Details revealed in lobbying case
Even before leaving office six years ago, a former aide to outgoing Mayor Ron Gonzales began a complex and illegal scheme to hide lobbying work that netted him millions, according to court documents obtained Friday by the Mercury News. As early as 1999, Tony Arreola, then the mayor's deputy chief of staff, set up his wife as the head of a corporation called Silicon Valley Strategies, prosecutors allege. Soon after leaving City Hall, they say, Arreola and another ex-Gonzales staffer, Sharanjit ``Sean'' Kali-Rai, went about lobbying, then hiding the income by shunting it to the dummy business.

Details revealed in lobbying case
EX-GONZALES STAFFERS ACCUSED OF CLOAKING MILLIONS IN WORK

By Sean Webby and John Woolfolk

Mercury News

Even before leaving office six years ago, a former aide to outgoing Mayor Ron Gonzales began a complex and illegal scheme to hide lobbying work that netted him millions, according to court documents obtained Friday by the Mercury News.

As early as 1999, Tony Arreola, then the mayor's deputy chief of staff, set up his wife as the head of a corporation called Silicon Valley Strategies, prosecutors allege. Soon after leaving City Hall, they say, Arreola and another ex-Gonzales staffer, Sharanjit ``Sean'' Kali-Rai, went about lobbying, then hiding the income by shunting it to the dummy business.

In one instance, the men allegedly received more than $326,000 in city funds intended for an affordable housing project by misrepresenting why they were paid. The criminal complaint also says a top local developer and an Arreola relative helped Arreola conceal his activities, but it was unclear from the allegations whether those men knew they were doing anything wrong.

The 26-page complaint accuses Arreola and Kali-Rai of conspiracy, perjury and grand theft for allegedly failing to report lobbying activity on behalf of developers and property owners soon after leaving City Hall.

``These former public officials were lobbying to the tune of over $2 million and flat out ignoring the law,'' said Assistant District Attorney Stephen Gibbons. San Jose's ``revolving door'' ordinance prohibits staffers from lobbying the city for a year after leaving City Hall.

The charges mark the second criminal complaint filed this year over City Hall ethics; Gonzales has been indicted on unrelated charges of conspiracy, bribery and misuse of public funds.

Arreola and Kali-Rai, who joined Gonzales' administration after his inauguration in 1999 and left in 2000, have declared their innocence. Their attorney, Craig Brown, said the complaint is based on allegations the city attorney lodged in 2004 and that a city commission later dismissed.

``This has to do with lobbying regulations that were in place at a certain time and that the city ethics commission and the city council and the city attorney's office decided were so vague and ambiguous as to be meaningless and unenforceable,'' Brown said. ``Nobody knew what they meant. Nobody knew whether they applied at all.''

But his clients face up to five years and four months in prison if convicted. Here is a closer look at the charges:

Grand theft charge

The grand theft charge arose out of concerns about $326,000 Arreola and Kali-Rai were supposedly paid as a ``finder's fee'' for introducing the buyer and seller on a subsidized housing project called Evans Lane. City investigators looking into the men's lobbying activities two years ago cited concerns that the money may have improperly come from public subsidies for the project.

Criminal investigators say that's what happened. According to an investigator's affidavit, developer Mark Lazzarini in February 2002 signed the ``finder's agreements'' to pay $203,000 to Silicon Valley Strategies and $123,250 to Atlantic Pacific National Corp., where Kali-Rai worked as a real estate broker.

In fact, authorities said, neither firm had anything to do with the Evans Lane transaction.

Evans Lane seller Sal Rubino told investigators that he and Lazzarini already knew each other and had discussed the property sale at a party without help from Arreola, Kali-Rai, Silicon Valley Strategies or Atlantic Pacific.

Investigators found Rubino had agreed to pay Arreola to lobby city officials for land-use changes on the project. Investigators also concluded that bogus ``finder's fees'' paid by Lazzarini came from money the city had put toward buying the Evans Lane property.

``There is no documentation that the city approved public funds to pay for lobbying expenses,'' the investigators' affidavit said, ``or that the funds could be used for that purpose.''

Lazzarini, now Arreola's business partner in a firm called DAL Properties, was unavailable for comment Friday, as was Rubino.

Prosecutors said they pieced together the puzzle after Arreola earlier this year testified before a grand jury investigating Gonzales. In that testimony, Arreola indicated he and Kali-Rai used ``finder's agreements'' to conceal lobbying work for another company, California Waste Solutions.

Defense attorney Brown would not discuss the Evans Lane project in detail but said his clients did nothing wrong.

Perjury charge

Despite allegedly working as lobbyists from 2001 onward, Arreola and Kali-Rai didn't register a single client as required until late 2003 and early 2004, respectively, the complaint said. But prosecutors said contracts, financial records and other documents turned up in searches of the men's homes and offices show they were paid during that time to work with city officials on land-use approvals.

When they finally registered, their sworn reports never mentioned the earlier lobbying work and listed just one client -- Clear Channel Outdoor -- leaving out many others, including the owners of East San Jose's Tropicana Shopping Center and residential developer KB Homes. After a series of Mercury News articles criticizing Arreola and other city lobbyists, the men disclosed additional clients but continued to leave off others.

Brown said his clients ``absolutely, positively'' did not knowingly make false statements when signing their registration and disclosure forms.

Conspiracy charge

The complaint accuses Arreola and Kali-Rai of 83 ``overt acts'' in which they conspired to hide their lobbying after leaving the mayor's office. Among them:

• When Arreola set up Silicon Valley Strategies in 1999, he falsely identified his wife as its sole agent to conceal his involvement and Kali-Rai's. Arreola later filed a city economic interest statement saying he had no position with the company.

• In November 2000, four months after leaving City Hall, Arreola set up an agreement worth thousands of dollars to secure an alcoholic beverage license for a supermarket. Arreola allegedly asked his cousin, Marin Arreola, to sign the agreement on behalf of Silicon Valley Strategies, even though Marin Arreola was not affiliated with the lobbying firm. Prosecutors would not say whether Marin Arreola, who at the time was president of the Hispanic Chamber of Commerce, is cooperating with the investigation; efforts to reach him Friday were unsuccessful.

• Between 2001 and 2003, Arreola and Kali-Rai were paid $500,000 to represent owners of the Tropicana Shopping Center in their fight against city seizure of the property. The men were not registered as lobbyists at the time.