in his capacity as attorney for the association and as chairman of the Motor Vehicle Committee of the Assembly. At both the 11)35 and 11)37 sessions of the Legislature there was action on the "in lieu" tax — which substitutes a State-collected fee for local property taxation on automobiles. The Motor Car Dealers Association endorsed this type of tax. Assemblyman Hornblower supported it. The Motor Car Dealers Association in the 1937 session opposed legislation for compulsory inspection of vehicles, for authorization of "speed traps" and for required finger-printing of operators. Assem- blyman Hornblower opposed these bills. The record shows that on some legislative matters, the Association was unable to formulate a policy and on some few matters Assemblyman Hornblower opposed legislation advocated by the Association. Assemblyman Hornblower's value to the Association perhaps is indicated by statements made to investigators by Association officials. Mr. Bates said in 1937 they considered employing a full-time lobbyist because of the great mass of legis- lation affecting their industry. Some of the members of the board of directors said lliey felt it was unethical to have Assemblyman Hornblower, a member of the Legislature, serving the Association as its attorney. The Association did not employ a lobbyist, but did continue the employment of Assemblyman Hornblower as attorney. A second item of income bearing a relationship to motor vehicle legislation was the amount of $025 paid by the California Association of Highway Patrolmen to Assemblyman Hornblower. The total of this item is represented by three checks in the sums of $100, $25 and $500. Again it is significant that Assemblyman Hornblower was chairman of the Motor Vehicles Committee of the Assembly. The State Highway Patrol is a division of the Department of Motor Vehicles. The California Association of Highway Patrol- men is an outgrowth of an original organization of motorcycle officers for the purpose of organizing a self-insurance program. The organization collects from its officer-members $6 annually and provides a death benefit of $2,000 in addition to its fraternal activities. Originally the attorney for the Association of Highway Patrolmen was Theodore Roche, Sr., who served without compensation. After Mr. Roche became Director of Motor Vehicles, also without compensation, he felt he should not be in the positional' representing the highway patrolmen as attorney. The work of the Association of Highway Patrolmen was taken over by Theodore Roche, Jr., who also served without compensation. April 4, 1939] Senate Journal 1095 In the 1935 convention of the Association of . Highway Patrolmen, there was a movement to appoint A.ssemblyman Hornblower at attorney for the Association. Some of the discussion on the floor illustrated a conception of the value of employing a lawyer-legislator: Officer Kent (from minutes of meeting) : "I move that William B. Horn- blower be employed by this association as legal counsel in all matters that the association shall deem necessary, and to further represent the special committee known as the executive committee at all times. To appear for and on behalf of said committee, and that the said attorney shall be an ex officio member of the said committee and association. Officer Le Bart : "He is going to l>e tied in with the association, his fingers will be tied. When a man is in -the Legislature in Sacramento, he is aligned with certain interests to whom he has certain obligations and with whom he has certain deals." Officer Torres : "We took this matter up with Mr. Hornblower . . . he thought it was the right thing to do and would be glad to represent us not only in any civil suit that might come up but in the Legislature as an ex officio member. That was his own statement." Captain Schmoke: "Hornblower is not going to present any $10,000 or $12,000 bill. If it is going to give him political prestige, figure that one out for yourself." The movement to appoint Assemblyman Hornblower as attorney failed. How- ever. Assemblyman Hornblower during 1037 performed such services for the associa- tion that its officers decided to pay him what has been called variously a "fee" and a "gift." The amount was $500. Prior to the payment of the $500 to Assemblyman Hornblower, this notation appeared' in the minutes of the Association of Highway Patrolmen : "The bill of William B. Hornblower was presented to the board for consideration, and after much discussion a motion was made . . . that Mr. Hornblower be reimbursed as diplomatically as possible, by the sec- retary for his assistance, efforts and advice, from time \o time." The secretary of the association is George Monyhan, an official of the Highway Patrol Division of the Motor Vehicle Department. That the association regarded the $500 payment as for legislative and other services is indicated by the following letter from Mr. Monyhan to Mr. Roche, Jr., who still remained in the status of non- salaried attorney for the association : i "In reply to your communication of February 25th concerning item on financial statement of the association under date of December 31, 1937, listed general expenses in the amount of $1,648.16 wish to advise that this amount is made up as follows : Miscellaneous expense ' : $267 43 Salaries (secretarial service) 300 00 Stationery and printing 288 10 Convalescent expense 292 63 (flowers, candy, sent to sick officers by employees) Adjustment expense- legislative matters, personnel problems before the Director of Finance Person- nel Board, retirement system and compensation insurance by executive committee 500 00 Officials of the Association of Highway Patrolmen informed investigators that they felt Assemblyman Hornblower earned his fee. They further said they felt that the $500 item should not be considered a fee, but a "gift." Under no interpre- tation of the facts could Mr. Hornblower be called the attorney for the Highway Patrol. Horse-Racing. The income record of Assemblyman Hornblower shows he received $19,755 from the California Jockey Club. Inc., and $1,250 from W. P. Kyue, manager of the Bay Meadows Race Track, making a total of $21,005. Assemblyman Hornblower was a leading advocate of legalization of horse racing in the 1933 session of the State Legislature. Since that time his entire legislative record has been proracing. During ensuing sessions of the Legislature, literally hundreds of bills have, been introduced affecting the interests of owners and stockholders in race tracks of Cali- fornia. In the 1937 session, the Santa Anita race track of Los Angeles found it advisable to spend vast sums of money for legal and lobbyist representation at Sacramento in order to protect the interests of the track. Investigators were unable to find that the Bay Meadows race track or its operating corporation, the Calif ornia Jockey Club, Inc.. found it necessary to employ representation, outside of the Legislature, at either the 1033 or 1937 session. It appeared that Assembly- man Hornblower, under employment by the California Jockey Club, Inc., looked out for the legislative representation of the northern California track. 1096 Senate Journal [April 4, 1939 Building and Loan. The record of Assemblyman Hornblower's income shows he received $4,100 from the Pacific States Savings and Loan Company in the form of a check for .$100 a month from August, 1935, to December. 1938, inclusive. In the 1935 session of the Legislature, several major bills dealing generally with the problems of depression-racked building and loan companies and 'their investors Mere introduced in the Assembly. One such bill was' Assembly Bill No. 1.12. introduced by Assemblyman Ralph W. Evans of Los Angeles. This was sponsored by building and loan investors' groups, and was bitterly opposed by the major building and loan companies. The bill granted to the holders of investment certificates the right to use those certificates as a payment, or offset, of any obligation owed by them to the building and loan company. Thus, if an individual owed a building and loan company .$3,000 on a home mortgage and held .$8.(100 of investment certificates, he could apply the certifi- cates at face value against the loan. Since most building and loan company certificates or pass hooks at that time were depressed to about 50 or 60 per cent of their face value on the open market, this legislation obviously was of benefit to the individual. It eliminated the probability that an investor would see his savings cut in half, wnile his debt to the building and loan company remained at the original figure. A second important bill was Assembly Bill Xo. 1300, sponsored by the major building and loan companies. Investigation disclosed that the Pacific States Savings and Loan Company paid the Los Angeles law firm of O'Melvany, Tuller and Meyer .$15,000 to prepare this bill. The Pacific States led the large building and loan group. The bill constituted a complete revision of the Building and Loan Code, and, from the point of view of Pacific States and other companies, was necessary to protect the companies from the ravages of the depression. The bill in its original form was violently opposed by investors' groups, including the proponents of Assem- blyman Evans' bill, Assembly Bill No. 152. At the beginning of the 193;") session's building and loan battle, Assemblyman Hornblower was clearly on the side of the Evans or "investors" group. However, a tabulation of Assemblyman Hornblower's votes on Assembly Bills Nos. 152 and 1300 shows that, finally, he voted generally with the building and loan company group. It should be pointed out that Assemblyman Hornblower's employment by the Pacific States Savings and Loan Company, sponsor of the successfully enacted Assembly Bill No. 1300, began after — not during — the session of the Legislature. Investigators asked officials of Pacific States why Assemblyman Hornblower was employed. One official of the building and loan company said that Assemblyman Hornblower solicited the employment so strenuously the company finally decided "it would be cheaper to hire him at the rate of $100 a month." Assemblyman Hornblower did perform some actual legal service for Pacific States. His duties were to take care of libel matters, the company said, and to appear for the company before the State Board of Equalization on any matters involving sale of liquor in properties of the company. The importance with which Pacific States regarded Assembly Bill N^o. 1800 in the 1035 session is indicated by the records of the company showing that it spent $51,000 for a lobby supporting this%ill, including .$7,750 paid to John A. Pettis, a San Francisco lobbyist, "for looking after the interests of the Pacific States Savings and Loan Company.'' at Sacramento, and $S,!)(M) paid to J. M. Jefferson, a Los Angeles lobbyist, for "looking after the interests of the Pacific States Savings and Loan Company and its subsidiaries during the 1935 session of the Legislature." Arthur II. Sarn'mh. The financial record of Assemblyman Hornblower shows he received .$3,900 from Arthur H. Samish, San Francisco lobbyist of varied interests. The fees represented by l hat total were paid at the rate of $100 a month from October, 1085, to Decem- ber. 1938, and were independent of campaign contributions made by Mr. Samish to Assemblyman Hornblower. Mr. Samish's employment of Assemblyman Hornblower began the same month that Mr. Samish became legislative representative of the^T brewing industry. Assemblyman Horriblower publicly stated that the fees paid by Mr. Samish were for legal services rendered the Motor Carriers Association, headed by Mr. Samish. Mr. Samish. examined before the grand jury, admitted the payment of money to Assemblyman Hornblower and corroborated Assemblyman Hornblower's explanation of the services rendered. .Mr. Samish said (hat the Motor Carriers Association was vitally interested in the problem of "wildcat ting" (that is, operation of competitive, unlicensed stages), lie said that Assemblyman Hornblower -assisted in (he prose- cution of "wildcatters." However, the force of this joint explanation from Assemblyman Hornblower and Mr. Samish was dissipated by the testimony of Orla St. Clair and Howard M. Day, San Francisco attorney and investigator. Mr. St. ('lair told the grand jury he has been general counsel for the Passenger Carriers Association — embracing the Motor Carriers Association — since 1934, and April 4, 1939] Senate Journal 1097 that it was his function as an attorney to protect, the association's bus line members from competition from "wildcatters." Mr. St. Clair testified that at no time was Assemblyman Ilornblower employed or associated in the prosecution of "wildcatters," nor did Assemblyman Hornblower ever confer or counsel with Mr. St. Clair, nor did Assemblyman Hornblower appear in behalf of the association before the Rail- road Commission or in any prosecution. Mr. Day testified that he is the special representative of the legal department of the Pacific Greyhound Lines, in charge of investigations of "wildcatting." He said at no time was Assemblyman Hornblower associated in these investigations or the subsequent prosecutions. Mr. Day said he recalled conferring with Mr. Samish on these investigations and said it was his understanding Mr. Samish on rare occasions did confer with Assemblyman Hornblower. But Assemblyman Hornblower did not appear as counsel in the prosecutions. Miscellaneous. The financial record of Assemblyman Hornblower shows that he was paid $3,400 by William Cadigan. The apparent monthly basis for this payment was $100, commencing in October, 1934, and continuing until currently. Mr. Cadigan is the operator of a lottery, which has operated for several years in San Francisco and the bay area. Lotteries are declared by statute to be unlawful. While each session of the Legislature produces controversies on gambling laws, this investigation did not attempt to trace any connection between this employment of Assemblyman Hornblower and specific legislation. The employment is cited because of the obvious undesirability of having in the role of a legislator, sworn to uphold the law, an attorney regularly employed by a violator or violators of law whose violations are on a businesslike, continuous basis. In examining the lawyer-legislator record of Assemblyman Hornblower, the inves- tigators encountered a series of contracts (attached, Exhibit No. 1) between Assem- blyman Hornblower and Albert E. Sheets, a Sacramento attorney, on the one hand, and various liquor control officers of the State Board of Equalization, on the other hand. The contract provided that Assemblyman Hornblower and Mr. Sheets should receive for services, rendered one-tenth of all pay increases collected for the contract- ing employees of the State Board of Equalization for a period of one year. During November and December, 1936, the California State Brewers Institute, the Wine Industries and the California Liquor Industries Association interested themselves with what they considered to be inadequate pay for liquor control officers. A survey was made in January, 1937, and Mr. Louis J. Gilbert, represent- ing the Liquor Industries Association, conferred with A. E. Stockburger, State Director of Finance, and Harry B. Riley, State Controller. Both Mr. Stockburger and Mr. Riley were members of the Personnel Board. The State Personnel Board in the early months of 1937 conducted a survey of liquor control officers' salaries leading to adoption, May 7, 1937, of a resolution recommending upward revision of those salaries to a figure of $190 a month for the lowest classification of officers. On May 28, 1937, the Assembly unanimously adopted a resolution, Assembly Joint Resolution No. 21G, requesting the Personnel Board to establish liquor control division pay minimums of: State Administrator, $10,000; Assistant Administrator, $6,000; district chiefs, $5,000; supervising officers, $3,000; officers, $2,280 — all annual salaries. While the Personnel Board had adopted a resolution for adjustment of the salaries, no general adjustments were placed in effect. That is, pay rolls at the adjusted figures were not certified. The Personnel Board wanted to complete a comprehensive survey of salaries paid to State employees. On September 15. 1937, the contracts between Assemblyman Hornblower and Mr. Sheets, first parties, and individual liquor officers, as second parties, were pre- pared, guaranteeing Assemblyman Hornblower and his associate 10 per cent of salary increases obtained. On October 4, 1937, Assemblyman Hornblower appeared before the Personnel Board and urged certification of pay rolls at the revised salary figures. He sug- gested that the question of availability of funds be left to the Director of Finance, arguing further that the employees affected could then take, their cases to court to compel the Director of Finance to pay the increased salaries." After hearing Assem- blyman Hornblower, the Personnel Board ordered the pay rolls certified as of that date. (However, on October 5. 1937, a motion by Harry Lutgens, member of the- Per- sonnel Board, was adopted setting aside the previous action and delayed certification of pay rolls pending completion of a survey. ) Referring to the contracts between Assemblyman Hornblower and his associate and the liquor officers, several of the officers said they voluntarily had signed the contracts. Others declared they were instructed to sign by their superior officers. Many believed they would receive the increases in the normal course of events and were confident an adjustment retroactive in nature would be made without the necessity of bringing suit. 1098 Senate -Journal [April 4, 1939 The attitude of the liquor industry toward these contracts is indicated by excerpts from letters to Arthur II. Samish from Louis J. Gilbert: • "As you will recollect, the matter of inadequate pay for liquor control personnel was discussed informally by officers of California State Brewers' Institute, Wine institute, and C. L. I. A. iu Noveml>er and December of 193G. On February 21, 1937, the board of directors of C. L. Is A. adopted a resolution urging that the State adopt a sound long-distance 'personnel policy in liquor control including (1) adequate pay, (2) promotion on a merit basis from lowest to the highest rank, and (3) ruthless weeding out of venality, and suggesting rates of pay running from $10,000 per year for Liquor Administrator to $200 per month for liquor control officers. You will remember that during the month of March, 1937, when the Legislature was in session, you, Mr. Hoerchner, and I conferred with the Governor at considerable length on the liquor control per- sonnel prohlem, at which time the Governor said that he considered it inadvisable that any provision for salary fixing be put in the Alcoholic Beverage, Control Act then before the Legislature, but advised us that he felt the matter would be dealt with adequately by the Personnel Board. The Governor was quite interested and talked very freely. I told him that my approach to the matter was nonpolitical although I was under the necessity of reporting to my directors in the next couple of weeks a ml to the whole industry by the first of the year; that interest in the program was widespread and that we would have to give some explanation as to what had happened to prevent the putting of the pro- gram into effect. The Governor said that he had no objections to the raises as such, that he was convinced that the rates of pay in private industry were going back to the 1929 level, and that he would like to see all rates of pay boosted in accordance with the survey which was now being com- pleted, part of the report being already prepared and the balance coming forward for the next meeting of the board on October 28th. I told him that we realized that nothing could be done without the cooperation of the Executive Department. The Governor said that he would see that money was made available as raises were approved. I discussed part of the technical conversation I had had with Mr. Kroeger, who had been very much interested in getting through me complete information as to the Federal Government's system of training their internal revenue officials. The Governor was quite emphatic in declar- ing that he was faced by an absolutely noncooperative spirit on the part of the Board of Equalization. He was also most emphatic in denouncing Assemblyman Hornblower's activities in connection with securing salary raises. He emphatically declared that it was his belief that any employee of the State who had agreed with Homblower to pay 10 per cent of a year's salary for increases secured as a result of Hornblower's campaign or legal action, should be removed from the State pay roltt Before leaving he again assured me that he would put no obstacle in the way of raises to the liq-vvor personnel provided they were in con- formity with the survey now ?>eing completed; that he considered it absolutely all right for us to submit all the data available and use what persuasive arguments we had with the Personnel Board and the technical staff to secure the highest possible classification for liquor control officers." Assemblyman Earl D. Desmond, Sacramento. Bank records of Assemblyman Desmond disclose the following items of income relating to clients directly interested in legislation introduced by and supported by Assemblyman Desmond : 1936 — Sacramento Milk Producers Association $893 00 1!)3G — Sacramento Milk Dealers Association (salary) 1,250 00 Expenses • ' ' 66 00 1937 — Sacramento Milk Dealers Association (salary) .__ 1,415 00 Expenses • 20 00 1937 — Sacramento Milk Dealers Association (legal services) __ 100 00 July 20, 1936 — Tax Revision League, Inc 10 00 Oct. 12, 1936— Tax Revision League, Inc 10 00 Feb. 16, 1937 — Tax Revision League, Inc 100 00 Investigation established that the first four items of income shown in the records of the, law firm of Wachhorst and Desmond had a relationship to milk legislation. In the fall of 1935 Frank S. Glass was engaged by the Sacramento Milk Dealers Association as secretary. In his efforts to straighten out a trade war raging among milk dealers, Mr. Glass employed Assemblyman Desmond as attorney to April 4, 1939] Senate Journal 1099 bring legal action against certain milk dealers. As a result of the oction filed by Assemblyman Desmond, his law firm was paid the amount of $893. Subsequently, the association asked Assemblyman Desmond to become its secre- tary. For a time Assemblyman Desmond was paid $200 a month from sums raised via assessments on association members. Assemblyman Desmond's salary later was reduced to $100 a month. Payment to him has been irregular. Members of the Sacramento Milk Dealers Association told investigators that after the passage of the "Young Bill," Senate Bill 100, in 1935, milk dealers felt that a similar act should be adopted, applying to their business. Where the "Young Bill" provided for fixing uniform minimum fair prices to be paid to the producers of milk, the dealers sought through legislation to provide similar, fair retail prices. On January 22, 1937, Assemblyman Desmond introduced Assembly Bill 2422 — "An act to amend and repeal certain sections of the Agricultural Code, relating to the marketing of fluid milk and fluid cream." This measure was referred to the Assembly Committee on Live Stock and Dairying. Assemblyman Desmond was a member of that committee. The bill was reported out to the Assembly, passed by the Assembly with amendments, sent to the Senate, passed there and on June 17 was approved by the Governor. The last three items cited of income shown in the record of the law firm of Wachhorst and Desmond were explained in testimony before the grand jury by H. F. Deuberry. Mr. Deuberry testified he paid Assemblyman Desmond the sum totaling $120 for the purpose of preparing and introducing certain measures desired by the Tax Revision League, Inc. Assemblyman Desmond, when he was called before the grand jury, admitted he had received the sum totaling $120, from Mr. Deuberry. But, Assemblyman Desmond contended this money represented legal fees for work performed as an attorney. He said the fees had no connection with any legislative matters. Assemblyman William Moseley Jones, Los Angeles. This case involved a member of the Assembly, with unusual powers to originate, guide, restrict or even halt a legislative investigation, who at the same time was the law associate of an attorney admittedly receiving a substantial fee from one of the parties concerned in the investigation. Assemblyman William Moseley Jones of Los Angeles was Speaker in the 1937 session of the Legislature. On May 20, 1937, the Assembly passed Resolution No. 171, sponsored by Speaker Jones. The resolu- tion created eleven interim investigating committees of the Assembly, one of which was to act as a coordinating committee with power to allocate funds to the several other committees from a $25,000 appropriation. The Coordinating Committee con- sisted of Speaker Jones, Assemblyman Oharles Lyon of Los Angeles and Assembly- man Henry Meehan of Oakland. One of the ten general committees (as distinguished from the coordinating or steering committee) was the Assembly Interim Committee on Labor and Capital. The International Alliance of Theatrical and Stage Employees is an American Federation of Labor union, holding agreements with the Motion Picture "Producers Association whereby the I. A. T. S. E. provides labor and technicians to the film industry. President of the I. A. T. S. E. is George Brown of Washington, D. C. The Hollywood locals of the I. A. T. S. E., losing their local autonomy some years ago, were placed under the personal management of William Bioff, who had the title of personal representative of Mr. Brown. k civil action was filed in the superior court of Los Angeles County by Carey McWilliams, a Los Angeles attorney, on behalf of a group of members of Local No. 37 of the I. A. T. S. E. This suit charged that Mr. Bioff and the nominal officers of the I. A. T. S. E. had engaged in improper and unlawful activities, including duress, intimidation, force to collect illegal assessments against members of the local. Other charges included discrimination against certain members of the local. In general, the litigation charged that the I. A. T. S. E. was operated by racketeering methods as the personal and profitable enterprise of Mr. Brown, Mr. Bioff and their asso- ciates, and not as the properly democratic, collective-bargaining agency of the Hollywood studio employees. Mr. McWilliams, in his effort to bring about exposure of conditions he charged existed in the I. A. T. S. E., sought to institute an investigation by the Assembly Interim Committee on Labor and Capital. During the post-legislative months of 1937, Speaker Jones of the Assembly, conducted his practice of law from the suite occupied by the firm of McAdoo, Neblett and Warner in the Transamerica Building. Los Angeles. Partners in the firm at that time were United States Senator William Gibbs McAdoo, William H. Neblett and R. Dean Warner. The exact .relationship of Speaker Jones to the ether members of the firm has been disputed. It is an established fact that he had offices in the McAdoo- Warner-Neblett suite and that he was from time to time associated in legal matters with Mr. Neblett and further that in December. 1937, Mr. Jones became a partner in the firm. In his effort to bring about a public hearing of affairs within the I. A. T. S. E. Mr. McWilliams called on Speaker Jones — keeping in mind Jones' capacity as chairman of the Coordinating Committee which had control over all legislative investigating committees — during the latter part of October or the early part of 1100 Senate Journal [April 4, 1939 November, 1937. Speaker Jones showed no interest in embarking on an investigation of the I. A. T. S. E. Mr. McWilliains left with Speaker Jones some data in connec- tion with his complaint. Subsequently, Mr. McWilliains received a telephone message asking that he call at Mr. Jones' office. At that meeting Mr. Jones asked for further detail on the complaint against the I. A. T. S, E. management. Mr. William Silliman, a political associate of and an investigator for Colonel Neblett, was present ,at the second meeting. Speaker Jones indicated to Mr. McWilliams that he was willing to urge the Jjjibor and Capital Committee to examine the affairs of the I. A. T. S. E. Something had occurred to change Speaker Jones' attitude toward the investiga- tion between the first and the second meeting with Mr. McWilliams. What that occurrence was investigators learned only through hearsay evidence which was not produced before the grand jury. That evidence was that after Mr. McWilliams' first meeting with Speaker Jones, Speaker Jones was present at a luncheon in Cook's Restaurant in Los Angeles. During this luncheon conference it was pointed out that the I. A. T. S. E. was _a tremendously wealthy union, of great power in the film industry. At the second meeting, Speaker Jones told Mr. McWilliams that the Assembly Labor and Capital Committee was meeting that day in the offices of Assemblyman Jack Tenney. " At Speaker Jones' suggestion r Mr. McWilliams accompanied Speaker Jones and Mr. Silliman to the executive meeting of the Labor and Capital Committee. Assemblymen liichie (chairman), Tenney, Reaves, Clark, Muldoon, Cronin and Dawson were present. Speaker Jones urged them to begin the investigation of the I. A. T. S. E. Mr. McWilliams gave information on his complaint against the I. A. T. S. ET As an inducement to the committee to proceed with the inquiry. Speaker Jones stated that he would provide investigators without expense to the committee and that he would see that funds were provided to carry out the investiga- tion. The committee then voted to proceed with the investigation. Speaker Jones then instructed Dclwin W. Smith, the sergeant-at-arms of the Assembly, to assist the Committee on Labor and Capital in the investigation of the I. A. T. S. E. Speaker Jones informed Mr. Smith that he had employed Mr. Silliman and Clayton S. Adams, another political and investigative associate of Mr. Neblett, to make the actual investigation. Mr. Silliman and Mr. Adams occupied offices adjoining those of Mr. Neblett in the Transamerica building. As was the foregoing, the following evidence was developed by investigators and in testimony before the grand jury. The chronology of events in the several days beginning November 8, 1937, clearly indicates the forces and motives at work in the I. A. T. S. E. investigation, and the profits anticipated and derived. November 8 — As the Labor and Capital Committee convened its session in the Los Angeles State Building, Mr. Silliman and Mr. Adams went to offices of the I. A. T. S. E. and attempted to serve the officers Avith subpenas. Unsuccessful investi- gators returned to the committee and obtained forthwith subpenas which were served later in the day. That afternoon, officials of the I. A. T. S. E. appeared before the committee and agreed to permit investigators to have complete access to their books and records. On the evening of the same day, Louis B. Mayer, of Metro -Goldwyn-Mayer Studios, conferred with Mr. Bioff on an impending strike in the Columbia Film Studio. The conference resulted irra satisfactory settlement and an agreement that union workers would report at the srudio the following morning. Also on the same day Mr. Mayer received a telephone- call from Mr. Neblett, the law office associate of Speaker Jones. Mr. Neblett said it was imperative that he see Mr. Mayer imme- diately. When Mr. Mayer suggested that he see Mr. Neblett at the latter's office on the following morning, November 9, Mr. Neblett rejected the suggestion, saying "Don't come to my office — that is . being watched for some reason. I want to see you personally." Mr. Mayer then agreed to see Mr. Neblett at his office at the Metro-Goldwyn-Mayer Studio during the afternoon of November 9. November 9 — Mr. Silliman and Mr. Adams began an examination of books and records in the Hollywood office of the I. A. T. S. E. On the afternoon of that day, Mr. Neblett saw Mr. Mayer, as per arrangement made the preceding day. Mr. Mayer was informed by Mr. Neblett that Mr. Neblett's partner, William Moseley Jones, was Speaker of the Assembly. Mr. Neblett said that Speaker Jones had a Legislative Committeeembarking on an investigation of the I. A. T. S. E. Mr. Mayer quoted Mr. Neblett as saying : "I think you have a darned good chance of getting rid of the I. A. T- S. E., if you take care of us." Mr. Mayer said that he told Mr. Neblett that the I. A. T. S. E. was an affiliate of the American Federation of Labor, that the studio had a contract with the union, and that he, personally, was not interested in ridding the industry of the I. A. T. S. E. Mr. Neblett, during the course of his argument, said that his partner. Speaker Jones, was in control of the committee and that two investigators from Mr. Neblett's office were handling the matter. He told Mr. Neblett he was' not interested in undertaking anv program against the I. A. T. S. E. — as Mr. Neblett suggested — Mr. Mayer said that he would telephone Mr. Nicholas Schenck at New York and let him decide the question. April 4, 1939] Senate Journal 1101 Later in the day, Mr. Mayer received a telephone call from Leo Spitz, president of R. K. O., who told him : "Gee, hell has broken loose." Mr. Spitz said he had been informed by Mr. Bioff that Mr. Mayer had instigated the entire investigation of I. A. T. S. K. through Speaker Jones. Mr. Spitz came to Mr. Mayer's office. There Mr. Spitz listened on an extension telephone to a conversation between Mr. Mayer and Mr. Neblett, in which Mr. Neblett repeated his offer to Mr. Mayer to wreck the I. A. T. S. E., through the medium of the investigating committee con- trolled by Speaker Jones, with the clear inference that Mr. Neblett wanted some payment of fee. During this conversation, Mr. Mayer told Mr. Neblett that Nicholas Schenck concurred in the opinion that the motion picture industry did not wish to destroy the I. A. T. S. E. The same day, Mr. Mayer conferred with Judge Isaac Pacht, a Los Angeles attorney, on a private matter not connected with the investi- gation. During this meeting Mr. Mayer and Mr. Spitz told Judge Pacht of the conferences and telephone conversations with Mr. Neblett. Judge Pacht was and is attorney for the 1. A. T. S. E. Mr. Mayer attempted to convince Judge Pacht that he, Mayer, had nothing to do with the investigation of the I. A. T. S. E. In testifying to this instance before the Grand Jury, Judge Pacht said that he had never heard of any legal services rendered the I. A. T. S. E. by Mr. Neblett or the law firm of McAdoo, Neblett and Warner or the law firm of Neblett, Warner and Jones— as it later was called. November 10 — A voucher and check in the sum of $5,000 was prepared at the direction of C. P. Cregau, auditor for the I. A. T. S. E. This check was drawn on the Hollywood State Hank, Los Angeles, and signed Harlan Holmden, vice president of the I. A. T. S. E., West Coast Studio Local. This check was number 2 in an account called the "Special Legal Account." Mr. Cregan testified that his instructions to make out the check came from Mr. Holmden. Under authorization of Henry Morgeutb.au, Jr., Secretary of the Treasury, Lawrence W. Givney, United States Internal Revenue Agent in Los Angeles, testified before the Grand Jury that during examination of records of the I. A. T. S. E. made July 12, 1938, he examined all vouchers and checks in the "Legal Account" maintained at the Holly- wood State Bank. Mr. Givney was .accompanied by Charles C. Emory, intelligence agent.' for the Treasury Department. Mr. Givney testified that he saw check No. 2, drawn in favor of Mr. Neblett for $5,000 and an accompanying voucher, No. 2, dated November 10, 1937, authorizing the payment of $5,000 to Mr. Neblett and "Moseley Jones." Mr. Cregan, the auditor for the I. A. T. S. E., produced before the grand jury a typewritten voucher authorizing the payment to Mr. Neblett only — as contrasted to the voucher noted by Mr. Givney authorizing payment to Mr. Neblett and to Moseley Jones. Mr. Cregau swore the voucher naming Mr. Neblett only was the sole voucher prepared on the payment item. Mr. Givney was shown the voucher produced by Mr. Cregan and testified that he had never seen that voucher before although he had examined the account painstakingly. He further testified that the voucher he had seen was bound or stapled into a manila folder and would have necessarily have to have holes in it where it had been stapled. The voucher introduced by Mr. Cregan did not correspond to that description. The check payable to Mr. Neblett in the sum of $5,000 was produced in evidence. It should be borne in mind that on the preceding two days, November 8 and 9, Mr. Neblett was soliciting Mr. Mayer for support of a program to wreck the I. A. T. S. E. through the agency of the investigating committee, and on this day, November 10, Mr. Neblett was in the process of receiving a fee of $5,000 from the T. A. T. S. E. November 11 — A completed report was in the hands of Mr. Silliman and Mr. Adams, the Neblett office investigators ostensibly serving the Labor and Capital Committee examining records of the T. A. T. S. E. This report purported to be based upon a complete examination of all records of the I. A. T. S. E. The report showed painstaking preparation. It made . certain recommendations. And, of significance in view of the check issued the preceding day, the report completely exonerated the I. A. T. S. E. from all of the charges which were the basis for the investigation. Mr. Silliman and Mr. Adams displayed this report to Mr. Smith, the Sergeant-at-Arms of the Assembly. They informed Mr. Smith that they had discussed the report with Mr. Neblett and that it was satisfactory to him. Mr. Smith immediately telephoned Speaker Jones at. Oilman Hot Springs, urging that Speaker Jones return to Los Angeles because — in Mr. Smith's judgment — something was amiss in the investigation. Mr. Smith was aware that the examination of the involved financial and administrative records of the I. A. T. S. E.. unon which the report supposedly was based, had begun only 48 hours before the finished report was in the hands of Mr. Silliman and Mr. Adams. November 12 — When the Committee on Labor and Capital met in executive ses sion on the morning of this date, to take up the I. A. T. S. E. matter, the report was handed to the committee. A hasty examination of the report convinced several members of the committee that it was a deliberate "whitewash." A suggestion was made that the investigation be dropped on the basis of the report. But several members of the committee insisted that the investigation go forward. In view of the evident attitude of some of the committee memhers that there were suspicious 1102 Senate Journal [April 4, 1939 circumstances in connection with the report, one of the persons in the room — variously identified as Speaker Jones. .Mr. Sillhnan. Mr. Adams or Mr. Smith, at the instruction of Speaker Jones tore the signatures of Mr. Adams and Mr. Silliman, as well as the recommendations and conclusions from the last page of the report. Some members of the committee, including Assemblyman Dawson, refused to permit tampering with their copies and original signed copies were produced for investigators. On the evening of this day, Mr. Mayer, attending a preview at the Uptown Theater in Los Angeles, was informed by his executive secretary, Miss Ida Koverman. that Mr. Neblett was urgently requesting to speak with Mr. Mayer on ihe telephone. Mr. Mayer sent Miss Koverman to take the message. Her testimony was Mr. Neblett said she was to inform Mr. Mayer that unless the Los Angeles Times stopped the adverse publicity concerning the "Bioff matter," a strike would be called by the L A. T. S. E. Mr. Neblett indicated to Miss Koverman that he was representing I. A. T. S. E. Noveml>er 13 — The Labor and Capital Committee took testimony for several days on administration of the I. A. T. S. E., developing detailed evidence in con- nection with the charges made by Mr. McWilliams at the outset of the investiga- tion but not arriving at i»ositive conclusions. Meanwhile, on this date Mr. Mayer had a conference with Mr. Nicholas Schenck, Mr. Bioff and Mr. Brown. Mr. Mayer attempted to convince Mr. Brown and Mr. Bioff that he had had nothing to do with the investigation of the Labor and Capital Committee into the affairs of the I. A. T. S. E. In an effort to prove his position, he telephoned Mr. Neblett. With Mr. Schenck. Mr. Brown and Mr. Bioff listening in on the telephone conversation, Mr. Mayer reviewed all the conferences and statements made by Mr. Neblett to him. This included repetition that Mr. Neblett had declared that through his partner. Speaker Jones, he could control the I. A. T. S. E. investigation and, if necessary, could blow the I. A. T. S. E. out of Hollywood. Mr. Neblett did not deny the con- versation nor this statement. The telephone conference ended by Mr. Neblett agree- ing to come to Mr. Mayer's office and further discuss recent developments. At the completion of the telephone conversation Mr. Bioff and Mr. Brown — who had heard it throughout — said to Mr. Mayer that they had been deceived by Mr. Neblett. to whom they had paid money presumably for the purpose of quickly terminating the investigation of the Committee on Labor and Capital. They further admitted it was Mr. Neblett who told them Mr. Maver was responsible for the investigation of the I. A. T. S. E. On the same day at about 8.30 p.m. Mr. Mayer was in his office at Metro-Gold- wyn-Mayer studios. Mr. Neblett, accompanied by a man whom he represented as one of the investigators for the Labor and Capital Committee, came to the Mayer office. At this time, according to Mr. Mayer, it was clear to him, Mayer, that Neb- lett, after offering to represent the motion picture industry in ridding' Hollywood of the I. A. T. S. E. was now in some manner representing the union. Mr. Neblett told Mr. Mayer that unless the Los Angeles "Times" halted critical treatment of the I. A. T. S. E. and of Bioff there would be a strike in the motion picture industry. Mr. Mayer said he was told by Mr. Neblett : "You know this committee down there. I could go down and blast things out of water." Mr. Neblett made a further obscure statement that Speaker Jones had "run out on him". Mr. Neblett said that he had a certain document in the back of his automobile, parked in front of Mr. Mayer's office, and with the aid of this document Mr. Mayer would be able to stop the investigation through the newspapers. Mr. Mayer sent one of his employees to the Neblett automobile and the document was returned to Mr. Mayer's office. A few minutes later the investigator accompanying Mr. Neblett tore out of the document the last page. As he left. Mr. Neblett admonished Mr. Maver. "Remember vou don't know where you got this.* : The document was a report 'of Mr. Silliman' and Mr. Adams on the I. A. T. S. E. investigation. Mr. Mayer examined the document and theu called Mr. Kyle Palmer of th* Motion Picture Producers Association. Mr. Mayer asked Mr. Palmer to look over the report and attempt to have it published in the newspapers. The foregoing chronology clearly shows that Mr. Neblett sought to obtain employ- ment from factions which he considered at opposite points of interest in the I. A. T. S. E. investigation — that is the I. A. T. S. E. itself and Mr. Maver. representing the motion picture industry. Mr. Neblett succeeded in obtaining emplovment from the I. A. T. S. E. Mr. Neblett repeatedly advanced as an argument in favor of his employment the contention that his partner was in control of the investigation. Mr. Mayer's testimony on that point is clear. Further, there is evidence from Mr. Giv- ney that the voucher for payment to Mr. Neblett as originally drawn was in favor of both Mr. Neblett and r Mr. Jones. What was the motive for the I. A. T. S. E. expenditure of a substantial sum in an effort to bring the investigation to an early termination? Apart from the obvious interests of the union in avoiding generally unpleasant publicity which might under- mine its position with its members investigation disclosed two pertinent potential motives. First : William Bioff had a criminal record including several arrests in Chicago, Illinois, and a long background of racketeering which did not fit well with his position as a powerful official of a large Hollywood union. Second: Evidence produced Itefore the grand jury showed that Mr. Bioff had received the sum of £100,000. Investigation traced this money to the account of Mr. Joseph Schenck. April 4, 1939] Senate Journal 1103 Because of Mr. Sehenck's position in the motion picture industry, with Mr. Bioff position of attempting to obtain from the motion picture industry the best collective bargaining terms for the members of his union, it was obvious that publicity con- cerning this large sum of money loomed as an alarming possibility to Mr. Biolf. When originally summoned to testify, Mr. Adams and Mr. Silliman refused to testify. They were cited for contempt and the matter was argued in the superior court of Sacramento County. An appeal taken by Adams and Silliman was denied. Mr. Adams was recalled and given an opportunity to purge himself of contempt. He then testified that prior to his employment by Speaker .lones as an investigator for the Labor and Capital Committee in the I. A. T. S. E. matters he had occupied offices in the suite of Colonel Xeblett in the Transameriea Building. He said his total investigative experience approximated three months, all of which work had been performed under the immediate direction of Mr. Xeblett. His principal other activities during recent years had been the management of political campaigns, in which he had been associated with Mr. Xeblett. He said that an investigation ot the union's records had begun on the morning of Xovember 9 and had been com- pleted on Armistice Day, Xovember 11. He denied a previous statement made to investigators that the report had been typewritten in the office of Mr. Xeblett. and contended rather that it was written by stenographers in the office of the I. A. T. S. E. Mr. Adams confirmed a conversation with Mr. Smith on Xovember 11 and corroborated Mr. Smith's testimony that he, Smith, charged the report was a '"white- wash". Mr. Adams did not recall that he had informed Mr. Smith the report had been discussed with Mr. Xeblett. Mr. Adams said he received $200 from Mr. Xeb- lett and that he was aware of Mr. Xeblett's fee of $5,000 from the 1. A. T. S.'E. Generally, Mr. Adams' answers to questions were so vague that the grand jury foreman asked if he had ever had any difficulty with his memory and whether he had consulted a psychiatrist to correct tiie trouble? Mr. Silliman, when called to purge himself of contempt, complained of amnesia. He recalled that the report was writ- ten at the office of the 1. A. T. S. E. " He recalled a visit to the office of Mr. Mayer with Mr. Xeblett and that the purpose of the visit was to induce Mr. Mayer to use his influence with the newspapers to stop adverse publicity to Mr. Bioff and the 1. A. T. S. E. Mr. Sam Small of Los Angeles, a publicist, testified to a conversation with Mr. Adams several months prior to Mr. Adams being subpenaed by the grand jury. Mr. Adams told Mr. Small that Mr. Xeblett had received a $5,000 fee largely through the efforts of Mr. Adams and that Mr. Adams after considerable delay had received .$200 from Mr. Xeblett out of this fee. Speaker Jones in his grand jury testimony, corroborated Mr. McWilliams' evi- dence as to the origin of the investigation of I. A. T. S. E. Speaker Jones admitted that he was at that time an office associate of Mr. Xeblett and that he knew Mr. Silliman and Mr. Adams were associated with Mr. Xeblett. Speaker Jones testified that late in December, 1037, he entered into a partnership agreement with Mr. Xeb- lett and Mr. Warner. Speaker Jones denied that he had received any part of the $5,000 received by Mr. Xeblett. and said when he learned of the fee he asked Mr. Xeblett to return it. Speaker Jones said that he learned of this fee when Mr. Xeb- lett came to him after the start of the investigation and said that Speaker Jones was investigating clients of his, Xeblett's. Mr. Xeblett in his testimony denied he had ever had any such conversation with Speaker Jones — particularly referring to Speaker Jones' claim he had asked Mr. Xeblett to return the fee. Mr. Xeblett con- tended he performed legal services prior to the investigation. Against this testimony was that of Judge Pacht, the regular attorney for the I. A. T. S. E.. who said that at no time did Mr. Xeblett perform legal services for the. I. A. T. S. E. Mr. Xeblett, in a statement to investigators, said he had been associated with Speaker Jones in numerous cases in the Los Angeles courts. Mr. Xeblett frankly said the purpose of this association was to gain a responsive attitude on the part of court. The judges were aware of the fact that Jones was Speaker of the Assembly. Mr. Xeblett pointed out. Judges were likewise aware that Speaker Jones could influence measures affecting the judiciary, including the salaries of judges, Mr. Xeb- lett said. Mr. Holmden. vice president of the I. A. T. S. E., testified that he had prepared and signed checks for $5,000 to Mr. Xeblett upon instructions of Mr. Brown, the president of the I. A. T. S. E., and of Mr. Bioff. Mr. Holmden said he had no knowledge of any services rendered by Mr. Xeblett to the I. A.-T. S. E. Mr. Holm- den added that the law firm of Pacht. Pelton, Warne and Black were the regular lawyers for the I. A. T. S. E. and that they had received a retainer of $20,000 to handle the legal business of the union. When he took the stand, Mr. Bioff testified that he received instructions concern- ing the Xeblett check from Mr. Brown. He said that he had no personal knowledge of any legal services rendered the I. A. T. S. E. by Mr. Xeblett. Mr. Bioff explained the $100,000 credit in his bank account as money advanced to him by a friend for personal purposes. In view of statements attributed to Mr. Brown that Mr. Xeblett had made state- ments to him and to Mr. Bioff that he could control the investigation through his 4 — s.t a4 1104 Senate Journal [April 4, 1939 partner, Speaker Jones, every effort was made to persuade Mr. Brown to return to California and testify hefoie the grand jury. Up until this time it lias been impos- sible to place Mr. Brown under subpena. Drainage District Legislation. Assembly Bills 21)10 "and 2911, introduced and sponsored by Assemblymen Gene Flint, and William Moseley Jones, respectively, autliorized the Los Angeles County Board of SuiMermit the Los Angeles Board of Supervisors to transfer into the Flood Control District approximately $5,000,000 worth of drainage district bonds. Where taxpayers in the large district had dis- charged their obligations', the Governor protested, they might be placed in the posi- tion of having to pay twice. His veto message commented that proponents of the hills planned to revise them, eliminating objectionable features. Among the property owners interested in Inn ing certain drainage districts — and their bonds— -absorbed into the Flood Control District were the Union Pacific and Santa Fe railroads. > This phase of the investigation is concerned with evidence that Assemblyman Jones, in the powerful position of Speaker of the 1937 session, represented at least one of these railroads in working for and accomplishing the transfer of certain drain- age districts? — and their bonds — into the Flood Control District. Investigators learned that on or about November 1 or 2 Carl Pustau of Los Angeles informed J. E. P. Dunn, a private investigator representing clients not con- cerned with the legislative inquiry, that he, Pustau, Assemblyman Jones and Leo Bolger of Ix>s Angeles (brother of James Bolger. former Los Angeles Commissioner of Public Works) were negotiating secretively in behalf of several railroads — par- ticularly the Union Pacific and the Santa Fe — to transfer various drainage districts with their liabilities and assets to the Los Angeles County Flood Control District. The railroads in question owned considerable real property within the drainage dis- tricts. By transferring the drainage district bonds to the Flood Control District, a tax savings could be accomplished. On November 4. 1037. Mr. Pustau was overheard telephoning Mr. Bolger and their conversation generally dealt with the above matter. Mr. Pustau stated that "the deal was all set," and effected arrangements to meet Bolger for lunch the fol- lowing day at the Txis Angeles Athletic Club. On November . r >. 1037. Mr. Pustau was overheard in a telephone conversation with Assemblyman Jones at TRinity 1681, the law office of William II. Neblett. Los Angeles. In this conversation Mr. Pustau briefly mentioned the deal set forth above to Assemblyman Jones and stated the matter could Ire put over but it would cost money to do so. On November 7 or 8 information was received that Mr. Pustau planned to meet Assemblyman Jones and Mr. Leo Bolger in a downtown hotel room for the purpose of discussing this transaction. Arrangements were perfected to listen jn on the dis- cussion by the use of sound equipment. At 12.50 p.m. Mr. Pustau anft. Assemblyman Jones entered Room 1110 of the Clark Hotel. Assemblyman .Toms immediately ordered a drink. Mr. Pustau left in order to meet Mr. Leo Bolger in the lobby of the hotel. Shortly thereafter Mr. Pustau and Mr. Leo Bolger entered Room 1110 where they prepared to have lunch- eon. Assemblyman Jones discussed briefly the fact that he was conducting an inves- tigation into the moral conditions of Los Angeles and expected "one of the biggest blow-off's in the country," After considerable more conversation. Mr. Leo Bolger stated. "Well, anyhow. Mose, they had this drainage thing all worked out once, but your people were not ready. It is not time to open it up again. We should wait until next year." Assemblvman Jones renlied : "It has got to be within thirty days. Anything Carl savs is okay with me." Mr. Bolger said : "Does this mean going back to the original deal? If so. it can- not be done." Then followed a discussion of whether' the transaction could be handled within the next thirtv days. After much discussion as to the feasibility of bringing up the situation before the Board within the thirtv-day period as against letting the matter ride for approxi- mated" a year. Assemblyman .Tones insisting that the matter must be brought up immediately. stntin<*. "I am not going to keep the fee open for another year. I will tell you something." Bolger: "As far as we are concerned. I think it should be next year — your fees are no good after thirty days. Tf nothing happens between now and thirtv days. Mose. you would have to have your fees reissued." Bolger: "Who do yon represent. Mose. Are you retained by the Santa Fe?" April 4, 1939] Senate Journal 1105 Jones : "No, I represent the U. P. I represent Jefl'ers. Let it go at Omaha." Bolger; "I thought it was the same picture." Jones: "I am sorry I could not answer your question." Bolger: "Well, Mose, you are in the. same picture — something must he done about it. You can't tell — we might work out some angle." Bolger : "Maybe you better let me check in and see what the picture is." Pustau: "As long as you know, Leo. who Mose represents and since this matter is going before the Board within thirty days, whatever arrangements are agreeable to you, I can work out. It is a legitimate matter. Get it before the Board. That's all we need, if we are mutually agreed that I am to be the go-between." Jones : "That is okay with me — right or wrong — whatever Carl says is okay." Bolger: "It's okay with me. Mose." Bolger: "Well, Mose, I think the deal can be fixed up, but it all depends ." Pustau: "How many votes did they need, Leo?" Bolger: "They had three, Jessup, Lee Ford and Legg." Jones : "I got Legg anyhow." Bolger: "I can make Jessup run this thing through, get it over quickly." Pustau : "Couldn't we get Lee Ford to bring it upV" Bolger : "He might bring it up — we have got two votes right now — then comes this delay. They panned hell out of hiin. Over that beach deal, the Venice property." Pustau: "That is the Roosevelt Highway thing." Bolger: "Yes and A T enice. He is timid about handling these things now How are you going to work this tiling out. Mose. so that I will be in the clear?" /Jones: "I trust Pustau. I am right behind him. Anything he says is okf>y." At about this time in the conversation, Bolger prepared to leave to keep a two o'clock appointment. Pustau: "Mose, shall I tell him the $2,500 is ready? Shall I tell him okay? He is expecting to hear it, you know." Jones : "Yes, absolutely, Carl. It's okay." Pustau : "You understand that, Leo." Bolger: "Okay, Carl. Let's shake on it, Mose." Jones : "I am particular who I shake hands with." Bolger : "Well, so am I, Mose, but if you have something in the palm of your hand, I am not so particular." On November 19, 1937, Mr. Pustau telephonically discussed with Assemblyman Jones the fact that something had to be done "on that matter right away." Pustau: "You mean the drainage thing?" Jones : "Yes." Jones instructed Pustau that they must get started on the drainage matter imme- diately. Thereafter they / discussed generally Assemblyman Jones' affairs with particular reference to the newspaper publicity he was getting in connection with his inquiry into moral conditions in Los Angeles. It was arranged that Mr. Leo Bolger, Assemblyman Jones and Mr. Pustau would meet the following Monday. On November 26, 1937, Mr. Pustau told Mr. Dunn that the drainage matter was to be docketed by the board of supervisors on the following Tuesday, at which time Assemblyman Jones was going to settle with him. Records of the Los Angeles County Board of Supervisors show that on Decem- ber 1, as Mr. Pustau had predicted, all Los Angeles County drainage districts were transferred into the Los Angeles Flood Control District. Supervisor L. M. Ford made the motion authorizing the transfer, seconded by Supervisor Herbert Legg. The vote on the motion to transfer was : Aye — Legg, McDonOugh, L. M. Ford and Jessup; No — John Anson Ford. On the same day a resolution of acceptance was adopted by the board, by the same vote, with the exception that Supervisor John Anson Ford was recorded temporarily absent. On December 3, Mr. Pustau informed Mr. Dunn that on December 2 — one "day after the transfer went through — Assemblyman Jones had gone to San Francisco to collect his fee in connection with the transaction. Shortly after December 4, when Mr. Pustau said Assemblyman Jones was to return to Los Angeles, Mr. Pustau, who had been in the trough of a personal depression, bloomed with pros- perity. Mr. Pustam displayed to friends several hundred dollars. Investigators examined records of Walter J. Little of San Francisco, lobbyist for the major steam railroads of California and a former Speaker of the Assembly. Correspondence was found in connection with Assembly Bills Nos. 1012 and 1913 (vetoed) and 2910 and 2111 (enacted) — all dealing with transfer of drainage districts into the Los Angeles Flood Control District. 1106 Senate Journal [April 4, 1939 The Southern Pacific an7 — then under Federal auspices. On February 1, 1080, Pomona Mutual dispensed with* the services of Mr. Welsh. Mr. Allard told the grand jury that he was attorney for Pomona Mutual during the period of Assemblyman Welsh's employment and that he, Allard,- did nearly all of the legal work. An interesting corrolary to the expose of the Pomona Mutual affairs and the subsequent employment of Mr. Welsh was found in the experience of Mr. 'W. B. Frederick, the stockholder referred to above. As a result of disclosures before the investigating committee, Mr. Frederick brought a civil action against Pomona Mutual charging acceptance of the Allard certificates was illegal. Mr. Frederick told investigators he held at that time S21 shares of Pomona Muili.nl stock which, because of current conditions were worth not to exceed $1 a share. After he filed his suit, Mr. Frederick's stock was purchased by Pomona Mutual for $38,850. As a condition of the settlement Mr. Frederick signed an agreement that he would not subsequently sue Pomona Mutual or any of its officers or directors as a result of the acts set forth above. 1108 Senate Journal [April 4, 1939 Senator liuJph Siring, San Bernardino. Fse of State Agricultural Association funds: In this case, in\ estimation showed through parallel lines of evidence how a lawyer- legislator and a prominent lobbyist who was his personal friend, both — at different limes — benefited from appropriations by an organization supported largely from State funds. The lawyer-legislator was Senator Swing, to whose political campaign committee a contribution of $1,000 was made by the National Orange Show of San Bernardino. ><- The lobbyist was Arthur II. Samish who was paid a $5,000 fee by the National Orange Show. In both cases, resolutions of the National Orange Show management appropriat- ing money were speciously worded so that the exact purpose of the appropriation was not indicated. The National Orange Show is principally supported from State funds, derived from taxation of pari-mutuel betting at race tracks. As a result of the 15)33 Horse Racing Act, ratified via constitutional amendment in 1034, 4 per cent of all pari- mutuel receipts at licensed tracks is paid to the State. From this revenue, $30,000 is appropriated toward the Horse Racing Board to defray expenses; $12r>,000 is allocated to the California State Fair at Sacramento; $lf>,000 is allocated to the Sixth District Agricultural Association ; $10,000 is allocated to the Department of Finance for supervision and auditing of the accounts. From the balance after making these deductions, 5 per cent is given to certain citrus fruit fairs defined in section 04 of the Agricultural Code ; 40 per cent goes to fostering county agricul- tural district fairs; 25 per cent is given to permanent improvements and support of the California Polytechnic School ; 33 per cent is allotted for permanent improve- ment and support of the University of California ; and the balance goes toward permanent improvement on property of State, county or agricultural association fairs. As an example of the importance of the State contribution, in the fiscal year ending June 30. 1037. the San Bernardino Orange Show received from the State approximately $82,000 and from all other sources approximately $67,000. Receipts of the Orange Show from the State are shown in the following tabulation : July 1, 1033, to June 30, 1034 $7,035 37 July 1, 1034, to June 30, 1935 44,202 OS Julv 1, 103.-,, to June 30, 1936 L 6r>,098 67 July 1, 1936, to June 30, 1937 82,412 99 July 1, 1937, to June 30, 1938 111,087 90 There is a definite restriction in State law on the use to "which agricultural fairs may put this money. Section 92 of the Agricultural Code provides that this money may be used only for premiums for agricultural, horticultural and live stock exhibits. The question in this investigation was whether or not the two appropriations with which the inquiry was concerned met this restriction of the State law. On October .1, 1936, directors of the National Orange Show adopted a resolution authorizing appropriation of $a,000 to be known as a "Promotional fund," for the purpose of cooperating with other fairs in assembling information showing the importance of the Orange Association to the citrus industry and the need of the National Orange Show for continued State support from the pari-mutuel funds. (See copy of resolution attached, Exhibit 2). It will be noted that this resolution said nothing about the use of the entire amount of the money to employ a lobbyist. Arthur Brown of San Bernardino, a director of the National Orange Show and a member <>f the State Personnel Board, testified he was asked by President Arthur / H. Brouse of the National Orange Show to arrange to have Mr. Samish watch all legislation introduced that might possibly affect the show's receipt of funds from the State, and to advise officers of the show of any developments concerning and adverse legislation. Mr. Brown stated that he conferred with Mr. Samish and that Mr. Samish said his fee for the services required would be $5,000. By happy coincideij.ee this is exactly the amount which had been set up in the "Promotional fund" of the National Orange Show. Mi - . Brown said he communicated with Mr. Brouse and instructed Mr. Brouse to send a check to Mr. Samish. A check for $5,000 was drawn by the National Orange Show payable to the San Bernardino Branch of the Bank of America on January 12, 1937. The then president of the show purchased a cashier's check payable to "Arthur Famish." This check, introduced in evidence, was endorsed '"Arthur Famish" and then "Arthur Samish" and was cashed at the Anglo-California Bank in San Francisco January lit. 1937. The check was not deposited in .Mr. Saniish's account but the individual who cashed it obtained currency. On the same day that the check was drawn. Mr. Blouse, a* president of the National Orange Show, wrote a letter to Senator Swing at the Hotel Sacramento, Sacramento. Unclosed in the letter was the $5,000 check for Mr. Samish. Mr. Brouse said that he had been told in a telephone conversation by Mr. Brown that there was considerable legislation being introduced affecting the fairs and the race track funds and that the Orange Show should be kept fully informed. Mr. Brouse quoted Mr. Brown as saying that Senator Swing was too busy to watch this legisla- tion for his home county, and that, consequently, Mr. Brown had arranged with April 4, 1939] Senate Journal 1109 "Arthur Famish" to check on legislation. Mr. Brouse explained he was sending the check to Senator Swing because he did not feel like sending it to Mr. "Famish'' as "there may be some instructions you may wish to give to him." (See letter attached, Exhibit 3.) Senator Swing testified to receipt of the letter and check and said that he instructed his secretary to forward the check to Mr. Samish. Both Senator Swings and Mr. Brown said they conferred with Mr. Samish during the legislative session) concerning bills which they thought might affect distribution of pari-mutuel funds. J Why President Brouse of the National Orange Show did not make out a check" directly to Arthur Samish and did not send the check directly to Arthur Samish may be indicated in the/ftestimony of L. B. Peaeher, an accountant, who testified that the $5,000 paid to Mr. Samish could not have been paid out of private monies of the National Orange Show, or out of the receipts or income of the Orange ShowA but was in fact paid out of the $05,000 received by the Show from the State in 1936 Jj This was an obvious violation of the restrictions on the use of State money/ (premiums, etc.). /it was a case of State money being, used to pay a lobbyist to get more State money for the National Orange Show, j On June 28, 1938, Directors of the National Orange* Show created a second "Promotional Fund." This is described as a fund to be expended by the president for the purpose of developing "good will of our neighbors as such neighbors." One of the "neighbors," of course, was Senator Swing who in 1938 was running for/ reelection. So W. C. Shay, according to his Grand Jury testimony, turned oveiw to the "Ralph Swing Nonpartisan Committee" $1,000 for use in obtaining publicity; for Senator Swing's reelection campaign. As far as the State's restriction on its allocation to Agricultural Fairs (premiums, etc.) was concerned, the contribution to the Swing campaign was entered on the books of the National Orange Show as a charge against private monies as distinguished from State monies. After Everett Swing, son and law associate of Senator Swing, became attorney for the National Orange Show he suggested that the Orange Show maintain separate books and records of disposition of State and other funds. The fact remains that the State was and is the principal supporter in a financial way of the National Orange Show ; and if it were not for the State funds it would be impossible to so tangibly cultivate/ the "good will of neighbors." / Assemblyman Charles W. Lyon , Los Angeles. An examination of the financial records of Assemblyman Lyon showed the follow- ing income items received from interests having a direct concern with State legislation : Summary of Payments Made to Charles W. Lyon, 1935-1937, inclusive. 1935 1936 1937 Totals A. H. Samish, Lobbyist- Retainer from Dec, 1935, $ 250 00 $3,000 00 $ 3.000 00 to Jan. 1, 193S *( 3,000 00) $ 9,250 00 Liquor Interests — Western Distillers 400 00 400 00 General Brewing Co. — Fleming & Robbins G22 50 000 00 1.222 50 Monarch Brewery 200 00 200 00 Ritz Liquor Co. — Fleming & Robbins 212 50 237 50 450 00 Horse Racing Interests — Los Angeles Turf Club 100 00 1,200 00 3,200 00 4.500 00 Gambling Interests — '■ Automatic Vendors ' 1,200 00 2,500 00 3.700 00 Gans Company 2.700 00 2,400 00 5,100 00 Zemansky 75 00 75 00 Milk Industry — Adohr Farms 500 00 50 00 550 00 Fish and Game Interests — Larco Fish 300 00 300 00 Clare Woolwine 390 00 300 00 Calif. Fish Canners 150 00 150 00 ■ Salm Manufacturing Co.. (abalone) 150 00 150 00 Totals $4790 00 $8910 00 $12,737 50 $26,437 50 * ($3,000 00) Legislator — Salary as Assemblyman $1,200 00 $1,200 00 $1,200 00 $3,000 00 * 1938. 1110 Senate Journal [April 4, 1939 Arthur II. Samish. The tinamial records of Assemblyman Lyon reveal that lit; received the sum of $0,250 from 11)35 through 1087 from Mr. Arthur II. Samish. This amount repre- sents fees to Assemblyman Lyon, a practicing attorney, paid at tue rate of $250' a montll front December, 1035, through December, 1037. Assemblyman Lyon advised investigators that tnis fee continued through the year 1038 which would increase tlie total by $3,000 to $0,250. ■ Mr. Samish and Assemblyman Lyon both publicly stated that the fee paid to Assemblyman Lyon is for tue purpose of representing Mr. Santish. in connection with tue Motor Carriers Association, of which Mr. Samish is the director. Assem- blyman Lyon told investigators that during the period he has received this fee he, in fact, has attended one hearing before tlie liahroad Commission relating to' "wild catting'' (unlicensed truck and passenger operations). This hearing lasted approxi- mately two or three days. Assemblyman Lyon reported the proceedings to Mr. Samish. Mr. Samish represents varied interests and receives substantial payments from the liquor industries, in his testimony before tne grand jury, Mr. Samish avoided any statement that Assemblyman Lyon represented aim in any matters relating to either the beer industry or the hard liquor industry. With reference to any service which Assemblyman Lyon may have rendered Mr. Samish in connection with the Motor Carriers Association or tlie problem of "wild catting," the testimony of Mr. Orla St. Clair and Mr. Howard Day, set tortu under tue, caption •Assemblyman William JJ. Jrlornbiower " is explanatory. Mr. St. Clair and Mr. Day both testified that tney had no knowledge oi any service rendered by Assemblyman Eiyon in connection witn the "wild catting" prosecutions. They testified that the 1'assenger Carriers Association, embracing the Motor Carriers Association, is in complete charge of all "wild catting" investigation and prosecution in tlie State. Liquor Industry. The schedule of Assemblyman Lyon's income set forth above reveals that during the period 1035 througn 1037 Assemblyman Lyon received the sum of $2,272 5U lioni various breweries and liquor organizations. For tne last several sessions of the Legislature, liquor c-ontrol has been a very controversial matter. It must be further remembered that Mr. Samish, who paid to Assemblyman Lyon $!),250 during the same period, represents both tlie brewery and hard liquor industries m the State of California. Mr. Samish in his testimony belore the grand jury took -v^r complete credit for the present Liquor Control Act which regulates tne liquor industry in thiu State. Horse liacing Interests. Testimony introduced before the grand jury by the auditor of the Los Angeles Turf Club revealed Assemblyman Lyon received from the club the sum of $0,100 from December 0, 1035, through May 31, 1038. Assemblyman Lyon advised investi- gators that the payment of $100 per month by the Los Angeles Turf Club was continued up to the present time, There were in addition three fees of $1,000 each. . In this same connection it should be borne in mind that the Ix>s Angeles Turf Club \ likewise paid Mr. Samish the sum of $54,000.07. An examination of the fees received by Assemblyman Lyon from the Los Angeles 'J¥urf Club indicates he has received a total of $o,000 for actual legal Services in connection with a change in the capital structure of the Los Angeles Turf Club, for appeal ance before the Jjoard of Supervisors in connection with a tax matter, and for geucral consultation in connection with possible action against the so-called "legalized bookmaking." From the foregoing it is safe to assume that two of the $1,000 fees, or $2,000 of the $0,100 paid to Assemblyman Lyon as legal fees by the Los Angeles Turf Club, were completely divorced from his legislative activities. The balance of the amount would appear to be directly in connection with his legislative activities. Dr. Charles Strub was not available for interrogation as to the exact services performed by Assemblyman Lyon, and Assemblyman Lyon, himself, could not be pressed on the subject in view of the confidential relationship which exists between attorney and client. In connection with the payment of any monev as attorney's tees or lobbying fees by the Los Angeles Turf Club, it must be remembered that dining the legislative session of 1037 a movement was pushed by interests seeking to establish a second -race track in the I xis Angeles area. The' Los Angeles Turf ( lub aggressively fought this bill. They employed first Mr. Samish who, according to a spokesman for the Hollywood Turf Club (the group seeking the second track), had evident influence with the Public Morals Committee. The Los Angeles Turf Club also employed the firm of McAdoo, Xeblett and Warner, of which firm Assemblyman William Moseley Jones, the Speaker of the Assembly, later became a partner. The nrm obviously had strong Democratic affiliations inasmuch as United States Senator \\ illiam t.ibbs McAdoo was a senior, partner. The employment of Assemblvman Lyon, who was', m the 1037 session, leader of the Republican party in the Assembly, gave the Los Angeles Turf Club representation with both maior political groups in the Assembly. ' April 4, 1939] Senate Journal 1111 Gambling Interests. From the foregoing schedule it is reflected Assemblyman Lyon received the sum of $8,875 from the Gans and Company. Sol Zemansky and Automatic Vendors. All of these organizations are interested in any legalization affecting gambling, and particular! v interested in slot machines, pin-ball games and other so-called "games of skill/' In the 11)37 session of the Legislature Assemblyman C. O. Cottrell introduced Assembly Bills Nos. 147.'} and 1474 captioned respectively, "an act to amend section 330a of the Penal Code, relating to gambling by use of slot machines and other devices," and "an act to add section 335a to the Penal Code, relating to the seizure and destruction of machines or devices prohibited by the lottery and gambling laws." The legislative history of Assembly Bills Nos. 1473 and 1474 is as follows : A. B. 1473 — Jan. 21— Read first time. To printer. Mar. 1 — From printer. To committee. Mar. 23 — From committee with recommendation : "Do pass as amended." Mar. 24: — Read second time. Amended. To printer. Mar. 25 — From printer. To engrossment. Mar. 26 — Reported correctly 'engrossed. Apr. 9 — Re-referred to Com. on Jud. Gen. Apr. 27 — Notice of motion to withdraw from committee given by Assemblyman Cottrell. May 3 — Withdrawn from committee. May 20 — Refused passage. A. B. 1474 — Jan. 21 — Read first time. To printer. Mar. 1 — From printer. To committee. Mar. 23 — From committee with recommendation : "Do pass as amended." Mar. 24 — Read second time. Amended. To printer. Mar. 25 — From printer. To engrossment. Mar. 20 — Reported correctly engrossed. Apr. !) — Re-referred to Com. on Jud. (Jen. Apr. 22 — From committee witli recommendation : "Do pass as amended.*' Apr. 20 — From printer. To re-engrossment. Reported correctly re-en- grossed. May 4: — Refused passage. Notice of motion to reconsider given by Assemblyman Johnson. May 5 — Notice of motion to reconsider continued until next legislative day. May — Ditto. May 7— Ditto. May 10— Ditto. May 11 — Ditto. May 12 — Reconsideration refused. As stated above Assembly Bill No. 1473 came before the Assembly on May 20. At this time the bill was defeated. Assemblyman Lyon voted "no."" On May 20 when Assembly Bill No. 1473 was before the Assembly, Assemblyman Lyon voted "no." On May 4, when Assembly Bill No. 1474 was before the Assembly. Assemblyman Lyon voted "no." On May 12 when Assembly Bill No. 1474 was before the Assembly for reconsideration, Assemblyman Lyon voted "no." Milk Industry. From the schedule setting forth Assemblyman Lyon's income, it will be noted he received .$550 from the Adohr Farm. At the 1937 session of the Legislature, Assemblyman Earl Desmond, Sacramento, introduced Assembly Bill No. 2422 on January 22. The bill amended and repealed certain sections of the Agricultural Code relating to the marketing of fluid milk and fluid cream. Various organizations appeared in Sacramento lobbying this bill. Among the more active lobbyists was Merritt H. Adamson of the Adohr Farm. Investigation established that the Adohr Farm of Los Angeles advocated the passage of the so-called Desmond Bill. Assembly Bill No. 2422. An examination of the legislative history of that bill reveals Assemblyman Lyon voted with the proponents of the bill on practically all matters. He voted for the passage of the bill in its final form on May 11, 1937. Investigation established that Assemblyman Lyon did, perform some legal service for the organization known as Adohr Farm. The exact nature of that legal service is not known. Fish and Game Interests. Assemblyman Lyon received $990 from various organizations interested in fish and game, including an item of $390 from Clare Woolwine, Los Angeles, marked in Lyon's records "fish matter." Mr. Woolwine is a lobbyist at Sacramento. In connection with the sum of $300 received from the Larco Fish Company of Santa Bai'bara. it was stated under the discussion of Assemblyman Hornblower's income that Chico Larco, head of the Larco Fish Company, was the leading 1112 Senate Journal [April 4, 1939 commercial fisherman operating in the Santa Rarbara area. It was further pointed .v off-shoots of evidence into an examination of the activities of Assemblyman Charles Hunt of Los Angeles. In (he case of Assemblyman Flint, the effort was to obtain specific evidence on a specific series of incidents. In the case of Assemblyman Hunt, the objective was a determination of sources of income — other than his modest $100-a-month salary as a Legislator — plus an examination of any connection between income and legis- lative activities. Investigation. Assemblyman Gene Flint, Los Angeles. Oil Legislation. Comi>eting oil interests, in the 1937 session of the Legislature, were aligned in conflicting groups in support of three bills. These were: first, the "Olson Bill" ( Senate Bill No. 579), regarded as the independent oil companies' measure, provid- ing for State leasing of drilling rights by competitive bidding. The tidelancl prop- erty was divided into eleven parcels. Bids were to be taken individually on each parcel. No company would l>e permitted to obtain award of more than one parcel. Second: The "O'Donnell Bill - ' (Assembly Bill No. 2090). regarded as a compromise bill l>etween the '"Olson Bill" and the "Welsh Bill." The "O'Donnell Bill" divided the title and property into eleven parcels, but the high bidding company could take all parcels if it outbid all competitors for each. Third, the "Welsh Bill" (Assembly Bill No. 14. r i5), was regarded as the major oil companies' bill. The bill provided for bonus method of bidding for drilling rights. The largest bonus would take the drilling rights of the enitire field. That would mean that theoretically one company might obtain a monopoly. The "Olson Bill" was the first of these measures to pass, then the "O'Donnell Bill" was passed. That set the stage for the battle over the "Welsh Bill," which precipitated the investigation of Assemblyman Flint. It should be recalled that the last bill enacted and signed in chronological order would ordinarily prevail. On May 14, 1987, according to testimony before the grand jury and in court, Assemblyman Samuel Yorty of Los Angeles was in the Assembly Chamber wash- room. He, Assemblyman Yorty, said that two members of the Assembly came into the washroom. He knew their voices well and identified them as Assemblyman Flint and Assemblyman Reaves of San Pedro. Assemblyman Yorty was concealed from Assemblyman Flint and Assemblyman Reaves. Assem blyman Yorty said h e .o verheard Ass£inblynian_Fli nt tell Assemblyman Reaves that there was money fo r anyone wi:o would vote For the "Welsh Bill." Assemblyman Yorty said ' that Assemblyman Heaves thereupon agreed to vote for the bill, tacitly accepting the offer of money. Subsequently on the same day. Assemblyman Flint was seen by Assemblyman Yorty and others to approach the Assembly desk of Assemblyman Reaves and leave an envelope. Later, Assemblyman Reaves picked up the envelope and walked back to Assemblyman Flint and returned the envelope. Assemblyman Reaves, both in statements and in testimony before the grand jury, said that during the washroom conversation May 14, Assemblyman Flint said some- thing about money being available for members who would vote for the "Welsh Bill." Assemblyman Reaves confirmed that later during the same day. Assemblyman Flint brought an envelope to Assemblyman Reaves' desk. Assemblyman Reaves said he returned the envelope, unowned, and that Assemblyman Flint appeared surprised. Assemblyman Reaves said that he told Assemblyman Flint "You must have mis- understood me." Assemblyman Ralph L. Welsh of Los xVngeles. author of the oil bill in question, testified before the grand jury that Assemblyman Flint twice approached him and solicited money for support of the "Welsh Bill." The record of the Assembly shows that Assemblyman Flint voted for the "Welsh Bill," Assemblyman Reaves voted against it. Assemblyman Welsh said that Assemblyman Flint's first approach was on April 28, when Assemblyman Flint asked what price was being paid for votes and said he had been offered $1,000 by the "other side." Assemblyman Welsh said that second approach was a few days prior to the May 14 vote on the bill. At that time Assemblyman Welsh said Assemblyman Flint asked for $1,450 to deliver the votes of five Assemblymen — Reaves, Hawkins, Pelletier, McMurray and Gilbert. (All of the five Assemblymen voted against the "Welsh Bill" and denied that they had either received or solicited money.) Assemblyman Welsh said that he did not pay any money to Assemblyman Flint. Subsequent investigation disclosed that Assemblyman Yorty, after overhearing the washroom conversation, described the incident to the then Senator Colbert L. Olson, who, as the author of a conflicting oil bill, was opposing the "Welsh Bill." Senator Olson after hearing Assemblyman Yorty's story went to the Assembly Chamber and informed Assemblyman Reaves there was a report that money was being used to influence the impending vote on the "Welsh Bill." Senator Olson then made :i point of giving the same warning to Assemblyman Flint. It was Senator Olson's state- April 4, 1939] Senate Journal 1117 ment to investigators that Assemblyman Reaves returned the envelope, after the warning from Senator Olson. Another line of investigation brought a never fully corroborated statement that on May 14 Mrs, Reaves stated to a Los Angeles lobbyist that her husband, Assem- blyman Reaves, had returned $500 which had been given him in an effort to outaiu his vote on the "Welsh Bill." Assemblyman Flint was indicted by the grand jury and twice tried on the charge of offering' a bribe to Assemblyman Reaves. In both trials, the jury disagreed. In the first trial the jury stood 10 to 2 for conviction. In the second trial the jury stood to (J. After the second hung jury, the district attorney concluded that a third trial would serve no purpose. Assemblyman Flint's defense was a complete denial of the allegation and bribe offering. His explanation of the washroom conversation was that he was discussing with Assemblyman Reaves a fund which had been collected by members of the Assembly and by lobbyists to help defray hospital expenses during a then recent illness of Assemblyman Reaves. This, of course, was in conflict with Assemblyman Reaves' own statement. Assemblyman Flint's explanation of the envelope which he took to Assemblyman Reaves' desk was that it contained an amendment to a bill dealing with employment agencies. Assemblyman Flint said he was handling this legislative matter, at the suggestion of Miss Teresa Fowe, of 118A West Forty - second Street, Los Angeles. This testimony of Assemblyman Flint was in conflict with the statement of Miss Powe, who said that she had no correspondence or con- nection with Assemblyman Flint concerning the employment bill in the 1937 session. She said that she had asked Assemblyman Flint to attempt to present her views in such a bill during the 1935 session. It was significant in the case of Assemblyman Flint that after his arrest his bond was arranged through one lobbyist, Clare Woolwiue of LOs Angeles, using funds admittedly provided by a second lobbyist, Will Fisher of Los Angeles. Further, some arrangement was made whereby Assemblyman Flint — admittedly without funds — was represented by the late Clifford A. Russell, Sacramento attorney. Mr. Russell was one of the most able, and most expensive, of Sacramento defense attorneys. Investigation of Assemblyman Flint disclosed a significant background, in view of the charge of corruption made against him by the grand jury. Investigators learned that when Assemblyman Flint ran for the State Assembly in Los Angeles in 1934 he received financing to the extent of $600 from Frank Lacavera, who Assemblyman Flint identified as representing the brewery and winery interests. A witness, Mrs. Bessie M. Rinker of 1177 West Thirty-ninth Street, Los Angeles, stated that Assem- blyman Flint informed her he was going to handle some bills at Sacramento for Mr. Lacavera, in return for Mr. Lacavera's financial assistance during Assemblyman Flint's campaign. Mrs. Rinker, with whose family Assemblyman Flint lived during part of his first session at Sacramento, stated that Assemblyman Flint openly said he was going to the Legislature to improve his financial position. Mrs. Rinker stated that Assembly- man Flint, who admittedly went to the Legislature without either funds or employ- ment, entered into an agreement in regard to his vote on an oil bill on the under- standing he was to receive $500. When the bill came to a vote, according to Mrs. Rinker, who said she was present in the Assembly Chamber'at the time, Assembly- man Flint became confused and voted adversely to the interest of the individual who had agreed to compensate him. Assemblyman Flint was paid not $500 but $135, according to Mrs. Rinker. Mrs. Rinker further stated she was informed by Mrs. Ruth Tait, Assemblyman Flint's companion, that during the 1935 session, Assembly- man Flint was able to accrue enough funds other than his salary to take care of his living expenses until the 1937 session of the Legislature. From another source, Mrs. Anna Hunt of 1445 West Twenty-fifth Street, Los Angeles, investigators obtained a statement that during the 1935 session of the Legis- lature, Assemblyman Flint was paid sums totaling between $1,500 and $2,000 by Assemblyman Charles Hunt, then the husband of Mrs. Hunt. Assemblyman Flint maintained no bank records. Assemblyman Flint's legislative record showed that he introduced many bills of "nuisance value" to legitimate business interests. In the 1937 session, for example : Circuses were concerned about Assemblyman Flint's bill to make them pay $250 a day State tax. Merchants were concerned about Assemblyman Flint's bill authorizing sheriffs to regulate and collect a $25 license fee for special "sales." Title insurance men were concerned about Assemblyman Flint's bill requiring them to set forth in insurance policies the zoning restrictions against the property insured. Cleaners and dyers were concerned about Assemblyman Flint's regulatory .bills- Financial interests were concerned about Assemblyman Flint's bills to restrict motor vehicle financing, and to tax securities and solvent credits. Liquor merchants were concerned about Assemblyman Flint's bill to establish State liquor stores, and another measure to require bond of $1,000 to $10,000 from liquor licensees. 1118 Senate Journal [April 4, 1939 Oil companies were concerned about Assemblyman Flint's bill to prohibit sales of gasoline containing poisonous substances (commonly used in motor fuels). Civic interests were concerned about Assemblyman Flint's bills to license horse racing bookmakers and to legalize dog track gambling. Foreign-born .fishermen were concerned about Assemblyman Flint's bill to limit commercial fishing licenses to United States citizens. ■ Collection agencies and pawn brokers were concerned about Assemblyman Flint's regulatory bills. * Trucking firms were concerned about Assemblyman Flint's bill to tax Diesel oil. Shipping interests were concerned about. Assemblyman Flint's bill to tax vessels. These bills were not passed, with one exception. All died in committee, except the single exception. That bill was vetoed. Assembhimnn Charles Hunt, Los Anr/eles. Legislative Income. From the standpoint of this investigation, the legislative career of Assemblyman Hunt is epitomized in one' statement by his wife, Mrs. Anna Hunt, before the grand jury. She stated that during the year 1935 Assemblyman Hunt's income from bis legislative salary and infrequent, part-time work as a railroad employee approxi- mated $1,300. On the other hand, Mrs. Hunt said that Assemblyman Hunt had an income of $8,000 in currency during that legislative year from mysterious sources. Assemblyman Hunt was elected to the State Assembly in 1082. Investigation disclosed that at that time he had absolutely no funds. His livelihood had been gained by sporadic work as a railroad fireman. His subsequent career as a legis- lator is summarized by the testimony of Mrs. Hunt before the grand jury, and by her statements to investigators prior to that testimony. Mrs. Hunt slated that during the 1933 session of the Legislature she and Assem- blyman Hunt had no source of income except his salary. At the end of the session, she said, they returned to Los Angeles with $120. During the remaining months of 1933 and the year 1034 Mrs. Hunt said she and her husband lived on his legislative salary of $100 a month while he tried unsuccessfully to find permanent employment with a railroad. Mrs. Hunt said that immediately prior to the 1935 session of the Legislature, Assemblyman Hunt informed her that when he returned to Sacramento "I am going to get; all I can. Anything above $25 for my vote influence." During the 1035 session, the financial affairs of Assemblyman Hunt took a marked turn for the better. Mrs. Hunt stated that Assemblyman Hunt regularly gave her his legislative check which she deposited in a savings account. She was thus able to accumulate $500 by the end of the session. Meanwhile, Assemblyman and Mrs. Hunt lived on income which Assemblyman Hunt acquired in cash as a result of his legislative activities, according to Mrs. Hunt. The Hunts during 1935 lived on a relatively lavish scale, entertaining from time to time and, for example, making trips to San Francisco to attend horse races. Mrs. Hunt stated that Assemblyman Hunt came home during the 1935 session of the Legislature freciuently with large rolls of bills. She said he did not discuss with her where he had obtained the money. Since Assemblyman Hunt at no time maintained a bank account and admittedly never filed an income tax return, the amount of his income other than his salary as a legislator, $100 a month, can be fixed only through the testimony of Mrs. Hunt, supported by the testimony of Mr. and Mrs. K. J. Sullivan of tos Angeles and other evidence. Mr. and Mrs. Sullivan lived in Assemblyman H*».nPs assembly district and were personal friends of Assemblyman and Mrs. Hunt. Mrs. Hunt stated that shortly before the end of the 1035 session of the Legisla- ture. Assemblyman Hunt gave her currency in excess of $5,000 and instructed her to take it to Los Angeles and find a place for them to live upon their return from Sacramento. It was then stated that she returned to Los Angeles, paid certain bills and made certain purchases of clothing for herself. After these expenditures, she said that approximately $4,700 was left. Mrs. Hunt said she placed the $4,700 with Mrs. Sullivan for safekeeping. Mrs. Sullivan said that she placed the $4,700 in a large conch shell used as a doorstop in the Sullivan residence. Mrs. Hunt returned to Sacramento and shortly after the end of the 1035 session came again to Los Angeles. Mrs. Hunt then repo.-sessed the $4,700 from Mrs. Sullivan. Mrs. Hunt, giving an address at 405 Fast Avenue Twenty-eighth, rented safe deposit box number 1115 on July 1. 1935, of the Rank -of America. On July 3, 1035. Winnie H. Sullivan of 1210 Isabel Street. Los Angeles, signed a signature card authorizing her to enter the safe deposit box. The bank records show that Mrs. Hunt entered the box two times in July, three times in August, three times in September, once in October, and three times in November. There were no subsequent entries and the box was surrendered at the termination of the one-year period. Mrs. Sullivan's statement was that she believed there was between $4,000 and $4,500 in bills in the envelope which Mrs. Hunt temporarily had placed in her care, but stated that she had no positive knowledge of the exact amount of the funds. Her statements Were corroborated by her husband. F. J. Sullivan. After the 1935 session of the Legislature, domestic differences developed between Assemblyman and Mrs. Hunt. Their remaining funds were divided. Mrs. Hunt April 4, 1939] Senate Journal 1119 said her share was $2,300 and that Assemblyman Hunt received a like amount. Mrs. Hunt said she prevailed upon a friend of Assemblyman Hunt to hold the $2,300 for him, inasmuch as Assemblyman Hunt was drinking excessively and she was afraid he would spend all of his money and become destitute. After the 1935 session of the Legislature, Assemblyman Hunt rented a home at 1445 East Twenty-fifth Street, Los Angeles, and purchased furniture .valued at approximately $3,000. On May 1, 1937, Assemblyman Hunt purchased a Chrysler Imperial automobile at Los Angeles, which car had a total sale price of $1,398.25. Another source of income was reflected in the statementof Mrs. Hunt that during 1936, a campaign year, Assemblyman Hunt received substantial sums of money from time to time. For example, she stated that in June of 1936 she had been at the home of Mrs. Sullivan when Assemblyman Hunt had telephoned requesting she and Mr. and Mrs. Sullivan join him. The Sullivans and Mrs. Hunt joined Assem- blyman Hunt at the Biltmore Hotel, thereafter attended the Cotton Club, a Los Angeles night club. Mrs. Hunt stated at that time Assemblyman Hunt flashed a large roll of bills estimated at $200. He hired entertainers to perform for him and his guests at the Cotton Club. He lavishly tipped the waiters and the entertainers, and upon one occasion he requested that the spotlight be turned upon' him,. when he arose in his seat and offered a toast, "Here's to a treat on the Standard Oil." Assemblyman Hunt's statement of expenditures in his campaign for the Assembly in 1936 included a report that $300 was received from "commercial fishermen," $200 from the "California Brewers Association." In another section of this report it is shown' that the California Chain Store Association contributed $200 to the campaign of Assemblyman Hunt. From the endorsement on this check, it was found that Assemblyman Hunt, himself, had endorsed this check and negotiated it at a saloon operated by one Milt Nolan. In view of this endorsement, Assembly- man Hunt can not contend he did not know of the contribution. His report of campaign expenditures made no mention of any contribution from either the Chain Store Association or the Standard Oil' Company. Mr. Hunt's affidavit of receipts and expenditures for the primary election for the year 1936 did acknowledge receipt of $200 from the California Brewers Association. Under the purity of election laws, a candidate is compelled to report all money received by him or expended on his behalf with his knowledge. Mr. Hunt testified before the grand jury that much of the money collected by him as campaign contributions was not used for that purpose, but rather to pay personal living expenses. Records of the Clift Hotel in San Francisco disclosed that Assemblyman Hunt, a Bob Rea and a Frank Meseway, all registering from Los Angeles, registered at the hotel June 27, 1935. A pencil memorandum on the bottom of the first ledger sheet of the Clift Hotel records is as follows : "If this party expects comp do. not charge for room otherwise $10 special — signed A. Ward." Records reveal that the entire party left the hotel on June 28 and returned on July 1. The total bill accumulated by Assemblyman Hunt on June 27 and 28 and July 1 to 3, inclusive, amounted to $361. This bill is still -unpaid, although "the hotel management stated that it has taken steps to obtain payment. The Clift Hotel, as well as the Alex- ander Hamilton Hotel, is owned by Allied Properties, a subsidiary of Pacific States Savings and Loan Company. Pacific States Savings and Loan Company was vitally interested in Assembly Bill No. 1300, dealing with building and loan company regulations, which was before the Legislature in 1935. Records of both the Clift and Alexander Hamilton hotels appear to show that Assemblyman Hunt received special consideration from the management of Pacific States. Assemblyman Hunt displayed relatively large sums of money in the 1937 session of the Legislature. Assemblyman Samuel Yorty *of Los Angeles stated that at a dinner given for members of the Legislature during the 1937 session, Assemblyman Yortv was seated at a table with Mr. R. Dean Warner of the Los Angeles law firm of McAdoo, Neblett and Warner, Assemblyman Hunt and others. During the dis- cussion Mr. Warner commented on the proposed American Legion pilgrimage to PaTris. and stated that transportation could be arranged at a very reasonable cost — something less than $300. Assemblyman Yorty said that Assemblyman Hunt pulled from his pocket a large roll of bills and handed to Mr. Warner $300, requesting Mr. Warner make reservation*! for Assemblyman and Mrs. Hunt. Assemblyman and Mrs. Hunt, subsequent investigation showed, did not make the trip to Paris. A reservation was made on the "Normandie" for Assemblyman and Mrs. Hunt for sailing September 29, 1937, to Paris. The cost of this space was $153 20 plus $10 United States tax per person one way sailinsr. A communication from the Santa Fe Railroad revealed that Assemblyman and Mrs. Hunt had chahsred their plans and a deposit of $20 placed by "Dr. Rock," a friend of Mr. Warner's, was returned to him. After a temporary reconciliation, Assemblyman and Mrs. Hunt again parted. On Mav 27, 1937, Assemblyman Hunt and Miss Blanche Black were married at Reno, Nevada. In summary, Assemblyman Hunt — without funds when elected to the Legislature in 1933 — was able from then until 1937 to maintain a home in Los Angeles, acquire 5 — sj a4 1120 Senate Journal [April 4, 1939 approximately $3,000 in furniture, an automobile valued at approximately $1,400, Mrs. Anna Hunt's bank account of $500, and income placed in one session of the Legislature (1935) by Mrs. Hunt at $8,000, and, according to reliable evidence, certainly amounting to a net of approximately $4,700 at the end of the 1935 session — all of this, in addition to living on an expensive scale. This does not necessarily indicate all of Assemblyman Hunt's income. While she freely discussed other details of her husband's finances, Mrs. Hunt refused to answer questions relating to contributions or other payments which may have been made by Arthur H. Samish, lobbyist, to Assemblyman Hunt. Mrs, Hunt said she would not discuss Mr. Samish, because he had been "very kind." -^rC Assemblyman Hunt appeared before the grand jury and admitted that he had practically no income other than his legislative salary during the years 1933, 1934 and 1935. (See attached exhibit of record of his meager earnings from occasional employment by railroads during that period.) Assemblyman Hunt stated that the money he acquired was from gambling — poker, playing and betting on the horses. He estimated his winnings at poker at something between $800 and $1200. He stated he was particularly lucky in 1936 on horse race betting. He admitted he had never filed an income tax return. Assemblyman Hunt admitted that in 1935, while stopping at the Clift Hotel, he telephoned a friend at Los Angeles by the name of "Sieg" asking for $1,000 which Sieg was holding for him. He stated that Mrs. Hunt had a like amount, $1,000. Assemblyman Hunt denied he received any of this money as the result of any legislative activities, or the influencing of his vote on any legislation. Assemblyman Hunt stated he sought no favors from the Pacific States Savings and Loan Company and that he fully expected to pay the bill of $360 odd dollars at the Clift Hotel, San Francisco. Turning from Assemblyman Hunt's financial record to his legislative record, investigation showed he introduced many pieces of legislation which were definite threats against business interests. Among legislators, bills of this type are known as "cinch bills." That is, the inference is that the bill is introduced not for the purpose of pressing it to enactment, but for prompting the interests potentially injured to employ someone to see that the bill is not enacted. For example, Assemblyman Hunt's 1937 record showed that he introduced bills : To levy a $500 fine on anyone who manufactured, sold, served or imported coca cola in the State of California. To prohibit sale of food in drug stores. To tax cigarettes $1.50 per thousand, and tobacco 10 per cent of the retail sales price. To tax slot machines $200 a year, pin ball games $50 a year — a matter of five or ten million dollars worth of concern to gambling interests. To make rentors and building owners liable to jail sentence where there was evidence of any type of gambling. To provide for manufacture of automobile license plates — now a profitable private enterprise' — in Folsom Prison. To restrict rates of interest, etc. Whether Assemblyman Hunt's ideas on these subjects and his interest in these reforms changed or not, the fact is he did not take any of these bills out of committee. At another session, Assemblyman Hunt introduced bills, such as the Car Limit Bill (restricting the number of cars which could be included in any one train which definitely jeopardized the interests of large corporations). Assemblyman Hunt permitted the Car Limit Bill to die in the Senate. This was in spite of the fact the various railroad brotherhoods were anxious to have the measure passed. In connection with the bill to prohibit coca cola in California, Carl Thompson of Los Angeles, vice president of the Coca Cola Company, stated after introduction of the bill he received three mysterious telephone calls at. his home from three different individuals all saying that they would be able to help the Coca Cola Com- pany kill the Hunt Bill. He said he advised these individuals, whose identity was unknown to him, that the Coca Cola Company was not going to spend one cent to have the bill killed. The fact is the bill died in committee. ,I n connection with Assembly Bill No. 1684, one of the important oil bills in the 1935 session of the Legislature, Mrs. Anna Hunt stated on or about June 23 1935 she received a telegram addressed to Charles Hunt. The telegram asked that Assemblyman Hunt go to Sacramento to determine whether Governor Merriam was going to sign this bill. When Mrs. Hunt located Assemblyman Hunt* he told her that a group of individuals who sent the telegram had "taken care of an individual in a confidential position at Sacramento," and that this individual was going to let Assemblyman Hunt know immediately if the Governor was going to sign Assembly Bill No. 1684. Assemblyman Hunt stated that if the bill were to be signed and if the group received advance information, they could make a substantial amount of money by "getting in on the ground floor of a stock deal " In connection with fishing legislation, investigation disclosed that Assemblyman Hunt opposed Senate Bill No 519 (regulating off-shore sardine reduction plants). This bill was opposed by the Italian Fishermen's Protective Association, which had April 4, 1939] Senate Journal 1121 contributed $300 in 1930 to Assemblyman Hunt's campaign fund. At the time the contribution was made, V. De Lucca, secretary of the association, wrote to Assemblyman Hunt : "We remember what you did in the past for our fishermen's organiza- tion, and I hope you do the same in the future, to use any possibility you can to try to help the fishermen's." At the special session of the fifty-first session of the Legislature during May, 1936, Assemblyman Hunt introduced Assembly Resolution No. 8 on May 26, 1936, reading as follows : Whereas, The State Medical Practice Act has been in effect since 1913 ; and Whereas, Under said act certain standards of professional conduct have been set forth - and Whereas, The number of violations of the State Medical Practice Act and of the laws relating to illegal operations have been steadily increasing ; and Whereas, It appears necessary that drastic action be taken to obtain more strict enforcement of the State Medical Practice ' Act and the other laws relating to the practice of medicine and that a complete study of these laws and the enforcement thereof be made; now, therefore, be it Resolved by the Assembly of the State of California, That a committee of three members of the Assembly be appointed by the Speaker to investigate the enforcement of all laws relating to the practice of medicine and illegal opera- tions to the end that said committee shall recommend to the Assembly such amendments as said committee may deem necessary for a more strict enforce- ment of said laws ; and be it further Resolved, That the committee is authorized to do any and all things neces- sary to make a full and complete investigation of the matters herein referred to and to require the production of books, agreements, documents, reports, accounts, and papers of every kind, to issue subpenas to compel the attendance of witnesses and to procure testimony. Each member of the committee is hereby authorized to administer oaths and all the provisions of Article VIII of Chapter II of Title I of Part III of the Political Code, relating to the attend- ance and assemblage of witnesses before the Legislature and committees thereof, shall apply to the committee created by this resolution, and said committee is hereby given leave to sit during the session of the Legislature and during the interval between sessions thereof, at any place or places in the State as the committee shall from time to time determine ; and be it further Resolved, That said committee is hereby directed to report the result of its findings, together with its recommendations, to the Assembly at the next regular or special session, or both of the Legislature ; and be it further Resolved, That for the purpose of paying the expenses of the committee and the members thereof, and the cost of its investigation, the sum of $300 or so much thereof as may be necessary is hereby appropriated out of the contingent fund of the Assembly, payments therefrom to be made from time to time by warrants of the State Controller drawn against said contingent fund for such expenses as the chairman of the committee shall certify to him from time to time, and which warrants the State Treasurer is hereby directed to pay. The Speaker of the Assembly appointed Assemblymen Hunt, Kent Redwine of Hollywood and James J. Boyle of Los Angeles to serve on this committee. Its ostensible purpose was to investigate the activities of a group known as the "Pacific Coast Abortion Syndicate" then under investigation and prosecution by law enforce- ment agencies at Los Angeles and at San Francisco. Mr. Reginald Rankin, head of the syndicate, was represented by a Los Angeles attorney. At a conference in the attorney's office shortly before this resolution was intro- duced, there was present Samuel B. Gach, head of an organization called the "Allied Democrats." Mr. Gach (see chain store campaign contributions) in 1933 and 1935 assumed an informal position as manager of Assemblyman Hunt, William Moseley Jones and Gene Flint of Los Angeles. At the conference it was proposed that Mr. Rankin would place $5,000 in the hands of the attorney. Mr. Gach would have Assemblyman Hunt introduce a resolution in the Assembly to cause an investigation into the abortion situation in California. It was planned that after the committee began its hearings, Mr. Rankin woild be called before the committee and would testify freely concerning abortion conditions. It was planned he would thus gain constitutional immunity from further prosecution under Article IV of the Constitution. It was planned that the $5,000 placed in the hands of the attorney would be given to Mr. Gach and distributed to Assemblyman Hunt and possibly others. Investigation disclosed that Mr. Rankin became suspicious of the parties involved in the matter. He was doubtful whether he would actually gain immunity and thus forestall pending prosecution on criminal charges. He demanded that the $5,000 be returned to him. The money was returned. Assemblyman Hunt-never convened the committee. Assemblyman Redwine and Assemblyman Boyle both were opposed to any intervention on the part of the State Legislature in pending San Francisco 1122 Senate Journal [April 4, 1939 and Los Angeles prosecutions of abortionists. They had no knowledge of any trans- actions between parties representing Mr. Rankin and Assemblyman Hunt. Findings. Evidence accumulated in this phase of the investigation leaves no possible inter- pretation other than that unscrupulous legislators have offered their votes for sale, haggled for the best price, and actually accepted money. The evidence was strong that Assemblyman Flint solicited money and, in turn, offered money to another lawmaker, in connection with the vote on an important oil bill. Admittedly, there was only circumstantial evidence of money passing from hand to hand. No one saw an actual exchange of currency, as far as the investiga- tion could determine. But the evidence of corrupt intent was powerful enough to convince 10 out of the 12 jurors sitting in Assemblyman Flint's first trial for bribery that he was guilty. Witnesses and informants whose testimony and statements were obtained gave a clear insight into Assemblyman Flint's conception of his opportunity for service in the Legislature. He saw it as an opportunity for self-service, for "money making." This legislator's record of bills was significant. He was the author of bills directed at business interests. If they were not introduced in the hope that these interests would pay for eliminating the bills, the obvious fact is that legislation of this type created opportunities for "shakedowns." In the case of Assemblyman Hunt, conclusive evidence that he acquired large sums of money must be considered in the light of his own admission that he had no legitimate source of income other than his $1,200 a year salary as a legislator and a few dollars earned in occasional employment as a railroad fireman. His explanation that his income sprang from lucky gambling overtaxes human gulli- bility. His record of legislation indicates deliberate use of his office in an effort to reap .personal gain — both by introducing legislation of "nuisance value" and by sponsoring legislation of cash value to lawless interests, as well as by bartering his vote on legislation introduced by others. The discovery that legislators under investigation, in this phase of the inquiry, maintained no bank accounts or other available financial records and received mysterious income in currency emphasizes the need for compulsory, public income statements of Assemblymen and Senators. Exhibit No. 1. Railroad earnings of Assemblyman Charles Hunt during period 1933 to 193S. Amount Balance Year Month Earned Due Total 1933 None 1934 July $12 00 $10 50 $10 50 1935 Oct. 5 75 4 25 5 75 5 75 Nov. 19 61 18 11 28 11 1936 May 11 77 9 81 38 88 37 35 47 16 1937 July 34 29 31 54 57 50 55 40 Aug. 35 80 33 00 72 71 70 06 Sept. 82 00 77 50 90 57 S7 26 Oct. 91 09 86 27 93 47 90 06 Nov. 59 55 55 87 92 05 88 69 Dec. 45 82 42 65 75 25 72 50 780 SO 1938 Jan. 52 54 49 07 39 74 38 44 Feb. 80 82 76 27 18 33 17 65 Mar. 31 66 2S 97 Apr. 101 41 93 81 52 03 50 08 May 46 42 43 IS 96 43 92 82 June 127 38 121 11 56 35 54 24 July 12 61 10 63 12 42 11 96 Sept. 24 87 22 44 710 67 April 4, 1939] Senate Journal 1123 IV. Activities of Lobbyists. Background. The State of California's lawmaking was done at Sacramento during 1937 by 120 legislators — and 2S6 registered lobbyists. There were more than two registered lobbyists for each Senator and Assemblyman and the word, "registered," is signifi-\ cant. Many lobbyists, whose field of operations was hotel rather than legislative; lobbies, did not. choose to register their names and their clients. Incidents growing out of the high-pressure lobbying on an oil bill, and the movements of an Assemblyman subsequently indicted for bribery prompted the Legislature, itself, to request this investigation. An inquiry was asked into charges and evidence of corruption in the Legislature. The inquiry led immediately into an examination of the activities of lobbyists. And most of the lines of inquiry, at one time or another, led to Arthur H. Samish, a relatively young San Francisco man who calls himself variously a public relations counsel, a legislative representa- tive and "a guy who gets things done." If all investigative roads led to Mr. Samish, it was only natural. For he was unusually modest when he registered in the Senate lobby list as the representative of the Motor Carriers' Association, San Francisco. Investigation showed that actually he was a lobbyist for motor carrier, railroad, liquor, racing, theatrical and other interests. Mr. Samish was the prototype of the lobbyist — and the envy of droves of his financially less successful competitors in the business of selling influence. Between 1935 and 1938 a total of $496,138.02, all of it from interests concerned with legisla- tion, flowed into the many bank accounts of Mr. Samish. Investigators never pre- sumed to believe that they had established a record of all of Mr. Samish's income from bank records, from testimony dragged from his evasive lips, from income tax reports he produced after fighting through the State Supreme Court and from corollary investigation. In 1937, the last legislative year, Mr. Samish received $174,144.47, as shown in the probably incomplete record established by the inquiry. As California's arch-lobbyist. Mr. Samish represented all of the methods used infc part or in full by members of his trade — campaign contributions to lawmakers withj a lavish hand, fees to lawyer-legislators; cultivation of State departmental and| legislative personnel with money or favors ; knowledge of the mechanics of legisla^ tion and of the human frailties along the path. The end and result of Mr. Samish's operations has been best phrased by Mr. Samish. himself, in one of his infrequ ent Pfinfljo 1 wmmpj its : "I'm the Governor of the Legislature. To hell with the laovernor of the State!" Mr. Samish learned the mechanics of legislation from the inside. He was a minute clerk in the Legislature, a minor political appointee. Prior to that, the man whose bank accounts now are accustomed to yearly income nearing $200,000 was a $170-a-month clerk in the San Francisco tax collector's office. As a legisla- tive minute clerk, 19 years ago, he learned the human element of lawmaking — and had an idea. The idea was that he could do what he saw lobbyists doing and that a newly developing industry would need lobby representation. Hence he formed the Motor Carriers' Association, to represent bus and trucking interests. His lobbying for the Motor Carriers' Association, which he controls, has been the thread of continuity in his expanding activities of the ensuing years. Mr. Samish conducts his complex operations from offices in the Kohl Building, San Francisco, with occasional southern California headquarters in the Biltmore Hotel, Los Angeles. He maintains an impressive residence at 293 Twenty-third Avenue. San Francisco, and a palatial summer home near Los Gatos. Investigation. Arthur H. Samish. The immediate guidance of the investigation into the affairs of Mr. Samish was prompted by discovery that a legislator under investigation was receiving a regular monthly fe<» from the lobbyist. An effort was begun to make a financial examina-, tion of Mr. Samish's business. The method employed in that investigation and the! obstacles placed in its way by Mr. Sajnish are important— in that the first clarifies the ensuing financial resume; and the second shows the lobbyist's reluctance to expose his operations to public scrutiny. 1124 Senate Journal [April 4, 1939 Mr. Samish was subpenaed to appear before the grand jury, June 10, 1938, at 10 a.m. On June 0, Mr. Samish requested a conference with the investigators. He was informed that the investigation's purpose was to examine his financial records in so far as they related to members of the Legislature. He was assured that, assuming his cooperation, any information not involving illegal or improper conduct on the part of Mr. Samish or any member of the Legislature would be regarded as confidential. After first agreeing to make his records available to the investigators and the grand jury, Mr. Samish subsequently resorted to a series of delays. These culminated in his statement that his attorney, John Francis Neylan of San Fran- cisco, had advised him to deny access to his records. Mr. Samish was in Sacramento on the morning of June 10, the date of his scheduled appearance before the grand jury. He left his hotel shortly before 10 a.m. Profanely expressing his opinion of the grand jury to a newspaper reporter, C. Lyn Fox of San Francisco, Mr. Samish left Sacramento. Mr. Samish was charged and convicted of contempt of court and was sentenced to pay a fine of $200 or to serve 60 days in jail. He paid the fine. His defense was that he ignored the grand jury subpena on advice of his attorney, Mr. Neylan. Mr. Samish thereafter produced, in several appearances before the grand jury, what he said were his records. The investigators, in examining these, had the advantage of their own independent check of bank records. Mr. Samish refused to produce his income tax returns, until so ordered — after long litigation — by the appellate court. His petition for review was denied by the State Supreme Court. ' Mr. Samish's records were not records, as a bookkeeper would understand the term. They were notations of income items and check stub records of bank account withdrawals. An effort was made to question Mr. Samish on specific income items. His answers were so evasive as to draw frequent comment from members of the grand jury. The investigators were forced to rely upon statements and testimony of the-clients who employed Mr. Samish, plus the evidence of other individuals possessing the facts in specific cases. During his several appearances before the grand jury, Mr. Samish made every effort to evade direct answers to questions and, at the same time, to cultivate grand jurors. ' Mr. Samish's financial records showed a series of checks either cashed by or made payable to Pat Hurd of Sacramento — April 3, 1937, $500 ; April 10, 1937, $500; March 12, 1937, $2,000; March 11, 1938, $500. Mr. Hurd is a horse-racing bookmaker. After the investigation was well under way, it was learned that E. B. Williams, a member of the grand jury, had at various times been employed by Mr. Hurd in his bookmaking establishment. At several stages of the hearings, Grand Juror Williams openly criticized the investiga- tion and took a position sympathetic to Mr. Samish. Another incident involving Mr. Samish and a- grand juror was of possible signifi- cance. On November 15,, A. G. Franklin, a member of the grand jury, met Mr. .Samish in the lobby of the Senator Hotel, Sacramento. Mr. Franklin said there was something he wanted to talk to Mr. Samish about personally. In a few minutes Mr. Franklin and Mr. Samish left the hotel. In a short time, they returned, Mr. Samish patting Mr. Franklin on the back and carrying two pheasants Mr. Franklin presented to Mr. Samish. On December 16, Mr. Samish appeared before the grand jury with his income tax returns, in final compliance with a court order. The grand jury had met in executive session and reached a decision to examine these records in public session. But Mr. Samish made a plea that he considered the records private, and would produce them publicly only if a majority of the grand jury so wisherl. Mr. Franklin then made a motion that the income tax returns be turned over to the grand jury for private study. Mr. Williams, the employee of the bookmaker patronized by Mr. Samish, seconded the motion. The motion did not carrv. The following is a summarv of payments to Arthur H. Samish during the years 1935, 1936, 1937 and 1938. The 1938 figures necessarilv are incomplete. Summary. Arthur H. Samish, salary and retainer ) Arthur H. Samish payments received, controlled and disbursed, in addi- tion to salary .$259,997 97 187,140 65 Frank X. Flynn work performed by Samish $447,138 62 . 49,000 00 Grand total $496,138 62 April 4, 1939] Senate Journal 1125 Salary and Retainers. (As shown by the records of the corporations listed and from his testimony.) 1935 1936 1937 1938 Total American Potash and Chemical Corp. Trona $10,000 00 $ 6,500 00 $ 14,000 00 $ 2,000 00 $ 32,500 00 California State Brewers Institute, San Francisco— 10,000 00 30,000 00 30,000 00 30,000 00 100,000 00 Donnelly, M. J. ( Liquor ) Chicago, 111 ___ — 5,000 00 5,000 00 Levee, M. C. (A. B. 1226) Los Angeles 5,000 00 ___ 10,000 00 ___ 15,000 00 Los Angeles Turf Club, Arcadia __ 8,000 00 9,333 38 27,999 94 9,666 65 54,999 97 Pabst Brewing Co. ___ ___ 5,000 00 5,000 00 San Francisco Bank 9,000 00 6,000 00 5,000 00 2,500 00 22,500 00 National Orange Show, San Bernardino ___ ___ 5,000 00 ___ 5,000 00 Major Steam Railroads* 5,000 00 5,000 00 5,000 00 5,000 00 20,000 00 $47,000 00 $56,833 38 $101,999 94 $54,166 65 $259,999 97 * Testimony of A. H. Samish.. Money Paid to Other Individuals or Corporations and Disbursed or Controlled by Arthur H. Samish. 1935 1936 1937 1938 Total California State Brewers Institute, San Francisco— $ 1,740 82 $10,005 77 $ 27,585 58 *$58,287 30 $ 97,619 47 Motor Carriers Association, San Francisco__ 19,455 32 16,628 47 17,997 59 t7,156 28 61,237 46 United California Industries, San Francisco— ___ 17,218 15 1,561 56 __ _ 18,779 71 C. A. S. B. Fund__ 7,100 00 2,404 01 ___ ___ 9,504 01 $28,295 94 $46,296 40 $ 47,144 73 $65,443 58 $187,140 65 * Includes Jasper's salary, t To June, 1938. Payments Made to Frank X. Flynn for Work Performed by Arthur H. Smith. California Liquor Industries Assn., San Francisco $12,500 00 ___ $12,500 00 Wholesale Liquor Dealers Assn. of Northern California, San Francisco ___ $12,000 00 12,000 00 Wholesale Liquor Dealers Assn. of Southern California, Los Angeles 12,500 00 12,000 00 24,500 00 $25,000 00 $24,000 00 $49,000 00 When after his unsuccessful fight in the courts, Mr. Samish appeared with copies of his income tax records, he produced before the grand jury a Federal tax return for the year 1937 and State tax returns for the years 1935 and 1936. The Federal return for the year 1937 showed a net income of $81,420.50 after deductions of $20,000.00 for expenses. Items of income apart from lobbying' fees included : Divi- dends, $8,912.21 ; interest, on bank deposits, $209.43 ; gains from sale of real prop- erty, $1,348.42. These additional items, when added to sums Mr. Samish reported as his fees, gave a total of $91,890.56. This return took absolutely no cognizance of the cash flowing into the hands of Mr. Samish (shown in the investigation analysis of his income and allegedly disbursed by him for political purposes. Also, there is no itemization of Mr. Samish's expense deductions). 1126 Senate Journal [April 4, 1939 Prosecutors of this case believe that Mr. Samish's return to the Federal Govern- ment in 1937 is not in compliance with rules and regulations of the United States Treasury Department, and does not attempt to set up figures which actually reveal Mr. Samish's true income. One disclosure from the Federal income tax return introduced in evidence is that apparently during the month of March, 1038, Mr. Samish received word that investi- gation was under way concerning graft and corruption in the Legislature. In the original 1937 return riled by Mr. Samish on or before March 15, 1938, no mention was made of the $5,000 received from the National Orange Show or the $10,000 received from Mr. M. C. Levee, representing the film actors agents in Hollywood. He filed an amended return, date unknown, including these items which he had omitted from his income tax statement. Arthur H. Samish, Income Break-down. 1. — Motor Carriers Association-Steam Railroads. An examination of Mr. Samish's income records shows that in the years 1035-38, he received from Motor Carriers Association of San Francisco a total of .$61,237.46. Mr. Samish testified that approximately $0,000 of this total was his salary and the balance represented the cost of operating the association. During the same years, Mr. Samish received from the major steam railroads a total of $20,000. Mr. Samish testified before the grand jury "There is no difference between Arthur Samish and Motor Carriers Association. I am the Motor Carriers Association." Originally, the Motor Carriers Association was an organization of small stage lines. Ensuing years brought mergers and the membership became smaller. In 1930 the Pacific Greyhound Bus Line, under that name, entered the association after pur- chasing the franchises held by a group of smaller independent lines. Among the franchises purchased was the San Francisco-to-San Jose route, partly owned by Mr. Samish. Pacific Greyhound, a subsidiary of the Southern Pacific Company, has been the principal contributor to the Motor Carriers Association — its contributions approximating $1,000 per month. In 1931, Mr. Samish was successful in bringing about the amendment to the Public Utilities Act known as the famous section aOJ. This section had the effect of giving competitive advantages to. Pacific Greyhound. The section has withstood legislative attacks, through the continued lobbying efforts of Mr. Samish. In addition to money which he withdrew directly from the Motor Carriers Asso- ciation, as such. Mr. Samish received $5,000 a year from the major steam railroads. He handled this money through a savings account in the San Francisco Bank, No. 735121, opened October 30, 1934, under the name "Motor Carriers Association, Si ecial Account." The signature card carries the statement that "the undersigned, Arthur H. Srmish, is doing business under the name of the Motor Carriers Associa- tion." For this fee. Mr. Samish exercised his influence On problems of the Legis- lature connected with motor carriers, which affect the various interested railroads. While Mr. Samish's original testimony before the grand jury sought to leave the impression that funds for the steam railroad contribution to the Motor Carriers Association were used in defraying general and varied legislative expense, Mr. t-'amish on December 16 corrected his statement and said he use! the money to 7-eimburse himself for expenditures "previously incurred." Mr. Samish revised his testimony after learning that investigators had made an examination of the special account through which the $5,000 a year payment from major steam railroads was handled. That investigation showed the account was u?ed as a personal account bv Mr. Samish. Following withdrawals from the account establish that fact : $1,000 Nov. 14, 1934— Withdrawal ticket signed bv Arthur H. Samish. $1,000 Feb. 20, 1865— Withdrawal ticket signed by Arthur H. Samish and exchanged for two cashier's cheeks in the amounts of $50O each, both cashed at the Los Angeles Turf Club, Incorpo- rated. X Feb. 27, 1035 — Exchanged for cashier's check. Cashier's check deposited in the personal account of Arthur H. Samish, Bank of America. Jan. 4, 1936 — Endorsed over to Benny Miller and cashed at the Bank of America. Seventh ami Olive streets, Los Angeles. (Mr. Samish testified that this was paid t.> Mr. Miller as a gambling wager.) June 20, 1936 — Withdrawal ticket exchanged for cash in amount of $1.050 — two cashier's checks for $450. Cashier's checks were signed D. Nisitch, Marius Moses. The second check was signed D. Miller. J. I. Harnett, cleared through the Security-First National Bank of Los Angeles, Pershing Square Branch. $ 500 $2,0C0 'i;2,ooo April 4, 1939] Senate Journal 1127 Oct. 24, 1936 — Exchanged for four cashier's checks in the amount of $500 each. Cashier's checks were signed Arthur H. Samish, Biltmore Hotel, Security First National Bank. Second check signed Arthur H. Samish, F. Mexler, Union Bank and Trust, Los Angeles. The third check endorsed Arthur H. Samish, F. Mexler, Ellis Cohn, Union Bank and Trust, Los Angeles. The fourth check Arthur H. Samish, Ellis Cohn, Union Bank and Trust. Mar. 1, 1938 — This withdrawal was converted into three cashier's checks in the amount of $1,000 each and. $2,000 in currency. One of the checks was signed Arthur H. Samish, Waldorf Astoria, Hotel Waldorf Astoria Corporation, New York. The second was signed Arthur H. Samish, (ilobe Ferns Company, Lou Newin, T. W. Lerner, National Builders Bank, Chicago. The third check was still outstanding at the time of this investigation. 2. — Liquor Industry. Mr. Samish's financial record shows that during the years 1935-38, there was paid into his accounts from : California State Brewers Institute, "public relations fund v " $97,619.47; California State Association of Brewers, $9,504.01; United Cali- fornia Industries, $18,779.71; M. J. Donnelly, Chicago, Illinois, $5,000; Pabst Brew- ing Company, Milwaukee. $5,000. Additional receipts under the subdivision of liquor interests were the following payments to the account of Frank X. Flynn, for work performed by Air. Samish, in such a manner that Mr. Samish had absolute control over the money ; California Liquor Industries Association, San Francisco, $12,500.00 ; Wholesale Liquor Dealers xissociation of Northern California, San Francisco, $12,000; Wholesale Liquor Dealers Association of Southern California, Los Angeles, $24,500. In addition, investigators were informed that the Distilled Spirits Institute, of Washington, D. C, employed Mr. Samish on a socalled "anti- discrimination bill" in ti e 1937 Legislature at a fee of $20,000 — this fee was not shown in any of Mr. Samish's financial records available in California. Examining first Mr. Samish's income from the brewing industry, it is found that the $100,000 received from the California State Brewers Institute was for Mr. Samish's salary at a rate of $30,000 a year for 1936, 1037 and 1938 with a $10,000 payment during 1935. The second major item of Mr. Samish's income from the brewing industry is $97,619.47 during the 1935-1938 period, from what he describes as a public relations fund of the California State Brewers Institute. Mr. Samish, as subsequent evidence will show, had absolute control over this second fund. Its ostensible purpose was to finance political activity and good will activity in behalf of the brewing industry. With one or two major exceptions, all of the California brewers are party to a contract under which the California State Brewers Institute acts as trustee in collecting funds, which are turned over to Arthur H. Samish. These funds are collected on a basis of 5 cents a barrel of beer produced. Mr. Samish's salary of $30,000 a year takes approximately one-half of the fund. The balance is the "public relations fund" referred to, from which Mr. Samish drew $97,619.47 during the years 1935-1938. Withdrawals of any of the California State Brewers funds, with which Mr. Samish is concerned, are made by three members of the board of directors at the request of Mr. Samish. The "public relations fund" is maintained as a special account in the Anglo-California National Bank in San Francisco. Testimony before the grand jury established that Mr. Samish had absolute control over the $97,619.47 withdrawn from the "public relations fund." James D. Hamilton, secretary of the Brewers Institute, testified that the board of directors never demanded an explanation of Mr. Samish of his request for withdrawals of funds. At the end of each month the canceled checks were picked up from the bank, examined by Mr. Samish, who advised the Brewers Institute of the date of the withdrawals, the amount of the withdrawal and the payee. The checks themselves remained in the actual custody of Mr. Samish who after examining them at the end of the month — according to his testimony — destroyed them. The significance of this method of handling large sums of money is amplified by the fact that many of the withdrawals are for ca'sh, and that Mr. Samish kept no memoranda to supplement his recollection of how he expended the money.. The value of his memory in this connection is indicated by the fact that while he said that he had made a campaign contribution to a good many legislators for several years, he did not recall the name of any legislator. Withdrawals from this special account of the Brewers Institute during several months are listed below for the purpose of $2,000 $5,000 1128 Senate Journal [April 4, 1939 illustrating how the account was handled. The payee and description are listed as they appeared on Mr. Samish's checks or vouchers : October, 1936— 15— Arthur H. Samish, cash $3,500 00 28— Cash 2,500 00 31— Arthur H. Samish (salary) 2,500 00 31— Jasper 150 00 December, 1937— Cash 1,500 00 13 — Democratic National Committee 500 00 Arthur H. Samish 2,500 00 William Jasper ' 250 00 Desert Garden Date Shop 103 39 Shannon Conway Printing Co 147 03 Cash _ 1,500 00 California Newspaper and Publishing Association 100 00 The Independent 6 00 Sausalito News 100 00 August, 1938— 10 — Southern California Business Men's Association 3,500 00 W. D. Hadeler 1,000 00 Cash 10,000 00 United California Industries 5,000 00 San Francisco Chronicle 470 40 California Federation Institute 200 00 Cash 5,000 00 12— B. P. Calhoun 750 00 23— Cash 10,000 00 31— Arthur S. Samish 2,500 00 William Jasper 250 00 California Newspapers Publishers Association 100 00 A. J. Kennedy , 28 00 The nature of the operation of this fund is further indicated by a conversation on December 12, between Mr. Samish and an employee of the California State Brewers Institute, who requested him to furnish the institute with a list of all checks drawn on the special account, thereby bringing the matter up to date. Mr. Samish said: "I think it is probably wise to wait until after Thursday (the date of the last grand jury meeting).'" Mr Samish added: "You don't understand my end of it. I would be very happy after Thursday to take the whole damn thing up and take care of it until the end of the, year. The only objection I have is that they still have everything (probably referring to the grand jury)." In addition to the withdrawals shown to be in favor of Mr. Samish. Mr. Samish ordered withdrawals from the Brewers Institute "public relations fund" to William Jasper in the total amount of $9,070 between October. 1935, and December, 1938. Mr. Samish identified Mr. Jasper as a friend, whom he liked and who looked around in Southern California, presumably in Mr. Samish's interests. The investigators have reason to believe that all the money contributed by the brewing industry for political purposes has not been aeeouiTted for* in this special account. Since the general election Mr. Samish has made efforts to collect special assessments from the brewers, apparently to cover extraordinary expenses during the 1938 campaign. The abstract of the account does not reveal the deposit of any extra assessments. Referring now to sums of $18,779.71 and $9,504.01, showing in Mr. Samish's financial records as originating with the United California Industries and the California Association of State Brewers, investigation disclosed that this money was intended for general representation of the alcoholic beverage industry. Califor- nia Association of State Brewers, created by the late Pjdward H. Sharp, was the forerunner of United California Industries. Mr. Samish succeeded Mr. Sharp and took over the balance of $9,504.01 in the California Association of State Brewers funds. That account was closed out on March 12, 1930. by transferring the balance of $2,400 to the account of Arthur Samish. Mr. Samish testified that the purposes of the United California Industries was to represent the alcoholic beverage industry's' general interests and for political campaigns. He said most of the money was spent for literature and stenographic help, etc. The next items of Mr. Samish's income from liquor interests are $5,000 paid by M. J. Donnelly of Chicago in 1938 and $5,000 paid by Pabst Brewing Company in 1937. Investigation of these fees disclosed that Mr. Samish was representing for hire both sides of a conflict within the liquor industry. Mr. Samish testified that he was authorized by the Board of Directors of the California State Brewers Association to attempt to obtain a working agreement with the eastern export brewers who sell in the California field. It was in this connection, Mr. Samish said, that he attempted to interest Donnelly, a Chicago representative of the export brewers, and the Pabst Brewing Company, in financing a brewers legislative council April 4, 1939] Senate Jouknal 1129 of California. However, investigation disclosed that the eastern export brewers had another interest — throwing a clearer light on their payment of $10,000 to Mr. Samish. . In the 1937 session of the Legislature, Assemblyman Jefferson E. Peyser of ban Francisco introduced Assembly Bill No. 2794, known as the anti-discrimination bill." This represented a proposed agreement between the California Wine Industry and the eastern brewers. The wine industry would support this measure eliminating the $500 importer's duty on eastern beer; in return, the eastern brewers would sponsor legislation in several States to eliminate discriminatory taxation on California wines. After this measure passed both the Assembly and the Senate, the wine interests observed that the export brewers of the east had not completed their part of the bargain. In fact, there was legislation introduced in only one State favorable to the California wine industry. California wine producers therefore asked Governor Merriam to veto the bill. The California hard liquor dealers opposed the bill, fearing competitive restrictions against hard liquor, distilled in the east (obviously the source of most of certain types of hard liquor consumed in California) . This was because the bill provided that, except in those States where legislation favorable to California wines was in effect, prohibitive restrictions would be put upon the importation into California of any alcoholic beverages manufactured in that State. In spite of the opposition from the hard liquor interests, whom he actually was simultaneously representing, together with the opposition of the wine industry, Mr. Samish made a vigorous campaign to obtain signature by the Governor of the Peyser bill. Wine industry leaders complained that Mr. Samish threatened to retaliate against them through amendments to a general liquor bill, Senate Bill No. 425. Governor Merriam vetoed the Peyser "anti-discrimination bill," over Mr. Samish's bitter protest. While Mr. Samish's income records show $5,000 from Mr. Donnelly and $5,000 from the Pabst Brewing Company, leaders of the wine industry in California were informed that Donnelly had agreed to pay an additional $15,000 if the "anti- discrimination bill" became law. The foregoing income items in this section, received by Mr. Samish from liquor interests, represented direct salaries and fees, together with other money received by him under some fictitious name but over which he had absolute control. In addition $49,000 was paid by the California Liquor Industries Association, San Francisco ; the Wholesale Liquor Dealers Association of Northern California, San Francisco ; and the Wholesale Liquor Dealers Association of Southern California, Los Angeles, to the account of Frank X. Flynn. Mr. Samish testified that he actually did the work for these hard liquor merchandising groups, although the payment was made in Flynn's name. This statement is corroborated by exami- nation of the records of the California Liquor Industries, etc., which show the only mention of the name of Frank X. Flynn is an occasional reference to contractual negotiations. The entire correspondence file and the case file of the organization reveal dealings with Mr. Samish. The checks payable to Frank X. Flynn are mailed regularly to the office of Mr. Samish and are deposited by Miss Dorothy Ready, Mr. Samish's secretary, to the account of Frank X. Flynn, main office of the American Trust Company, San Francisco. Miss Ready has the power and does make withdrawals of money from Mr. Flynn's account. That is substantial evidence that Mr. Samish regards this money as his, and not Mr. Flynn's. Further investigation established the fact that Miss Ready has withdrawn from the Frank X. Flynn account sums to pay part of the rent for Mr. Samish's office in the Kohl Building, San Francisco. Further examination of the account has revealed that although Mr. Flynn's incqme was nominally $2,000 per month from the hard liquor wholesalers, the only money which he converted to his personal use has been a withdrawal of $300 per month. In short, $300 of the $2,000 monthly payment goes to Mr. Flynn ; the balance is under the control of Mr. Samish. Mr. Flynn's nominal employers, the three liquor wholesaling groups referred to, have currently been in the position of not knowing Mr. Flynn's whereabouts for the last six months. During that period the investigators have been attempting to subpena him. Mr. Samish's own description of the relationship of Mr. Flynn to the hard liquor dealers is contained in the following testimony before the grand jury : Mr. Samish : "Frank Flynn is very close to me. He has been very loyal as far as I am concerned." Q. "What did he do for you?" A. "Well, let me say this. Frank Flynn has been around me for a great number of years. Frank publishes the West Coast Brewer * * * I gave him the responsibility of jointly publishing the West Coast Brewer with Miss Readv and others we have who more or less write the copy."" Q. "What does he do?" A. "A lot of odds and ends — a lot of things * * * Frank Flynn has been very loyal to me and has been around me for years day and night, so sometime ago when I took the brewery industry contract naturally I had a lot of work to do that carried me around the State and I like companionship — I am away a great deal — and I took Frank Flynn 1130 Senate Journal [April 4, 1939 with me more or less us a personal companion * * * he receives a small remuneration from the West Coast Brewer * * * However, about six or seven months ago the first opportunity presented itself for me to show my appreciation of Frank Flynn in suggesting his employ- ment to a job that I could not take which, however, I wanted to keep close to my organization. I suggested his name and he has that employ- ment today * * * Mr. Frank Flynn today * * * is employed by the Wholesale Liquor Dealers Association * * * for which he receives .$2,0!)O a month. I have a brewery arrangement. I couldn't take that employment, so out of my loyalty to Frank Flynn I naturally turned it over to him, which this whole account will show for itself. He today is emoloyed by them even though I do, personally, most of the work." 3 — Horse Racing Interests. Between 1935 and 1038 Mr. Samish's income records show receipts of $54,999.97 from the Los Angeles Turf Club. The Los Angeles Turf Club operates Santa Anita Race Track. Payments to Mr. Samish during the legislative year 1937 total $27,999.94. The Los Angeles Turf Club was organized in 1934. It has enjoyed phenomenal success and profits. Until this year it had an absolute monopoly on horse racing in Southern California. Since horse racing operates under State regulation and taxation, and since the tremendous profits of the Los Angeles Turf Club incited promoters of other tracks to attempt to force legislation authorizing a second South- ern California racing plant, a great many bills have been introduced in the Legisla- ture affecting the financial interests of the Santa Anita management. That the Santa Anita track management was Well aware of this is indicated by the fact that it employed R. Dean Warner of the law firm of McAdoo, Neblett and Warner, Los Angeles, during the months of March, April and May 1937 to represent the track at the Legislature. Mr. Warner's firm was paid $12,275.35. This employ- ment of course, was in addition to the employment of Mr. Samish. In the following resume of legislation introduced during the 1937 session affecting horse racing, attention is called to Assembly Bills 1820 and 2573 introduced by Assemblymen Jack Tenney, Los Angeles, and Rodney Turner, Bakersfield, respec- tively, each of which would have required a second race track in Southern Cali- fornia : (a) Racing Commission. A. B. 2517 — (Donihue) — 5-man commission bill April 21, Public Morals. A. B. 282— (Maloney) January 13, Public Morals. A. B. 3S2 — (Voigt) January 14, Public Morals. S. B. 21— (Young)^ Passed May 28. (b) Bookmakers. A. B. 126— (Reaves) Januarv 11, Public Morals. A. B. 304 — (Flint) January 14, Public Morals. A. B. 2017— (Daley) March 1, Public Morals. (c) Classification of Counties. A. B. 2128 — (Cassidy, Dannenbrink, Donihue) March 1, Public Morals. (d) Skeleton Bill. A.B. 314 — (Baynham) January 13, Public Morals. A. B. 450 — (Lyon and Baynham) January 18. Public Morals. A. B. 2101— (McMurray and Dawson) March 1. Public Morals. A.B. 2102— (McMurray) March 1. Public Morals. A. B. 2103 — ( McMurray) March 1, Public Morals. A. B. 2513— (Donihue) March 1, Public Morals. A. B. 2514— (Donihue) March 1, Public Morals. A. B. 2040 — (Field) March 1, Public Morals. S. B. 58.S— (Olson) March 1, Governmental Efficiency. A. B. 1054— (Williamson) May 19, Killed in Senate. (e) License Fees. A.B. 245— (Latham) January 12, Public Morals. A.B. 250 — (Maloney) January 12, Public Morals. A.B. 1513 — (Donihue) March 1, Public Morals. A. B. 2571— (Turner) March 1, Public Morals. S. B. 37C — (Seawell) March 1, Revenue Taxation. S. B. 702 — (Swing) March 1. Governmental Efficiency. S. B. 1054— (Hayes) May 20, Defeated in Senate. (f) Commissions and Licensees. A. B. 1513— (Donihue) March 1, Public Morals. A. B. 2513 — (Donihue) March 1, Public Morals. A. B. 2571— (Turner) March 1, Public Morals. (g) Issuance and Limitation of Licenses. A. B. 1636— (Lore) March 1, Public Morals. April 4, 1939] Senate Journal 1131 (h) Removal of Licenses. A. B. 1693 — (Turner) March 1, Public Morals. (i) Lotteries. A. C. A. 7 — (Voigt) January 11, Public Morals, (j) Regulation of News Service. A. B. 157 — (Swing) January 18, Judiciary, (k) Admittance to Race Courses. A. B. 1055 — (Williamson) March 1, Public Morals. (1) Number of Racing Days Allowed. A. B. 1286 — (Flint, Hawkins, Reaves) March 1, Public Morals. A. B. 2128 — (Cassidy, Donihue, etc.) March 1, Public Morals. A. B. 2573— (Turner) March 1, Public Morals, (m) Allocation of Receipts. A. B. 152. — (Peyser) May 3, Ways and Means. A. B. 245 — (Latham) January 12, Public Morals. A. B. 253 — (Maloney) (check) May 25, Senate Finance. A. B. 342— (Rosenthal) May 3, Ways and Means. A. B. 467 — (Lyon and Baynham) Passed. A. B. 549— (Thorpe) May 25, Public Morals. A. B. 648 — (Rosenthal) March 23, Ways and Means. A. B. 804— (Williamson) May 3, Ways and Means. A. B. 1866— (Robertson) May 3, Ways and Means. A. B. 804 — (Williamson) May 3, Ways and Means. A. B. 1866 — (Robertson) May 3, Ways and Means. A. B. 2161— (Donnelly) March 1, Public Morals. A. B. 2402--( Garibaldi) May 3, Ways and Means. A. B. 2660— (Leonard) May 3, Ways and Means. S. B. 356— (Nielsen) Passed May 28. S. B. 556 — (Fletcher) March 1, Finance. S. B». 791— (Schottky) March 1, Finance. S. B. 792— (Schottky) March 1, Finance. S. B. 948 — (Rich) March 1, Finance. S. B. 954— (Tickle) March 1, Finance. S. B. 955 — (Tickle) March 1, Governmental Efficiency. S. B. 964— (Crittenden) March 26, Senate Floor. S. B. 1079 — (Garrison) March 1, Finance. A. B. 1603— (Patterson) March 1, Public Morals. A. B. 1743— (King and Lyon) March 24, Senate. S. B. 602 — (Crittenden) March 1, Governmental Efficiency. S. B. 793 — (Jespersen) March 1, Governmental Efficiency, (n) Number of Tracks in Southern Calif omia. A. B. 1820— (Tenney) March 1, Public Morals. A. B. 2573 — (Turner) March 1, Public Morals, (o) Unclaimed Redistribution. A. B. 2516 — (Donihue) March 1, Public Morals. A. B. 2571 — (Turner) March 1, Public Morals. S. B. 707 — (Swing) March 1, Governmental Efficiency, (p) Wagering Outside Track Enclosure. A. B. 84 — (Yorty) May 6, Assembly Floor. A. B. 1305 — (Fulcher) May 21, Assembly Floor. A. B. 1773— (Turner) March 1, Public Morals. A. B. 2639— (Field) March 1, Public Morals, (q) Wagers Inside Enclosure for Principal Outside Enclosure. A. B. 616 — (Yorty) January 20, Public Morals. A. B. 2639— (Field) March 1, Public Morals. It will be noted that a great many of the racing bills were referred to the Assembly Committee on Public Morals. The influence of Mr.' Samish with that committee was patent to everyone present during the 1937 session of the Legislature. None of the many bills affecting Santa Anita's interests received any serious consideration in the Assembly. Most of them died in committee. During the session the Assembly appointed a special Horse Racing Investigating Committee, including Assemblyman Turner, chairman ; Desmond and Laughlin. During Los Angeles hearings, the committee recommended a five-man racing commission, on the repre- sentation that the existing three-man commission was dominated by the Santa Anita track. The five-man commission move was an obvious forerunner to licensing of a second track in Southern Califoi-nia. When the five-man commission bill was before the Public Morals Committee, with the recorded support of the special investigating committee as well as of the previously functioning Donihue Investigating Committee, only one member of the Public Morals Committee, Assemblyman Turner, voted for the five-man commission bill. 1132 Senate Journal [April 4, 1939 Mi 4 . Samish's income schedule also shows a $5,000 fee received in 1987 from the National Orange Show, San Bernardino. Mr. Samish was employed to lobhy in the interests of the orange show's share of State revenue from the tax on pari- mutuel betting. Most of the bills which would affect pari-mutuel funds were referred to the Committee on Public Morals. (Circumstances of this employment of Mr. Samish are detailed in the section of the report entitled "Activities of Lawyer- Legislators — Senator Ralph Swing, San Bernardino"). 4. M. C. Levee Account. In the years 1985 and 1937. Mr. Samish's financial record shows the receipt of $5,000 and $10,000, respectively, from M. C. Levee. Mr. Levee is a film artist's agent. Mr. Levee testified before the grand jury that, accompanied by Leo Morrison, another artist's agent, he went to Sacramento in 1935 to attempt to exempt the motion picture agency business in Los Angeles from the possible effects of a law proposed by Assemblyman Thomas Maloney, San Francisco. On January 21, 1935, Assemblyman Maloney introduced Assembly Bill No. 403 providing it should be unlawful to charge a fee in excess of 7 per cent of the wages or salary earned for the first month, in the case of fees collected by private employment agencies. Mr. Levee said that various individuals in the motion picture artist's agency business ft 1 1 this law might be interpreted to include them, and fhey desired exemption. On arriving at Sacramento, he learned that the scheduled hearing on the Maloney bill had been delayed until the following day. Anxious to return to Los Angeles, to attend to their business, Mr. Levee and Mr.' Morrison communicated with an attorney of Los Angeles, Ralph Blum, who at that time represented one of the lading actor's agents. Mr. Blum advised Mr. Levee and Mr. Morrison to retain •i lobbyist at Sacramento. He suggested a list of three men — Mr. Samish, Joe Rosenthal and J. M. Jefferson. Seeking any one of the three, Mr. Levee encountered Mr. Samish. Mr. Samish told the prospective employer that he, Samish, represented the "Fleishacker interests, the Greyhound bus people, the liquor industry and numerous other clients." Impressed by this clientele, Mr. Levee employed Mr. Samish at a fee of $5,000, after Mr. Samish had first demanded a larger fee. Assembly Bill No. 403, with which Mr. Levee was concerned, passed the Assembly and was killed in the Senate Judiciary Committee. v In 1937, according to Mr. Levee's testimony, his attention was called to Assembly Bill No. 1226, introduced by Assemblymen James D. Garibaldi and Thomas A. Maloney on January 20. This bill specifically regulated artist's agents, fixing fees. Mr. Levee pointed out. that the 1935 bill did not specifically mention the motion picture industry and did not appear to be directed at the motion picture industry. On the contrary, the 1937 bill, specifically defined actor's agencies to mean and include the business of booking actors, actresses,, directors, etc., with any studio. Fearful that passage of this bill might legislate his business out of existence, Mr. LeA'ee requested Mr. Samish again to represent his group before the Legislature. Mr. Samish doubled his 1935 fee and Mr. Levee agreed to pay $10,000. Mr. Samish agreed as a part of his employment he would in the future sponsor bills specifically taking actors' agents out of the employment agency act. The Garibaldi-Maloney employment agency bill with which Mr. Levee was con- cerned died in the Assembly Judiciary Committee. When Mr. Samish first was questioned about this fee, he testified: "I was delegated — they delegated me with a certain responsibility to watch certain work for them and I did — I thought I did the job and I sent them a bill for ten thousand and they paid it. Q. Well, w T as it in connection with any particular bill or bills in the Legis- lature? A. No, no. Q. Didn't have anything whatever to do with the Legislature? A. No, it was just to generally watch their interests. They didn't have anything." After Mr. Levee had testified and his testimony had been corroborated by Mr. Morrison, Mr. Samish requested the opportunity of being further heard on this matter. He then revised his testimony to say that in 1935 employment was to "more or less watch their general interest in any legislation that was introduced whether it was specific bills or not." In 1937, Mr. Samish continued : * * *"my employment again was to stay on the job to watch their interests in connection with any subject matter on any bill in addition to the bills you specifically mentioned." Mr. Samish's examination at this point continues : Q. "Mr. Samish, it is a fact, is it not that your employment in 1937 included or embraced work on your part on behalf of Mr. Levee and his group in the matters defeating Assembly Bill No. 1226? A. No particular bills. Never did they employ me to defeat any particular bill. Never did they mention specifically 1226 or any other bill." April 4, 1939] Senate Jouknal 1133 It was the opinion of the special prosecutor, George Naus, and the district attorney, Otis D. Babcock, that Mr. Samish had committed perjury in his testimony of June 30 when he said that the employment by Mr. Levee had nothing to do with the Legislature. Foreman J. L. R. Marsh of the grand jury swore to a perjury complaint on July 19, 1938. On August 18, 1938, the case was heard by justice of the peace Will J. Carragher. Judge Carragher held that the defendant, Mr. Samish, had in effect committed perjury on June 30, 1938, but in his subsequent testimony July 19, 1938, had corrected his testimony or clarified it and thus had purged himself of the crime. 5. American Potash and Chemical Corporation. From the American Potash and Chemical Corporation, Trona, California, Mr. Samish received in the years 1935-1938 a total of $32,000. . ' Mr. Samish's explanation before the grand jury of his employment was evasive, but sought to leave the impression that the employment was not essentially of a legislative nature : "Q. The American Potash and Chemical Company. What is the nature of the work for them; public relations and legislative? A. Yes. Q. Is that the type of it? A. Personal work — personal work. I have a lot of work to do for them, Mr. Naus. Q.. I see. You can't recall for the moment the nature of it? A.' Oh, yes. I can recall a lot of it. Q. Well, can you state it, please? A. Well, there is a lot of special out of State that they are interested in— that I am helping them on. Q. Nationally, you mean? A. Yes." Investigation disclosed that O. M. Simpson, district general manager of the American Potash and Chemical Corp., originally employed Mr. Samish in 1935. Mr. Simpson testified, after avoiding process for some time, that he retained Mr. Samish to look out for all matters that might be of interest to the corporation during the session of the Legislature. Examination of files of the corporation showed that it was particularly interested at that time in a proposed severance tax. As far as these files disclosed, the only service rendered by Mr. Samish was routine forwarding of bills to the head office. These were bills which would affect any mining corporation of the size of the American Potash and Chemical Corp. There was in addition occasional discussion in Mr. Samish's correspondence of the threat of a severance tax. Mr. Samish also made a check for the Trona company on the feasibility of including 41 miles of highway in Inyo County in the State secondary highway system. The American Potash and Chemical Corp. was in doubt as to whether the Department of Public Works had authority to handle this matter or whether it would require legislation. On January 16, 1937, Mr. Samish. telegraphed Mr. Simpson: "O. M. Simpson, Trona, California. Recess twenty-third suggest you immediately write full particulars concerning road legislation or anything else. Committee appointments entirely satisfactory. Regards. ARTHUR H. SAMISH." The reference to satisfactory committee appointments, is significant in view of the investigators' findings that Mr Samish was credited with influence with Speaker William Moseley Jones of the Assembly in the matter of committee appointments. Mr. Samish's friendship and influence with State employees and employees of the Division of Motor Vehicles made it possible for him to bestow small favors on his clients, as indicated in .the following excerpt, from a letter to Mr. Samish from Mr. Simpson, dated March 10, 1937: "First, I have . received my plates and secured number l-Q-49, which apparently is a very low number and I am pleased that you were able to obtain it." The American Potash and .Chemical Corporation files show under date of March 11, 1937 a communication addressed to the Senate and Assembly of the State of California certifying that : "A. H. Samish is authorized to represent the American Potash and Chemical Corporation before the Senate and Assembly of the Legislature of the State of California." Neither of these documents was filed by Mr. Samish. He stated that he does not want people generally to know whom he represents. With further reference to specific legislative matters in which the American Potash and Chemical Corporation was interested, examination of their files revealed : That the corporation opposed Senate Bill No. 680 introduced by Senators Allen, 1134 Senate Journal [April 4, 1939 DeLap and Seawell, relating to liability of common carriers by railroads for injury or death sustained by their employees by reason of the violation of any statute or commission orders. State or Federal, enacted for the safety of railroad employes. The corporation operates its own railroad on its mining property. The bill was defeated in the Senate April 15. That the corporation instructed Mr. Samish to oppose companion bills, Senate Bill No. 602 and Assembly Bill No. 538, introduced by Senator Crittenden and As*semblyman Yorty, respectively. Senator Crittenden's bill died in the Senate. Assemblyman Yorty's bill, establishing a California Labor Relations Board (known as "the little Wagner Act") passed the Assembly and was killed in the Senate's committee. Another communication in the files of Mr. Samish to Mr. Simpson dated June 13, 1938 contained the statement: "Tried to reach you at the Biltmore on Friday but I found you had checked out. However, with reference to all candidates running for office in the State of California, I suggest and recommend you refrain from making any commitment until the filing date closes on June 25th. Naturally in the meantime we will have completed our records showing the history of each candidate together with comment on whatever course of action we should follow." Mr. Samish's financial records show that in 1936, a nonlegislative year, he received only $6,500 from the American Potash and Chemical Corporation as com- pared to $10,000 received during the legislative year 1935. In 1937, Mr. Samish's fee was increased to $14,000. The severance tax — the perennial bugaboo — was again discussed in 1937. Full page advertisements appeared in the San Francisco Chronicle in behalf of the Gold Miners Association. Several news articles discussing the possibility of the severance tax appeared in the newspapers. Mr. Samish forwarded these items to the American Potash and Chemical Corporation. Investigation indicated there was no greater prospect of the severance tax passing in the 1937 session of the Legislature than there had been in any of the previous sessions. Mr. Samish was able to convince his client, the American Potash and Chemical Corporation, that they were in danger of being taxed out of business through the severance tax. 6 — San Francisco Bank. Another lucrative source of Mr. Samish's income, his financial record shows, was The San Francisco Bank, which paid him $22,500 during the years 1335-1938. Investigation and testimony disclosed that Mr. Samish was employed by Parker Maddux, president of The San Francisco Bank. Mr. Samish was instructed to keep Mr. Maddux advised on all matters of legislation which might affect the bank. As a result of the depression, many bills were being introduced which vitally affected banking houses generally. More specific problems particularly concerned the San Francisco Bank. Prior to 1935 the State Banking Act provided that any savings bank acquiring real estate by foreclosure must within five years dispose of this real property. The San Francisco Bank held much real property and felt that should it be necessary to foreclose and should it be necessary to sell this real property on a deflated market, the effect upon the bank would be harmful. Therefore, Mr. Maddux requested that Mr. Samish attempt to amend the State bank act so that savings banks could hold real property obtained through foreclosure for a period of ten years, rather than five years. This amendment was adopted at the 19.°,."i session of the Legislature. As stated in another section of this report, Mr. Samish for several years has paid Assemblyman Charles W. Lyon of Los Angeles, who is an attorney. $250 per month Assemblyman Lyon stated to investigators that during the 1935 session of the Legislature, Mr. Samish came to him and "practically demanded" that he Lyon obtain an appointment to the Assembly Committee ' on Banking. Assemblyman Lyon said he was not interested. Thereafter, Mr. Samish came to Assemblyman Lyon and asked that Mr. Lyon introduce an amendment to the State Banking Act to permit savings banks to hold foreclosed property for a period of ten years rather than five years. Assemblyman Lyon stated that he saw no objection to the amend- ment and that he did not know that Mr. Samish represented the San Francisco Bank. When Assemblyman Lyon took the question of the amendment up with Assemblyman Raymond Williamson, San Francisco, chairman of the Assembly Banking Committee, Assemblyman Williamson stated he had no objection, accord- ing to Assemblyman Lyon's statement. It seemed that the measure was on its face, a desirable piece of legislation for savings banks. Accordingly, when Assembly Bill No. 341, introduced by Assemblyman Williamson, was on the floor, April 1, 1935, Assemblyman Lyon offered an .amendment to strike out the word "seven" (as the bill was amended in committee) on page 2. line 23. and insert in lieu thereof the word "ten." There was no objection and no contest on the amendment. April 4, 1939] Senate Journal 1135 When Mr. Samish was first questioned before the grand jury relative to his employment by the San Francisco Bank, he was asked : "Q. Now, what kind of work were you doing for the bank? A. Well, it is of a personal nature, Mr, Naus. I don't think it is perti- nent to this inquiry. I have a very close relationship with Mr. Maddux, the president of the bank. In fact, I think he will tell the world I am one of his best friends. I really don't think that should be divulged. Q. Well, can't you state generally whether it is public relations work or legislative work ? A. Public relations work. A. In order to satisfy you — public relations work. Personal matters. Q. You mean personal to him, Mr. Maddux, as distinguished from the bank? A. No, it is the bank. It is noteworthy that Mr. Samish testified his employment by the San Francisco Bank had nothing to do with legislative work. On July 7, 1938, Mr. Maddux appeared before the grand jury and described Mr. . Samish's employment. Mr. Maddux stated definitely that he employed Mr. Samish for legislative work. 7. — Influence of Legislators, State Employees, etc. The obvious foundation of Mr. Samish's influence in the Legislature is the vast amount of money he had at his disposal for campaigns and other political purposes. From the "public relations fund" of the California State Brewers Institute alone, it must be remembered, during the years 1935-1988 Mr. Samish had at his disposal $97,619.47, which he withdrew mainly in cash. He had absolute control over this money and was required to make no accounting. Mr. Samish testified that h^had made many contributions to candidates for the Legislature, although he never could remember the name of one legislator to whom he nad contributed, and, as a matter of fact, only two legislators ever acknowledged contributions from Mr. Samish. (See section on pre-election influence of legislators.) In addition to campaign contributions, Mr. Samish had the facilities of the organizations he represented to throw in support of or against a given candidate for the Legislature. Mr. Samish testified that the alcoholic beverage industry, which he represented, had approximately 50.000 outlets in the State of California. Prior to any election, the list of candidates was studied carefully by Mr. Samish to deter- mine whether he considered the candidate would be favorable to this industry. Then each of the 50,000 outlets were circularized and instructed or ordered to support the candidates upon whom Mr. Samish had placed his blessing. Obviously, a great deal of personal power — as distinguished from power used in behalf of a client — was in the hands of Mr. Samish in throwing the weight of such a cast organization in support of or against a candidate. Not only did Mr. Samish make campaign contributions to candidates for the Legislature but he could do them other tangible favors. For example, between 1935 and 1938 he paid Assemblyman Charles W. Lyon of Los Angeles, a lawyer-legislator, a total of $9,250. In that period he paid Assemblyman William B. Hornblower, San Francisco, another lawyer-legislator, a total of $3,900. Mr. Samish thus obviously was able to perpetuate a circle of tremendously profit- able power for himself. It was he who threw support and money behind his chosen candidates for the Legislature. And it was he whom businesses and individuals had to employ to establish a favorable contact with those legislators. In other words, Mr. Samish was the middleman between the business interest, which had a proper right to a direct hearing of its case by members of the Legislature, and those mem- bers of the Legislature. Whatever the members of the Legislature knew of the business interests came from Mr. Samish. Whatever the business interests knew of the members of the Legislature came from Mr. Samish. Mr. Samish also developed, through favors and financial help, power with State employees. For example, Moe Ginsberg, listed as an investigator for the State Motor Vehicle Department, is a close associate, informant, and occasional chauffeur for Mr. Samish. Harry Caro, another employee of the Motor Vehicle Department* is shown in Mr. Samish's records to be indebted to Mr. Samish for a $1,000 loan and for $300 listed by Mr. Samish as "personal expense." When Director Ray Ingels assumed his duties as head of the Motor Vehicle Department, a personnel survey convinced him that Mr. Ginsberg's services were unnecessary. He instructed that Mr. Ginsberg be discharged. Mr. Ginsberg, Direc- tor Ingels was informed, was a personal friend of Mr. Samish. In spite of this information, Director Ingels put through the order- for Mr. Ginsberg's dismissal. 6— sj a4 1136 Senate Journal [April 4, 1939 Mr. Samish intervened at Sacramento and Director Ingels was directed to return Mr. Ginsberg to the pay roll of the State. That was done. Conversations in Mr. Samish's office disclosed that prior to the November elections of 1988 Mr. Ginsberg and Mr. Caro, operating from the Hay ward ' Hotel at Los Angeles, reported political developments to Mr. Samish's office. Mr. Samish con- ducted a poll and circularized the results of the poll to his clientele. During the 1937 session of the Legislature Mr. Ginsberg was in Sacramento, ostensibly representing the Motor Vehicle Department. Actually, investigation dis- closed, Mr. Ginsberg served as an assistant and messenger for Mr. Samish. Another State employee who has assisted Mr. Samish as an informant and occa- sional chauffeur is Carl E. Winkleman, inspector for the State Board of Pharmacy. The awe in which Mr. Samish is held by some State officials is illustrated by the following incident: Howard K. Deems, Registrar of Motor Vehicles, was applicant for the position of lobbyist or public relations representative for the California Association of Finance Companies. Meeting with a group representing that organi- zation, and stating his qualifications, Mr. D>eems said that Mr. Samish lmd the Legislature of the State of California in the palm of his hand. As a public official. Mr. Deems said that he- was "appalled" at Samish's strength, but added that Mr. Samish was his, Deems', personal friend and would do anything he. Deems, asked him. Hence through Mr. Deems, the group was told, they would have direct approach to the most powerful man in the State of California. Mr. Samish also attempts to maintain an influence with newspapers in Cali- fornia. He testified that one of his duties was to watch the editorial policy of all newspapers in the State, in so far as that policy affects the alcoholic beverage industry. If he believes a newspaper is opposed to the interests of the alcoholic beverage industry. Mr. Samish's clients, he sees to it that no advertising is placed in tVat particular newspaper. SU Oliva. Bryce "Florence. Senate Bill No. 519, proposing to regulate and restrict off-shore floating reduction plants, after passing in the Senate, provoked one of the major Assembly contro- versies of the 1937 session. Conservationists and on-shore sardine packing plants actively supported the bill. Off-shore Uoating reduction plant operators, brokeis in fish oil and fish meal, some commercial fishermen who sold their catch to the Uoating plants and some agricul- tural interests (users of fish meal fertilizer) opposed the bill. One of the world's largest brokers in fish oil is the film of Wilbur-Ellis Company, with head offices in San Francisco. Books of the firm were examined, with complete cooperation of the firm. The examination would have been impossible without such cooperation. _ Jit, was noted in the examination that numerous items were transferred from the general ledgers of Wilbur-Ellis Company to what was called a private ledger. No employee of the company had access to the private ledger, other than the chief bookkeeper. Items in the private ledger showed payments to : Sil Oliva, during 1937 $4,030 00 Bryce Florence, during 1937 4,100 00 Pacific Coast Fisheries Inst. — August 3, 1936 3,000 00 December 27, 1937 2,000 00 Total $13,030 00 Mr. Oliva, an associate of Assemblyman William B. Hornblower, who openly led commercial fishing interests' opposition to Senate Bill No. 519, was an active lob- byist against Senate Bill No. 519. Mr. Florence is a lobbyist who long has been interested in commercial fishing legislation. The Pacific Coast Fisheries Institute was organized for the purpose of combatting regulation of off-shore sardine reduction plants. Wilbur-Ellis Company was not the sole financial participant, either pro or con, in the struggle over Senate Bill No. 519. Results of an examination of the company's private ledger are cited for the purpose of illustrating the method involved and call- ing attention to potential dangers of lobbying funds not subject to public report. Under the section of this report dealing with pre-election influence of Legislators, attention is called to evidence that Assemblyman Ernest Voigt of Los Angeles April 4, 1939] Senate Journal 1137 accepted a campaign contribution from floating sardine reduction plant interests, and, consequently felt himself committed to vote against Senate Bill No. 519. Walter J. Little. Manley A. Harris. J. A. Pettis. C. R. Stevens. J. M. Jefferson.. Walter J. Little is an attorney with offices in San Francisco. He carries the title of special attorney on the records of the major .steam railroads, i.e. the Southern Pacific, Northwestern Pacific, Western Pacific, Union Pacific and the Santa Fe. In reality, Mr. Little is a full time lobbyist employed by all. the railroads operating in California. Walter J. Little, Income. Mr. Little is paid at the rate of $15,000 per annum. J935 Salary $15,000 00* Expenses during legislative session 8,640 37 1937— . Salary 15,000 00 Expenses during legislative session ' 12,958 00 Total ____$51,598 37 Mr. Little's activities keep him constantly traveling about the State, maintaining his contacts and connections throughout the entire year. Mr. Little's additional expenses, or normal expenses not set forth in the above schedule, augment the total. Investigation of Mr. Little's accounts reveal, however, that these expenses were not unusual. Mr. Little's expense accounts during the legislative session are set forth inasmuch as they are typical accounts of a person engaged in lobbying activities at Sacra- mento. A breakdown of the account for the first fifteen days of January, 1937, is as follows: Office expense- $127 08 Meals and lodging — 628 18 Pullman ± 11 80 Auto (852 miles @ 7 cents) 58 24 Other expenses 126 39 Total, one-half month $951 69 A schedule by months for the legislative session of 1937 is as follows : January $2,134 56 February 1,952 81 March 2,488 44 April 3,262 58 May 3,119 61 Total, 5 months $12,958 00 The major steam railroads operating in California finance their lobby on the following mileage prorate basis: Southern Pacific ! 60.4 per cent Northwestern Pacific — s 4.9 per cent Atchison, Topeka and Santa Fe 1 20.8 per cent Western Pacific 8.5 per cent Union Pacific , 5.4 per cent Total 100.00 per cent In arriving at any total figures for the cost of maintaining the railroad lobby at Sacramento, there should be added the $5,000 per annum paid to Arthur H. Samish and set forth in the schedule of Mr. Samish's income. Through the cooperation of the Southern Pacific railroad and the cooperation of Mr. Little, the methods used by lobbyists and by Mr. Little at Sacramento were discussed fully. Mr. Little stated that it was his task to carefully scan each and every bill that is introduced before the Legislature and to make a decision as to whether that bill would affect his client. If he believed there was a possibility 1138 Senate Journal [April 4, 1939 of affecting his client, a copy of the bill was forwarded to the client for considera- tion and instruction. Mr. Little stated that he attempted to sell his client's point of view on proposed legislation to the individual legislator by arguments advanced to him, and to further present arguments before the appropriate committees. Nowhere in Mr. Little's accounts could any record be found indicating that Mr. Little had given money or financial aid to any legislator. Mr. Little admitted that during the legislative session it was a common practice for himself and all other lobbyists to entertain members of the Legislature. In practically every lobbyist's headquarters, a bar is maintained for the benefit of members of the Legislature. It is the entertainment of legislators, according to Mr. Little, which causes his expense account to run into the thousands of dollars during the legislative session. In addition to watching affairs at Sacramento, Mr. Little is charged with the duty of observing national legislation affecting railroads as well as city and county legislation which might affect his client., An examination of the records of the Southern Pacific and of Mr. Little reveals that in the year 1935 an educational campaign fund was authorized by the major steam railroads, said fund not to exceed the sum of $20,000 and to be expended by Mr. Little for the purpose of educating the public as to the losses being incurred by the railroads from the ruinous competition of motor trucks, with particular reference to unregulated motor trucks. A total of $15,500 was actually expended on this educational program. Items observed from scanning the vouchers submitted in connection with this educational fund are of interest. August 12, 1935— Mr. J. A. Pettis $1,012 50 September 7, — Manley A. Harris services and expenses 595 00 W. J. Little services and expenses 1,555 00 Mr. Pettis and Mr. Harris are both well knowir as lobbyists. The history or background of this program is as follows : The statute regulating motor trucks prior to 1933 gave in the opinion of the major steam railroads an unfair advantage to freight carriers and motor trucks operating on the highways. In 1933 legislation was introduced remedying this condition. The bill met with serious opposition and was defeated. An educational program was proposed in order that the bill might be put through the next, session of the Legislature. As a result of the educational program conducted, in the 1935 session two bills were introduced, Senate Bill No. 329 and Assembly Bill No. 944, both bills having the identical purpose and both bills similar to the bill introduced in 1933 with certain alleged objectionable features eliminated. The title of Senate Bill No. 329 was : "An act regulating the use of public highways by motor vehicles operated for the transportation of property for compensation ; preventing the discriminations between various forms of transportation ; conferring powers upon the Railroad Commission with respect to the transportation of property for compensation by motor vehicles ; providing penalties for violation and repealing all acts inconsistent with the provisions of this act." Proponents of the bill claimed among other things that this bill would eliminate "wild catting" and would prevent the ruinous competition caused by rate cutting. The major railroads, the larger trucking interests and, assertedly, the Railroad Commission supported this measure. It was opposed by independent truckers associations and certain farming interests. Both Senate Bill No. 329 and Assembly Bill No. 944 passed both houses after a stubborn fight. Both bills were approved by the Governor. Another phase of Mr. Little's activities of particular interest to investigators was the passage in the 1937 session of Assembly Bills No. 2910 and 2911. This matter has been discussed under the caption "Activities of lawyer-legislators, Assemblyman William Moseley Jones." As stated there, Mr. Little admitted that two of his clients, the Santa Fe and Union Pacific were vitally interested in these particular bills which transferred drainage district taxes to the Flood Control District of Los Angeles, thereby materially lessening the tax load. Mr. Little admitted that he likewise assisted in the presentation of the necessary ordinances' before the Board of Supervisors of Los Angeles County. Mr. Little declined to discuss fully his activities before the Board of Supervisors and the connection of Assemblyman Jones with the situation, on the grounds that a confidential relation- ship exists between attorney and client. C. R. Stevens represents, nominally, the California Oil and Gas Association, Los Angeles. Mr. Stevens actually is a lobbyist for the major oil companies operating April 4, 1939] Senate Journal 1139 in California. Mr. Stevens' employers use exactly the same system as is used by the railroad companies. Each of the major oil , companies makes a pro rata contri- bution to the maintenance of the California Oil and Gas Association, which associa- tion in turn employs Mr. Stevens to handle their lobbying activities at Sacramento. The books and records of the major oil companies, similar to the records maintained by the railroads, reveal no political contributions. Due to the limitation of funds and time available for this investigation, a detailed study, of their records was not possible. Officers advised that they made no political contributions as such; how- ever, it is generally known that candidates may receive aid from the officers of the respective oil companies operating in California. J. M. Jefferson, Los Angeles, is the lobbyist for small loan interests. Prior to the 1935 session of the Legislature, Mr. Jefferson sponsored the candidacy for the speakership of Assemblyman Ted E. Craig. Assemblyman Craig was elected Speaker. Subsequently, Mr. Jefferson Avas employed by the Pacific States Savings and Loan Company to "look after their interests in the 1935 session." Admittedly, Mr. Jefferson's service to the Pacific States Savings and Loan Company was to assure them a sympathetic committee for consideration of a building and loan bill in which they were vitally concerned, Assembly Bill No. 1300. Speaker Craig admittedly was obligated to Mr. Jefferson. Findings. Lobbying, as represented by the activities of Mr. Samish, has become a powerful — if secretive and unofficial — "fourth branch" of State government. Mr. Samish, one of 286 lobbyists registered at the last session of the Legislature, either received or controlled in the years 1935-38 a total of $496,138.62 originating with sources interested in legislation. Some of his clients undoubtedly paid, more in fees to Mr. Samish than they paid in State taxes for the support of all legitimate functions of State government. Since business incorporates its expenses into the prices paid by the consuming public, the vast sums going into the hands of Mr. Samish constituted a heavy unseen tax on the public of California. This "fourth branch" of government represented by the Samish type of lobbying 4 is responsible not to the public but only to individuals or interests able to pay high fees. It operates in great secrecy — secrecy so great that neither the public, nor the regularly constituted agencies of government, nor, on occasion, the fee paying clients know what the lobbyist is doing. A distinction should be made between the lobbyist of this type' and the lobbyist or legislative representative who openly speaks for a single industry or individual at the Legislature. For example, Walter J. Little is the legislative representative at the Capitol of the major steam railroads. When he talks to lawmakers, they know he is speaking for the railroads. When he entertains legislators — as he frankly admits he does — they know they are being entertained at the expense of the rail- roads. He goes before legislative committees and represents the railroads' point of view. He may be expected to favor such legislation as he and his clients believe is in their interest, and to oppose such legislation as he and his clients believe is opposed to their interests. Any industry obviously is entitled to such representation at the Legislature. The abuses arise from another type of lobbyist represented in this investigation by Mr. Samish, with large amounts of money at his disposal, still it is not always known whom he represents. For example, Assemblyman Charles Lyon of Los Angeles stated that he handled an amendment to the Bank Act for Mr. Samish, which amendment was desired by Mr. Samish's client, The San Francisco Bank. Mr. Lyon was not aware that Mr. .Samish received $6,0OO in 1935 for that specific matter. On occasion a lobbyist wiH represent two clients with conflicting interests in specific legislation. For example, Mr. Samish in the 1937 session represented both the hard liquor wholesalers (who opposed the Peyser "anti-discrimination bill") and the eastern export brewers (who favored the bill). The secrecy with which this type of lobbyist operates is illustrated by Mr. Sam- ish's statement that he did not *vant it generally known whom he represented at Sacramento, together with his efforts to withhold his financial records from investi- gators. Similarly, his method of keeping his business records so. that they will not reflect to whom he has made financial payments, is indicative of his type of operation. Lobbying methods typified by Mr. Samish are detailed in the section of the report dealing in detail with his activities! In. short, the basis of the niethod is to acquire influence with a group of Legislators through campaign contributions or other favors and then to sell that influence to industries concerned with legislation. If it is the fact that influence of this type probably is limited to a relatively small number of 1140 Senate Journal [April 4, 1939 Legislators, in the case of any one lobbyist, it is likewise true that on most contro- versial bills there is a natural division on the merits of the issue. Hence, a small number of "influenced" votes can prevail. The operation is typically that of a middle-man, standing between the lawmakers and the business interests, telling each that it can deal only through the middle-man-lobbyist. Evidence accumulated that lobbying of this type leads to racketeering methods. In one session of the Legislature, the Hollywood film artists' agents feared they would be affected by a general bill. They paid a $5,000 fee to Mr. Samish. In the next session of the Legislature, a bill was introduced specifically aimed at this busi- ness. The business men concerned paid a $10,000 fee to Mr. Samish, and concluded, in the words of M. 0. Levee, that, perhaps, they had better get an attorney. The fact that the second bill specifically endangered this business does not impugn the motives of the authors of the bill. The very method of introducing thousands of bills makes it frequently true that a Legislator introduces a measure by request without being fully aware of its potential effect. Business interests which could get fair treatment in a direct and open approach to the Legislature are, in the racketeering type of lobbying, placed on the same foot- ing as interests seeking some improper or special consideration from the Legislature. The investigation showed both types of clientele dealing with the same lobbyist. Legitimate business interests were convinced by the lobbyist that they were in danger and that only the lobbyist could protect, them. The investigation of lobbyists showed the need for an effective registration of all legislative representatives, listing not only their clients but their fees. Further, the lobbyists should be required to file periodically during the Legislature a detailed statement of their expenditures. For evidence that the present method of registra- tion is ineffective, it is necessary to go no farther than Mr. Samish. He registered as the representative of the Motor Carriers Association, whereas investigation dis- closed that he actually represented be,er, liquor, racing, theatrical, mining, banking, railroad and other interests. An effective registration of lobbyists' clients, fees and expenditures will provide both the public and members of the Legislature with a means of judging a given lobbyist's interest in specific legislation. V. Pre- Election Influence of Legislators Background. Campaign contributions are an established part of the California election machin- ery. Under the Direct Primary Law, no limitation is placed upon the amount a candidate for nomination may spend in behalf of his candidacy. In the general elections, a limitation is placed on expenditures of candidates, but no effective limi- tation is placed on expenditures by others in his behalf. Since this investigation was directed at charges of corruption in the Legislature, its only concern with campaign contributions was in so far as such contributions might- -lead to corrupt 0£ improper representation in the Legislature. What is reported here is not intended to represent an exhaustive investigation of campaign contributions in California. It is merely a report on specific cases, which developed incidentally to other phases of the inquiry more directly concerned with corruption. If any individual, firm or group appears to be singled out in connection with cam- paign contributions, it is not because such was the intent of the investigators. Well aware of the common practice of campaign contributions by individuals, groups and businesses, the investigators were forced by the scope of their work to confine themselves to detailed inquiry into cases arising in connection with other investi- gative work. In this phase of the investigation, an effort was made to apply to campaign contributions the testing question : "Was the contribution made for the purpose of influencing the Legisla- tor or prospective Legislator to adopt a definite attitude on specific legis- lation, or to adopt a friendly attitude toward an individual or group poten- tially concerned with specific legislation?" INVESTIGATION. Arthur H. Samish, San Francisco. Campaign Contributions : Evidence reported under the section, "Lobbyist," is here summarized from the viewpoint of campaign contributions and other preelection influence of legislators. Mr. Samish, who informed the grand jury that he represented all phases of the alcoholic beverage industry in California, received from the brewery industry alone April 4, 1939] Senate Journal 1141 during parts of the years 1935, 1936, 1937 and 1938 a total of $97,619.47 (exclusive of salary and fees) for the admitted purpose- of "helping the right candidate be elected to the Legislature and other elective offices where the elective official may be important to this particular industry." In the current election year Mr. Samish had available a total of $58,287.30 to spend as he saw fit on campaigns. On July 8 Carl Schuster, president of the Brewers Institute, was questioned before the grand jury on the matter of checks to "cash" which Mr. Schuster had co-signed with two other directors for Mr. Samish. "Q. Do you recall * * * being a co-signer of the checks to cash in the aggregate of $36,512.00? A. I don't recall the amount. I did sign checks as approved by Mr. Samish. q * * * Was there ever any discussion at which you were present with respect to the use of which those checks payable to cash were to be put? A. Not directly * * * they have * * * turned the entire matter of handling that phase of it over to Mr. Samish. Q. The immediate question was whether there was any discussion in your presence with respect to the intended use to which any of those cash withdrawals were to be put or the actual use to which they had been put? A. No, sir. Q. Well, in other words — the special account of the California State Brewers' Institute in the Anglo Bank was an account that was in the entire control of Mr. Samish to disburse as he pleased? A. Yes, sir. Q. Without any accounting whatever to. anybody? A. Yes. Q. In other words, the remaining $28,000 is there to be withdrawn at any time Mr. Samish wants for any purpose he wants and without any explana- tion or statement to anybody why he wants it or what he is going to do with it? Is that correct? A. That is correct." Keeping in mind that Mr. Samish had available during the period under con- sideration nearly $100,000 for political expenditures, and that he was in position to draw checks for cash solely on his own volition, the question naturally arises — to whom he provided campaign funds? In all this period, only two candidates for the Legislature — Assemblyman William B. Hornblower, San Francisco and Assem- blyman John Francis Sheehan, San Francisco — acknowledged contributions attribut- able to Mr. Samish. (Assemblyman Hornblower acknowledged a direct contribution from Mr. Samish and Assemblyman Sheehan acknowledged a contribution from Frank X. Flynn, an employee of Mr. Samish.) Assemblyman Charles Hunt, Los Angeles, acknowledged receipt of $200 from the "California Brewers Association" in the 1936 primary. And Mr. Samish himself did not remember to what candidates for the Legisla- ture he had made contributions. While admitting he had made a great many of these contributions, Mr. Samish was so evasive in answers to questions attempting to elicit names that Grand Juror John Adams said : "I think, Mr. Foreman, that the witness is thoroughly avoiding answering questions. That ought to be clear enough to anyone." When questioned as to cash items totaling $28,000 which he withdrew during the election months of 1938, Mr. Samish testified tjiat part of the money was used for Legislative campaigns — again he could not name a single candidate. He did recall that he had assisted in financing the primary campaign for GoYernor of George J. Hatfield, San Francisco. One form of direct aid to" candidates indicated by investigation was shown in evidence that William Jasper, Los Angeles, an employe of Mr. Samish, contributed $500 to the Democratic Central Committee. In addition, Mr. Jasper paid for direct mail advertising for the candidacy of Assemblyman C. Don Field, Glendale candidate. In the 1936 campaign literature was forwarded to every registered Democrat in the 43d District, urging the candidacy of Assemblyman Field. Litera- ture carried the postal permit issued to Mr: Samish's organization. In conversations in his office Mr. Samish admitted that , he - was helping carry the pay roll of the campaign of Andrew J. Gallagher, candidate for the Board of Equalization in the San Francisco district. At the same time Mr. Samish was 1142 Senate Journal [April 4, 1939 supporting the campaign of Mr. Gallagher's opponent, George Reilly of San Fran- cisco. One conversation between Mr. Samish and an office employee was : "Man : This radio stuff for Gallagher is * * * Samish : I told him what to do. I haven't heard anything to the contrary as yet. I don't thing it is necessary. Man : Let's give them some money for some spot announcements — they've got a pay roll to meet up there. Samish: I'll tell you something." (Interrupted by telephone call) (Quoting telephone conversation) : ( Samish : One of our friends just told me they needed some pay roll tomorrow and I said I'll take care of it. I'll take care of it, do you under- stand? I'll do everything I can because I like what he is doing, do you understand? Say, on Monday morning it's going to knock you off your — out of your office. Furthermore the ticket (referring to the San Francisco 'Chronicle's' indorsements) is coming out tonight, and boy you'll be there, you'll be there.)" Many of the disbursement records of Mr. Samish's numerous payments are in favor of an organization called "United California Industries." . Mr. Samish testi- fied this organization was set up to represent many branches of the alcoholic beverage industry in political campaigns. United California Industries informed its membership about candidates for public office. Mr. Samish, by his own state- ment, controls the policy of this organization. Incidentally, he explained that the alcoholic beverage industry has approximately 50,000 outlets in California. Prior to any election, Mr. Samish examines the field of candidates in an effort to determine which will be favorable to the alcoholic beverages industry. Each of the 5Q,000 outlets then is circularized and requested or ordered to support the candidates selected by Mr. Samish. Both California and eastern liquor groups contribute to the financing of this organization. Considering preelection influence of candidates for the Legislature, it should not be overlooked that Mr. Samish pays regular sums to Assemblymen Hornblower, San Francisco, and Lyon, Los Angeles, describing this money as legal fees. California Chain Store Association. Campaign Contributions : In the 1935 session of the Legislature, a bill introduced by Assemblymen Melvyn Cronin and Patrick J. McMurray, both of San Francisco, Assembly Bill No. 2365, was adopted establishing a graduated tax on chain stores. Effect of the act was deferred by a referendum, No. 22 on the 1936 ballot. The proposed chain store tax was decisively defeated by the voters of California. The California Chain Store Association filed with the Secretary of State a report reflecting expenditures in excess of $1,250,000 in the successful campaign against *4ie chain store tax. Records of the association revealed to investigators that approximately $1,290,000* was~spent by the association during this campaign. Originally the campaign of the chain stores was managed by the advertising firm of Lord and Thomas. The work subsequently was taken over by Braun and Company, public relations counselors. At the outset of the campaign, Lord and Tftomas conferred with a leading firm of accountants who established a complete set of books and records maintained under the supervision of the accounting firm. The records disclosed that during the 1936 campaign when members of the Legislature were running for election at the same time that the chain store tax campaign was being waged the California Chain Store Association made contribu- tions ranging from $100 to $700 to 57 candidates for the Legislature. Contribution checks were issued for 50 Assembly candidates and 7 Senate candidates. In 4 Assembly districts, contributions were issued for 2 rival candidates, reducing to 46 the net number of districts in which the Chain Store Association made contribu- tions to Assembly candidates. Thirteen candidates for the Legislature (12 Assembly, 1 Senate) for whom checks were drawn by the. Chain Store Association rejected the contribution and returned the checks. The election returns showed that sixteen candidates who accepted the Chain Store Association contributions were elected to the Assembly. Four candi- dates who accepted Chain Store Association contributions were elected to the Senate. The association made contributions to twenty-two unsuccessful candidates for the Assembly and two unsuccessful candidates for the Senate. If all of the Assemblymen to whom the Chain Store Association issued campaign checks had been elected, the association would have been in the position of having April 4, 1939] Senate Journal 1143 contributed to forty -six members out of the eighty members of the Assembly. If all of the Assembly candidates who accepted Chain Store Association contributions had been elected, the Association would have been in the position of having helped finance the campaign of thirty -fan*' members out of the eighty members of the Assembly. Records of the Chain Store Association showed the contributions and the dispo- sition of the checks. Checks, payable to "Primary Committee Campaign for ," were issued to and cashed by or in behalf of the following successful candidates : Amount 1936 Legislator District of Check Endorsed Check 7/20 Gene Flint 65A $200 Primary Campaign Committee for Gene Flint 7/20 Charles A. Hunt 45A $200 Charles A. Hunt 7/21 Henry P. Meehan 37A $250 Contribution to primary campaign, Henry P. Meehan 7/21 John A. Frazier 4A $250 John E. Frazier 7/21 Clinton J. Fulcher 2A $250 Primary Campaign Committee for Clinton J. Fulcher by L. D. Burk- ster 7/21 T. H. DeLap 10A $500 Primary Campaign Committee for T. H. DeLap, by P. M. Sanford 7/21 William M. Jones 51A $200 Campaign Committee for William Mosley Jones by S. B. Gach 7/21 Harry L. Parkman 21S $500 Primary Campaign Committee for Harry L. Parkman by Anthony Skorson (?) 8/10 Harry L. Parkman 21S $200 Campaign Committee by H. T. McCarthy 7/21 John B. McColl 5S $300 Primary Campaign Committee for John B. McColl by H. A. McColl 7/23 H. L. Poerpvoch 9S $300 Primary Committee for A. L. Pier- ovich by Bartley W. Cavanaugh 7/27 James B. Utt 74A $200 Primary Campaign Committee for James B. Utt by Fred W. May 7/27 Wilbur F. Gilbert 54A $200 Primary Campaign Committee for Wilbur F. Gilbert by Samuel B. Gach, Mgr. 7/29 Jack Carl Breenberg 61A $200 Jack Carl Greenberg see Treas. Sixty -first Dis- trict Council (Ernest O. Voigt?) 8/4 Frank G. Martin 48A $200 Primarv Campaign Committee for F. G. Martin, Ray E. Green, Treas. 8/4 Frank D. Laughlin 55A $200 Primary Campaign Committee for Frank D. Laughlin 8/4 Charles W. Lyon 59A $200 Primary Campaign Committee for Charles W. Lyon by Charles W. Lyon 8/4 Thomas J. Cunningham 56A $200 Primary Campaign Committee for Thomas. J. Cunningham by Ken- wood B. Roher 8/4 Frank J. Waters 58A $200 Primary Campaign Committee for Frank J. Waters by Frank J. 8/24 Charles Stream 80A $100 Primary Campaign Committee for Charles W. Stream by James B. Lent (?) Checks were issued to two rival candidates in the same district in tne- following instances : Amount 1936 Candidate District of Check Endorsed Check 7/17 Gilbert C. O'Tool 14A $250 Check cashed 7/29 Charles Banta 14A $150 Check cashed 7/7 Wilbur F. Gilbert__^ 54A $200 Check cashed 7/21 Harry A. Barbour 54A $200 Check cashed 8/4 Frank J. Waters__JJh5i___ 58A $200 Check cashed 8/4 Frank E. Dalin 58A $100 Check cashed 7/27 Augustus F. Hawkins_^_ 62A $200 Check canceled 7/21 Frederick M. Roberts 62A $100 Check cashed 1144 Senate Journal [April 4, 1939 Chocks were issued to and cashed by or in behalf of the following unsuccessful candidates : Amount 1986 Candidate District of Check Endorsed ,\*V 7/17 Gilbert C. O'Tool 14A(*) $250 Gilbert C. O'Tool V ,A 7/17 Averv C. Moore 18AM $250 Avery C. Moore ■ i 7/17 Helen Pairweather Burke. 37 A «*$250 Helen Fairweather Burke i *** "*fl 7/20 W. E. Winnebreiiner C>4Ai $250 Primary Campaign Committee for W. E. Winnebrennes 7/20 Carroll Parcher 42A .$100 Primary Campaign Committee for Carroll Parcher (' ■ e.e^. >•*-<. 7/20 Fred R. Drinkhouse 25A] $300 Primary Campaign Committee (4ylr#t~'<*' 7/29 Fred R. Drinkhouse 25A> , *c $200 for Fred Drinkhouse 8/18 Fred R. Drinkhouse 25A> $200 by W. P. Caubu (?) 7/20 Franklvn M. O'Brien $250 Primary Campaign for M*-M*rr»*- 8/18 Franklvn M. O'Brien 24A5 c $200 Franklyn M. O'Brien by ' ~ L. M. Wollitz, Treasurer 7/21 Richard L. P. Bigelbw 7S?v$300 Primary Campaign Committee U*wM »<< s is Ri,-| 1;1 rd L. P. Bigeb.w 7S.5 $200 by C. C. Martin (?) ' 7/21 Harry ,\. Barbour 54A -* $200 Harry A. Barbour c&*--6./W •««•/ 7/21 Frederick M. Roberts 62A w $100 New Age Dispatch Co. by Fred- . erick M. Roberts, Pub. (a*— •rf*~>'"-i ■"■<■) 7/21 Walter Banish 29A) . v $300 Walter Barush 8/18 Walter Barush 20 A J ( "' $300 , . , \ '21 Otto Bowman 44A >~ $100 Otto Bowman (0 WW- —< f 7/27 Vance Auxier: 53A) t $100 Campaign Committee for ('*.'• <.*^«—J 8/17 Vance Auxier 53A] $100 Vance Auxier, Clarence Wilson, Treasurer 7/27 John W. Whitten 63A »»* $200 J-ohn W. Whitten 1* ' 7/29 Arthur D. Albaum 50A(fl)$100 Primary Campaign Committee for Arthur D. Albaum by Samuel D. Gach 7/20 Charles F. Banta 14A I*) SI 50 Charles F. Banta 7/31 Thomas P. Scollan 19S (*) $300 Primary Campaign Committee for , Thomas P. Scollan by E. Pickett A 8/4 Frank E. Dalin 58A.-c$100 Campaign Committee for Frank E. Dalin 8/5 James S. Baline 15A .«< $200 Primary Campaign Committee for James G. Baline by William AV. Hoffman, Chairman t>- i '■•>. »•«/•«-*- 8/17 Harry Lyons 64A $100 Harrv Lvons bv David Lyons 8/17 John R. MacFadden 46A <") $100 John R. MacFadden 8/17 Charles Lee Cronk 70A »<■ $100 Charles Lee Cronk !>-<:(*#*■ 8/17 Everett M. Glenn 8A f*)$100 Primary Campaign Committee for Everett Glenn by Anthony (?) J. Kennedy 8/21 Vincent Whelan 78A r*v $100 Primary Campaign for Vincent Whelan, Duncan Canes, Treas.*}-^ *''*■ **■ Checks were issued to but were returned by the following candidates : Amount 1936 Candidate District of Check not endorsed; Check returned. 7/21 Cecil King 67A $100 7/27 Augustus P. Hawkins 62A $200 7/29 James J. Rovle G6A $200 7/30 Ben Rosenthal 52A $200 8/4 Kent H. Redwine f>7A $200 8/5 Edgar W. Stow 31S $250 8/6 Harold F. Sawallisch 10A S200 8/17 Clarence R. Walker 77A $200 8/17 J. D. Garibaldi 33A $200 8/21 Adron A. Beene 30A $100 10/24 James B. Utt 75A $200 10/24 Wilson Dilworth 76A $200 8/5 Fred Reaves 68A $200 April 4, 1939] Senate Journal 1145 California election law requires candidates for the Legislature, as for other public office, to report campaign disbursements by themselves or of which they have knowl- edge. Only one candidate for the Legislature in 1936 acknowledged receipt of a con- tribution from the Chain Store Association. This was Assemblyman Frank D. Laughlin, Fifty-fifth District. Two candidates acknowledged contributions as coining from M. J. .Donohue. Donohue was a Braun & Company employee active in the anti-chain store tax campaign, but was not so identified in these acknowledgments. The acknowledg- ments were made by : Helen Fairweather Burke, Thirty-seventh District and Charles F. Banta, Fourteenth District. Three candidates acknowledged contributions as coining from the Allied Demo- crats Associates. They were Assemblyman William Moseley Jones, Fifty-first Dis- trict ; Arthur D. Albaum, Fiftieth District ; and Assemblyman Wilbur F. Gilbert, Fifty-fourth District. (In each of these cases, the Chain Store Association check bore the endorsement of Samuel B. Gach.) Thirty candidates failed to make any acknowledgment of a Chain Store Asso- ciation contribution. They were : Candidate District Candidate District W. E. Winnebrenner ._ 64A A. L. Pierovich 9S Gene Flint 65A Otto Bowman 44A Charles Hunt 45A James B. Utt 74A Carroll Parcher 42A Vance Auxier 53A Franklyn M. 0'Brien__ ._ 24 A Ernest 0. Voigt 61A Henry P. Meehan 17A Frank G. Marton 48A John E. Frazier 4A Frank E. Dalin 58A Clinton Fulcher 2A Charles W. Lyon 59A T. H. DeLap 17S Thomas J. Cunningham _ 56A Richard L. P. Bigelow. 7S Frank J. Waters 58A Harrv A. Barbour 54A James S. Baline 15A Harry L. Parkman 21S Harry Lyons _ 64A John B. McColl 5S Charles Lee Cronk 70A Walter Barusch 29A Charles W. Stream 80A Everett M. Glenn 8A Frederick M. Roberts— _ 62A In the 1936 campaign, the Chain Store Association's activity was divided into two general phases — political and educational. Under the category of educational expense, the books of the Association showed these payments to Assemblyman Ken- nett B. Dawson, San Francisco, an attorney : March 10, 1936, to November 2, 1936, for work in connection with Propo- sition 22 (Chain Store Tax Referendum) : Salary $3,500 00 Expenses 212 69 Expenses in connection with special session of the Legislature, May 23 to May 26 36 00 Total $3,748 69 In addition to his compensation and expense money from the Chain Store Asso- ciation, in connection with the special session of the Legislature, Assemblyman Dawson received his salary as a legislator and an $18 State expense allowance for attending the session. Assemblyman Melvyn Cronin, San Francisco, an advocate and co-author of chain store tax legislation, made the statement to investigators that he was told by Assemblyman William Moseley Jones, speaker of the 1937 session of the Legislature, that he, Jones, received approximately $7,000 from chain store sources for himself and other candidates for the Legislature in Southern California. Assemblyman Paul Peek of Los Angeles stated that Assemblyman Jones openly offered chain store campaign funds to candidates in Southern California. Assem- blyman Peek said that Assemblyman Jones told him, Assemblyman Peek, to see J. Y. Spear of the Chain Store Association in the Edison Building, Los Angeles, and that Mr. Spear would contribute $200 to $250 toward the expense of Assembly- man Peek's campaign. On the other side of the chain store tax fight in 1936 — that is, on the side of the proponents of Proposition 22, an examination of the records of the Anti-Monopoly League showed that Senator Chris Jespersen of Atascadero was paid $250 a month as manager of the league for a period of three months, September to November, 1936. Assemblyman Melvyn Cronin, San Francisco, appearing on the records as attorney for the league was paid $300 for legal services, plus $135.84 expenses. The question naturally arises : "What specific interest had chain stores in legis- lation at the session next ensuing after the 1936 elections?" The fact is that there Avas no anti-chain store legislation in the 1937 session. The Chain Store Association and the Anti-Monopoly League had an equal, if diametrically opposed interest in Assembly Resolution No. 42 introduced on January 1146 Senate Journal [April 4, 1939 19, 1987, by Assemblyman Croain. This resolution proposed an investigation of expenditures made by chain stores in the 193G campaign. Assemblyman Dawson, who had received compensation from the Chain Store Association, withheld unanimous consent in consideration *>f the resolution. On a motion to suspend the rules, Assemblymen Dawson and Jones, another "recipient of Chain Store Association . funds, as well as many other members of the Assembly, voted against the resolution. Statements of many members of the Assembly indi- cated they believed that Anti-Monopoly League expenditures in behalf of Proposi- tion 22 should receive equal scrutiny with Chain Store Association expenditures against Proposition 22. While in the session immediately following their general contributions to the campaigns of candidates for the Assembly the chain stores were not concerned with specific legislation of a major character, there remains the factor of political influ- ence of the candidates receiving contributions — influence which might have been used for or against the chain stores in the 1936 general election battle over Propo- sition 22. Liquor Interests. Campaign Contributions. In this case, the sum of $1,000 was admittedly placed at the disposal of a poten- tial candidate for the State Senate. This money was not only to be used in support of the candidate's campaign for the Senate, but carried the further restriction that the candidate withdraw from a contemplated campaign for the State Board of Equalization. The Board of Equalization, of course, is the agency administering State liquor laws. In February, 1938, John P. Dondero of Berkeley announced that he would be a candidate for the State Board of Equalization in the Second District. Fred E. Stewart of Oakland is the incumbent in that district. Mr. Dondero, first in state- ments to investigators and later in testimony June 2, 1938, before the grand jury, said that late in March he received a telephone call from Sil Oliva, San Francisco, a personal acquaintance of many years. Mr. Oliva informed Mr. Dondero tbat he, Mr. Ojiva, and Don Marshall, District Enforcement Chief in San Francisco for the Liquor Division of the State Board of Equalization, wanted to meet Dondero and discuss his campaign plans. After sev- eral telephone conversations, a meeting was arranged at the home of Mr. Dondero for March 29, 1938. Mr. Oliva arrived and with him was a man he introduced as "Frank O'Brien." Mr. Oliva introduced "Mr. O'Brien" as a lobbyist for the sar- dine industry. Mr. Oliva said that Mr. Marshall had not been able to come to the meeting. Mr. Oliva and "Mr. O'Brien" then undertook to pursuade Mr." Dondero not to make a race for the State Board of Equalization against Mr. Stewart. Among the arguments' they advanced was that Stewart intended to spend between $40,000 and $50,000 in the campaign, that the State Board of Equalization position paid only $5,000 and that the position, of State Senator from Alameda County was much more attractive to Mr. Dondero. Apparently assuming that Mr. Dondero was an attorney, Mr. Oliva and "Mr. O'Brien" urged that a position as State Senator would enable Mr. Dondero to obtain attractive legal employment. According to a stenographic record of the conversation which took place in Mr. Dondero's home, "Mr. O'Brien" said : "It isn't the $100 a month (salary of a State Legislator). It is the money you make being there. Look at Hornblower, he is attorney for Bay Meadows race track, doesn't do anything, gets $5,000 a year." When Mr. Dondero asked how much "Mr. O'Brien" and Mr. Oliva could raise to finance the campaign for the State Senate, "Mr. O'Brien" said thev could raise between $12,000 and $15,000. "Mr. O'Brien" said that he would see Arthur Samish, lobbyist representing liquor and other interests, and Walter Little and (?) Frank Arnold, the latter two representing the Southern Pacific. Mr. Dondero left with Mr. Oliva and "Mr. O'Brien" the impression that he was agreeing to consider their proposition, if they could raise the $12,000 or $15,000 referred to. That is, Mr. Dondero gave these two men the impression that if they financed the campaign for the State Senate adequately, Mr. Dondero would run for that office and not for' the State Board of Equalization. In the next few days Mr. Dondero had several meetings with Mr. Oliva at Mr. Oliva's San Francisco restaurant, The Exposition Grotto. Mr. Oliva assured Mr. Dondero the finances would be obtained for the State Senate campaign and said that one of the difficulties delaying matters was that one of the men concerned had been on vacation (Arthur Samish was away from the State of California at this time.) At one of the Exposition Grotto meetings Mr. Oliva advised Mr. Dondero that a Mr. Hanson and a Mr. Bottaro, both of Sacramento, were attempting to get some funds from Mr. Samish. Mr. Dondero testified that on May 17, 1938, as a result of telephone arrange- ment with Mr. Oliva, Mr. Dondero met Mr. Oliva and Mr. John J. Bottaro and April 4, 1939] Senate Journal 1147 Mr. H. L. Hanson, the latter two from Sacramento, in front of the Berkeley- branch of the Bank of America. Mr, Hanson and Mr. Bottaro presented business cards to W. R. Jenkins, vice president of the Bank of America, Berkeley branch, and said they were there to make an escrow in favor of Mr. Dondero to the effect that Mr. Dondero would receive $1,000 to be paid to him in the event he did not file for the office of Board of Equalization on or before the 26th day of June (the last legal filing date). Mr. Jenkins referred the group, including Mr. Oliva, Mr. Bottaro, Mr. Hanson and Mr. Dondero— to R. C. Carlson in the escrow department. Mr. Carlson testified that he prepared the escrow on May 17, 1938 (a copy of which is attached). In discussing the terms of the escrow, Mr. Jenkins said that he demurred at the condition that the $1,000 be paid in the event Mr. Dondero did not file for the State Board of Equalization. Mr. Jenkins objected to placing the bank in the position of determining whether or not Mr. Dondero had complied with the conditions of the escrow agreement. Ultimately, the escrow was written to the effect that the $1,000 would be released to Mr. Dondero upon the written instruc- tions of Mr, Bottaro. After the $1,000 was placed in escrow. Mr. Dondero asked Mr. Oliva about the balance of the $12,000' to $15,000 to finance the campaign for the State Senate. Mr. Dondero said tha't Mr. Oliva stated to him : "This $1,000 is to prove to you our good faith of backing you up for .the State Senatorship, and you will get the balance of it at the filing time." Further Mr. Oliva stated to Mr. Dondero that at the expiration of the filing period Mr. Stewart would make a statement that he supported Mr. Dondero for the State Senate and that Mr. Dondero at that time should make a statement he intended to support Mr. Stewart for the State Board of Equalization. Then, Mr. Oliva said, he had been assured by Mr. Bottaro that. Mr. Dondero would receive the balance of his campaign funds. Called before the grand jury in Sacramento Mr. Bottaro testified he was the head of the Argonaut Liquor Company, wholesalers, operating in Sacramento. Mr. Bottaro said he put up $500 of the $1,000 placed in escrow for Mr. Dondero because "us fellows in the liquor industry, we are willing to help fellows that are inclined to run for the Senate . . . not only here in Sacramento but any place." Mr. Bottaro's testimony was that he intended the $500 to be a campaign contribu- tion for Mr. Dondero, and that no statement was made concerning the Board of Equalization and Mr. Dondero's abandonment of his announced intention to run for the Board of Equalization. Mr. Hanson testified he was manager of the liquor department of McKesson- Kirk-Geary Company, with offices at Sacramento, California. He said Mr. Bottaro requested him to contribute $500 to be placed in escrow for Mr. Dondero, in the event he ran for the position of State Senator from Alameda County. Then Mr. Hanson likewise denied that any mention was made of the race for the Board of Equalization. He said that he put up. the $500 because, as a business man inter- ested in the liquor industry, he was in favor of seeing men elected to the State Senate who were liberal minded in regard to liquor. Mr. Hanson testified that his salary was $425 a month. Yet he insisted he placed the $500 as his share of the escrow fund as a personal contribution, not involving the firm. Investigation revealed the $500 came from the company funds as a personal advance. . A stenographic record of the conversation in Mr. Dondero's home on March 29, 1938, was made possible by the fact that on that date the investigators were advised rf the proposed meeting between Mr. Oliva, Mr. Marshall and Mr. Dondero. After M-\ Dondero had been interviewed by investigators, he was asked to go ahead with the conference in order that the full purport of the influences being brought to bear upon him could be made a matter' of record. A man introduced as "Mr. O'Brien" during the meeting among Mr. Oliva, Mr. Dondero and a third man at Mr. Dondero's home, was not immediately identified. No one in the sardine industry had ever encountered a "Mr. O'Brien." Subsequent investigation indicates that ."Mr. O'Brien" was Frank X. Flynn, who represents himself as a public relations man for the hard liquor industry, and who has been identified by Mr. Samish as the chauffeur, companion and business associate of Mr. Samish. Mr. Flynn has been paid some $24,000 a year by the hard liquor interests, although Mr. Samish testified that he, Mr. Samish, did all of the work for the hard liquor people. Mr, Flynn was sought for grand jury testimony. He has not been located. for subpena service. During Mr. Flynn's absence payments to his account from hard liquor interests have been continued. They -have "been endorsed by Miss. Dorothy Ready, secretary to Mr. Samish. Miss Ready then has used these funds to pay operating expenses of Mr. Samish's office. An indication of the inducements offered Mr. Dondero to abandon his plan to seek election to the Board of Equalization, and, instead run for the State Senate, is found in additional portions of the record of the conversation in Mr. Dondero's home March 29 : 1148 Senate Journal [April 4, 1939 "Frank O'Brien : You have a damn good chance to win. John Dondero: How much can you raise? Frank O'Brien : $12,000 maybe $15,000. Sil Oliva : We get more out of a Senator than we do out of the Board of Equalization. John Dondero: What about the State Senatorship? Are you sure you can raise the money ? Frank O'Brien : Sure. It's wide open, if you wait a few days longer. We certainly have to have someone friendly ... I think the time will come in the Senate when they have all attorneys. They pass "screwey" legislation in the Assembly and we stop 'em in the Senate. DeLap, he make's $300 a month being an. attorney for the Standard Oil Company. Hornblower makes $5,000 a year as an attorney for Bay Meadows. Sil Oliva : The legal work is big if you're a Senator. Ha&nk O'Brien : Yeah, they all do it. You have to give it to 'em. Sil Oliva : You'd make more money as a Senator from law. Hornblower takes care of motor vehicles' at $300 a month and $5,000 for the race track." Commercial Fishing Interests. Campaign Contributions. A simple illustration of the circumstances under which some campaign contribu- tions are made is -seen in the following letter, obtained by investigators during the course of inquiry into activities of Assemblyman Hunt of Los Angeles. "San Pedro, California, July 20, 1936. Charley Hunt, 4122 Berenice Ave., Los Angeles, California. Dear Sir: Having been favored with, your address I am taking the liberty to write a few words. We remember what you did in the past for our Fishermen's organiza- tion, and I hope you do the same in the future, to use any possibilty you can to try to help the fishermen's. Enclosed you will find a check for two hundred dollars ($200) to help you out for your campaign. I hope everything will come out okey regarding your campaign. I am your respectfully, ITALIAN FISHERMEN'S PROTECTIVE ASSOCIATION By V. De Luoa, Secretary." An examination of the records of the Italian Fishermen's Protective Association showed these 1830 campaign contributions: Date Check No. Payable to Amount July 29,1936 112 Assemblyman Ohas. Hunt $200 00 July 27, 1936 117 Assemblyman Cecil R. King $100 00 Aug. 1,1936 119 Assemblyman Fred "Reaves $100 00 Aug. 5, 1936 120 Assemblyman J. P. Rawls $100 00 Mr. De Luca, secretary of the Association, told investigators that both Assembly- man Hunt and Assemblyman King .personally had solicited their contributions. In the 1937 session of the Legislature, the Italian Fishermen's Association opposed Senate Bill No. 519 (restricting operations of floating sardine reduction plants.) Assemblyman Hunt and Assemblyman King voted against the bill. Evidence that one member of the Legislature had accepted a campaign contribution which he, himself, considered committed his vote on a piece of commercial fishing legislation was obtained from Argylle Campbell of Monterey, an attorney repre- senting commercial fishermen and a former State Chairman of the Democratic Central Committee. The legislation in question was Senate Bill No. 519 (see above.) Mr. Campbell favored the Bill. He communicated with United States Senator William Gibbs McAdoo, who favored Federal legislation similar in purpose to Senate Bill No. 519. Since Senator McAdoo was titular head of the Democratic party in California, Mr. Campbell asked that the Senator attempt to convince some of the Southern Cali- fornia Democratic Assemblymen that they should abandon their opposition to the Bill. * Mr. Campbell was / present when Dean Warner of the Los Angeles law firm of McAdoo, Neblett and Warner, had a telephone conversation with Senator McAdoo. Mr. Campbell said Mr. Warner stated to Senator McAdoo, in substance : That Mr. Warner had summoned to his Sacramento office Assemblyman Ernes't Voigt, Los Angeles, in connection with Assemblyman Voigt's opposition to Senate Bill No. 519; that Assemblyman Voigt had informed Mr. Warner he had accepted campaign funds from interests opposing Senate Bill No. 519 and that, therefore, Assemblyman Voigt considered himself committed to oppose the bill. This measure passed the Senate, was defeated in the Assembly. Its provisions were enacted via the initiative at the 1938 general election. April 4, . 1939] Senate Journal 1149 Findings. Evidence of pre-election influence of legislators in this investigation manifested itself in two general forms. The first and most; widespread was the practice of election campaign support, in cash or in the use of political machinery. The second was the practice of extending favors, financial or otherwise, to legislators or candi- dates for the Legislature, apart from specific campaign assistance. In both of these practices, it became evident, the dangers lie in the lack of a complete public record, fn other words, except through an investigation of this type it has been impossible for the public to know those interests to which, an individual legislator may be indebted. It is obvious that in most instances a pre-election contribution or favor extended a candidate for election or re-election carries with it some degree of implied obliga- tion — both in the mind of the contributor and in the mind of the recipient. A simple example of the attitude of a campaign contributor is found in a letter from V. De Lucca, secretary of the Italian Fishermen's Protective Association, to Assemblyman Charles Hunt, Los Angeles, enclosing a campaign contribution. The letter said : "We remember what you did in the past for our fishermen's organiza- tion and I hope you do the same in the future, to use any possibility you can to try to help the fishermen's." As an example of the attitude of a recipient of a campaign contribution there is the evidence that Assemblyman Gene Flint, Los Angeles, went .to the 1935 Legislature openly stating to his friends that some $600 in campaign funds received from an individual interested in alcoholic beverage legislation obligated him, Flint, to sponsor bills in the interests of that individual. Such a feeling of obligation on the part of a legislator, coupled with an anticipa- tion of obligation on the part of the contributor, might be of little importance in one or two isolated cases. A potential danger of the system becomes instantly apparent when considered in the light of the fact that one lobbyist in the years 1935-1938 had at his disposal for campaign contributions and similar political use a total sum in excess of $97,000. This lobbyist was Arthur H. Samish,- who said most of this money went for campaign purposes — candidates and issues — the detail of which he could not recall. Turning to the influences on legislators of the second form of obligation, the investigation disclosed payment of substantial fees by Mr. Samish, the lobbyist, to at least two members of the Assembly who in private life were attorneys. There have been other forms of similar assistance — employment, the general practice of entertainment, etc. Some sense of obligation is inevitable in this type of assistance when it becomes general practice. With one conspicuous . exception, the investigators found a complete lack of accounting for campaign contributions. This applied both to the contributors and to the recipients. In the case of Mr. Samish and the $97,000 at his disposal between 1935-1938, the first point of significance is that both he and his clients in this account (California State Brewers Institute) testified that none of this money was subject to detailed accounting by the organization providing the funds. Since this is not ordinary business practice in dealing with large sums, it carries the impli- cation that the money was not to be used for any ordinary purpose. Mr. Samish testified that he withdrew sums from this fund at his own discretion — frequently in cash — and that his only report to his principals was the statement of the amount of each withdrawal and the payee showing on the face of the check. Practice was to make these statements about every thirty days. After that Mr. Samish destroyed the checks, again a deviation from ordinary business practice. Mr. Samish, of course, was not the only substantial contributor to political campaigns. Other lobbyists and many organizations make contributions. In the case of the major steam railroads, an examination was made of the financial records of Walter J. Little, lobbyist for the railroads, and of the Southern Pacific Company, the largest single company in the railroad group which Mr. Little represents. Neither Mr. Little's records nor those of the Southern Pacific revealed any campaign contributions. In the case of the oil industry, a search of the records of the Standard Oil Company and a partial investigation of the California Gas and Oil Association failed to disclose any campaign contributions. The obvious finding is that Mr. Samish, the railroad group and the oil group all made campaign contributions of which there is no adequate record. On the other hand the investigation found in the books of the California Chain Store Association a complete record of contributions made to candidates for. the Legislature in 1936. If in the course of this report the. fact that the chain* store association kept a record showing many contributions to candidates for the Legislature makes it appear that this group was engaging in a practice not common to large industries and business organizations, such is not the fact. It is the fact that the chain store association met the first requirement toward a complete accounting of campaign contributions by maintaining in its own books a record of each contribution. But the chain store association was not required to report and did not report to any public agency the detail of these contributions. 1150 Senate Journal [April 4, 1939 That was the obligation of the candidates, receiving a contribution under the present election law. This part of the purity of elections law obviously has broken down. In only two instances were investigators able to find candidates acknowledg- ing contributions from Mr. Samish, who had the vast political fund. Likewise, only one candidate acknowledged a contribution from the chain store association during 1936 when the association, itself, recorded issuance of 57 campaign contri- bution checks, 13 of which were returned uncashed by the candidates. It is clear that effective statutory compulsion must be placed upon campaign contributors to report each contribution to the Secretary of State. To complete the protection pf the public, the purity of elections" laws need revision to enforce a report on all contributions received by all candidates. Any such provision must be broad enough to secure an accounting on contributions received by a conSmittee or an individual in behalf of a candidate. Such a public accounting by the con- tributor and by the recipient should not interfere with legitimate support of candidates for public office. This will give the public an opportunity of scrutinizing the possible obligations of each elected official, and will place each official on notice that the public may choose to examine his official acts in the light of his financial supporters. Respectfully submitted. EDWIN N. ATHERTON & ASSOCIATES. By H. R. Philbrick. Exhibit A. Senate Concurrent Resolution No. 49 Dated May 27, 1937 House Resolution No. 190 Dated May 27, 1937 Whereas, Certain statements have been made within and without the legislative halls to the effect that corruption exists within the membership of the Legislature, and that persons have attempted to influence legislation by resorting to improper methods and means, and specifically on the evening of May 26, 1937, the Senator from Los Angeles charged that he had evidence of corruption affecting members of the Assembly but in no way affecting members of the Senate ; and Whereas, The Senate considers it the solemn obligation of any member of either house of the Legislature having or believing that he has information as to the commission or asserted commission of any criminal offense by another member of the Legislature, to furnish that information and all details thereof promptly and forthwith to the Attorney General, who is the chief law officer of the State, and to the district attorney of the county wherein the offense may have occurred ; and Whereas, It is deemed the duty of the Attorney General as such chief law officer and of the district attorney of the county where any such offense may have occurred promptly and exhaustively to investigate all pertinent facts and vigorously to prosecute the offenders in the appropriate courts if the investigation indicates it is reasonably probable that a criminal offense has been committed ; and Whereas, It seems inappropriate for the Legislature or either house thereof to undertake to investigate itself in such a case ; now, therefore, be it Resolved by the Senate of the State of California, That the Attorney General of the State and the district attorney of any county in which any such offense is asserted to have occurred be and they are hereby requested and urged to take cognizance of the making of such statements and charges, investigate thoroughly and vigorously to the fullest extent within their power every phase of the subject of this resolution, and promptly bring to the bar of justice any member of the Legislature and any other person who may appear to have committed any such offense. Motion. Senator Rich moved that certified copies of the above resolution be transmitted to the Attorney General, the district attorney for Sacramento County, and to the Assembly. Motion carried, and such was the order. Exhibit B. Petition in the Superior Court of the State of California in and for the County of Sacramento. In the Matter of the Investigation \ by the Grand Jury of the County of / Sacramento, State of California, ( of / Matters Affecting the General Public \ Welfare. ) To the Honorable, the Superior Court of the State of California, in and for the County of Sacramento: Whereas, The grand jury of the county of Sacramento, State of California, is April 4, 1939] Senate Journal 1151 about to conduct an investigation into a matter affecting the general public welfare and which respects matters involving the alleged corruption, misfeasance or mal- feasance in office oi dereliction of duty of public officials, to wit : Members of the Legislature of the State of California ; and Whereas, It is the desire of the District Attorney of the county of Sacramento, State of California, and of the grand jury of said county of Sacramento, that said session or sessions of said investigation be conducted open to the public; Now, therefore, it is respectfully requested by the district attorney of the county of Sacramento, State of California, and by the grand jury of said county acting through its foreman, that this honorable court make its order that said session or sessions of said grand jury for said investigation be conducted open to the puhlic. OTIS D. BABCOCK, District Attorney of the County of Sacramento, State of California. J. L. R. MARSH, Foreman, Grand Jury of the County of Sacramento, State of California. Exhibit C. Order of Superior Cou»t of Sacramento County. It appearing to the court and the court finding that the subject of the investiga- tion by the grand jury of the county of Sacramento, State of California, relative to certain matters respecting the alleged corruption, misfeasance or malfeasance in office or dereliction of duty of public officials, to wit : Members of the Legislature of the State of California, is one affecting the general public welfare ; It is Therefore Ordered that said session or sessions of the grand jury 'of the county of Sacramento, State of California, relative to the investigation of the above mentioned matters be conducted in a session or sessions open to the public. The District Court of Appeal, Third Appellate District, held in Samish v. Supe- rior Court, et al, 95 California Appellate Decisions 101 (hearing denied by the Supreme Court), that the foregoing invested the grand jury of Sacramento County with jurisdiction to conduct the inquiry. Exhibit D. Otis D. Babcock, District Attorney Office of District Attorney of Sacramento County Sacramento County Court House, Sacramento, California, June 6th, 1938 Honorable Frank F. Merriam, Governor, State of California, State Capitol, Sacramento, California. Dear Sir : The 1937 session of the State Legislature, by joint resolution, called upon the district attorney of Sacramento County to conduct an investigation into charges of corruption in the Legislature. Since then, Sacramento County has pressed to the limit of its resources the investigation of and prosecution of corrupt practices within the law-making bodies of the .State of California. As a result of the investigation which has been made under my direction, a mass of evidence and information has been gathered concerning practices in the Legisla- ture inimical to the welfare of the State. In my opinion, in certain cases, a criminal prosecution should follow. In other cases, there should be a full public airing in order that remedial measures protecting the public may be invoked. The scope of the investigation is state-wide. Evidence has been obtained in all parts of the State, although the focal point has been Sacramento where the Legis- lature convenes. As an example : In one case, the facts of which have been pre- sented to the Sacramento grand jury, money was appropriated in Monterey to defeat legislation ; money was paid in San Francisco to a member of the Legislature and the legislation was defeated in Sacramento. Since the commencement of public grand jury hearings at Sacramento, the district attorney and the grand jury have received many demands from groups and indi- viduals scattered throughout the State, to investigate alleged charges of legislative corruption. These demands have overtaxed the financial resources of this office. Heretofore the work has been financed from the district attorney's secret investi- gation fund. That fund is now practically exhausted. On July 1st, this fund will be replenished. I am willing to pledge to this investi- gation all of this fund except the minimum necessary for normal county investigative purposes. The law prevents the use of the district attorney's special investigation fund for the employment of special counsel. This is a state-wide investigation and the facilities of my office are intended only for county law enforcement. Those facilities have been overstrained by the work of this investigation. Special counsel is imperative. Therefore, I urge that you, as Governor of the State of California, make available to tEe district attorney of Sacramento County, sufficient funds to employ special counsel and to complete the investigation. The Legislature demanded this investigation. Sacramento County has attempted to comply with the demand. The people of the entire State of California are entitled to have each charge of corruption verified or disproven and, where possible, 1152 Senate Journal [April 4, 1939 remedial steps suggested by the grand jury. As district attorney of Sacramento County, I am willing to go forward with the investigation within the limited resources of my office. Respectfully yours, (Signed) OTIS D. BABCOCK, District Attorney. ODB :H Exhibit E. Statement of Governor Frank F. Merriam. Governor's Office, State Building, San Francisco, June 6, 1938. At the request ot Otis D. Babcock, district attorney of Sacramento County, and the Sacramento County grand jury, I am making available immediately $5,000 for use in employing special counsel in connection with the investigation of unlawful and improper practices in the State Legislature. Appointment of the special counsel will be made by District Attorney Babcock. The California Legislature in May, 1937, by joint resolution of the Senate and the Assembly, •called upon the district attorney of Sacramento County to investigate charges of corruption in the Legislature. The district attorney has informed me, in the attached letter, that he has carried forward this statewide investigation within the limits of the funds which Sacramento County makes available for such purposes. I am informed that the district attorney is prohibited by law from using his special investigating fund to employ special counsel. The district attorney has advised me that the proper completion of the investi- gation ordered by the Legislature requires employment of special legal assistance. I am mindful that any and all charges and rumors affecting an agency of government must be the concern of government ,as a whole. The public interest demands that when such charges and rumors arise, they are fully investigated to the end that those which are false are proven false, and those which are true are fully exposed and the situation corrected. I am sure that the Legislature itself, as indicated by its joint resolution, is aware that any cloud or suspicion must be dispersed by thorough investigation. Only in that way can those who are innocent be assured of public vindication. As in the past, this investigation will remain under the direction of District Attorney Babcock. I am complying, as Governor, with his special request for funds for the definite purpose of employing special counsel. District Attorney Babcock has assured me that further investigation work will be financed from funds made available to him by his County. My only concern is tha*t the investigation be thoroughly prosecuted, without regard whom it may affect. I have informed District Attorney Babcock that when and if the $5,000 alloca- tion is exhausted, he may bring to me for my consideration a request for further State funds. Exhibit F. APPOINTMENT IN THE SUPERIOR COURT OF THE STATE OF CALIFORNIA IN AND FOR THE COUNTY OF SACRAMENTO IN THE MATTER OF THE INVESTIGATION \ BY THE GRAND JURY OF THE COUNTY OF I SACRAMENTO, STATE OF CALIFORNIA, of MATTERS AFFECTING THE GENERAL PUBLIC WELFARE. / In the matter of the investigation now being conducted by the Grand Jury of the County of Sacramento, State of California, in sessions open to the public, under and pursuant to the Order of the above entitled court, in the above entitled matter, which Order was filed May 18th, 1938, I hereby appoint GEORGE M. NAUS, a member of the bar of the State of California, as my associate, to assist me as District Attorney of the County of Sacramento, State of California, in the examination of witnesses and in the conduct of the investigation in the above entitled matter, to the same extent and as fully as is permitted me, under and pursuant to Section 925a of the Penal Code of California. DATED : June 15th, 1938. OTIS D. BABCOCK District Attorney of the County of Sacramento, State of California. ACCEPTANCE I hereby accept the foregoing appointment. GEORGE M. NAUS. Excerpt from California Senate Journal of page 1104. April 5, 1939. Motion Sjmafc^Seaw^ll moved that Senate Journal of Tuesday, April 4, be cor- rected by striking out the inadvertantly entered Philbrick Report accompany- ing the Governor's letter of April 3rd, on the ground that said report is not a public document but a prejudiced and unsupported confidential report of a private detective. Motion carried and such was the order. UNIVERSITY OF CALIFORNIA LIBRARY Los Angeles This book is DUE on the last date stamped below. REC'D LD-URL _ fi, MAR 24^ MAR 20 1971 £ APR 6 19T2 ***** nCT 18 \3T 20m-7,'67(H3149s4) REC'D LC-UR6 FEB 2 3 1978 KECD LD-UW JS AUG 51985 JUL 241985