Executives Link Lobbyist to Funds for Senator : Court: Witness denies donations to Paul Carpenter and others were bribes but admits there’s a ‘thin line.’

SACRAMENTO — Two former San Fernando Valley insurance company executives on Thursday testified that they always followed lobbyist Clayton R. Jackson’s recommendations on how to distribute thousands of dollars in campaign funds to state legislators, including former Sen. Paul B. Carpenter.

The contributions to Carpenter, who along with Jackson is being tried on federal corruption charges, were being made at the same time the Downey Democrat allegedly was illegally laundering funds to former Sen. Alan Robbins (D-Van Nuys).

In testimony in U.S. District Court, Robert Thompson, chief operating officer of Woodland Hills-based 20th Century Insurance Co. in the late 1980s, denied the contributions made at Jackson’s direction to Carpenter and others were bribes but acknowledged “there’s a pretty thin line.”

In an interview Thompson, now a Northridge insurance consultant, said Jackson’s fund-raising methods gnawed at him, but he “didn’t have the guts to fight the system” which he branded as “gentlemanly extortion.”

Upon reflection, he said he considered himself “conveniently naive” and now kicks himself “for not saying this system sucks.”

Jackson and Carpenter have pleaded innocent to charges of racketeering, mail fraud and laundering money. The trial, which ended its third week on Thursday, will resume next week with Jackson’s defense expected to start, possibly as early as Monday.

In testimony that ended Tuesday, Robbins said he orchestrated an elaborate scheme to illegally launder contributions from Jackson’s clients through Carpenter.

Robbins, now serving a two-year sentence after pleading guilty to corruption charges, said that starting about mid-1986 Carpenter acted as a middleman, paying out the money to the Goddard Co., a Santa Monica public relations firm, which illegally provided about $160,000 for his personal use.

As lobbyist for the Assn. of California Insurance Companies, Jackson mapped out campaign fund-raising budgets for the major trade group and for its members, who annually pledged a certain amount for campaign donations. The executives, most of whom are based outside Sacramento, relied on Jackson’s expertise about how to get things done in the Capitol.

Thompson testified that he always deferred to the advice of Jackson, the association’s lobbyist in legitimately earmarking this company’s campaign donation budget of about $50,000 a year.

Under questioning, he said he believed a $3,000 donation his company made on March 22, 1988, to Carpenter would have been spent on a campaign by Carpenter, who by then was in the middle of a term on the state Board of Equalization.

He said the contributions were needed to combat legislation sought by trial lawyers, the insurance industry’s main adversary in the Capitol.

Jackson would occasionally give industry leaders “pep talks” at which he indicated “you had to put up (money) if you were to survive in the game,” Thompson said.

Both Thompson and Gerald Kreger, president of Encino-based Republic Indemnity between 1984 and 1989, testified that they relied on Jackson’s recommendations for contributions 100% of the time. They and others denied that they were aware any of the money would be used for Robbins’ personal benefit.

At Jackson’s direction, Kreger testified, his firm made legal contributions of $100,000 a year. “I didn’t like all of them, but we sent them anyway,” he told the jury, as a way to legally influence the outcome of legislation and elections.

Kreger, who now lives in New Jersey, said he later concluded that the contribution system was ineffective. “It’s really a waste of time and money . . . pouring good money after bad.”

He also said he had never had any dealings with Robbins.

Acting as a government informant, Robbins in 1991 secretly recorded conversations with Jackson, who prosecutors contend offered the former Valley lawmaker a $250,000 bribe if he would switch jurisdiction of workers’ compensation legislation from the more hostile Senate Industrial Relations Committee to the friendlier confines of the Robbins-chaired Insurance, Claims and Corporations Committee.

To show that Jackson was actually raising the $250,000 during this period, prosecutors earlier this week questioned a Glendale insurance executive about conversations he had with Jackson in August, 1991.

James E. Little, president of Fremont Pacific Insurance Co., said he “felt uncomfortable” when Jackson asked him to pony up $50,000 to state Senate President Pro Tem David A. Roberti (D-Van Nuys) for a campaign to battle an initiative.

He said Jackson was asking for roughly $250,000 to set up a new industry trade association as well as getting together four executives to each contribute $50,000 to Roberti. He couldn’t recall where the money was intended to go but “it was something that was near and dear to the president pro tem’s heart.”

Little said that because it was such a large amount he had to think it over. “He wanted to leave with a check,” Little said. “I felt I was really having the arm put on me. I felt I was really being pressured.”

Times staff writer Cynthia H. Craft contributed to this story.