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Chang-Perata Connection Raises Questions

By Robert Gammon
Originally published in the Oakland Tribune
February 27, 2004

[Anybody But Perata Website Note: This article was written at the time when Henry Chang was running for re-election as At-Large City Councilmember of the City of Oakland. The position of Oakland Vice Mayor is a largely ceremonial office selected by Oakland City Councilmembers from among their own members.]

In addition to having the full backing of Don Perata's political machine, Oakland Vice Mayor Henry Chang Jr. has hired the state senator's son, Nick Perata, in a deal that raises questions about nepotism and the proper use of campaign funds.

Chang, who is in a tough re-election fight with political newcomer Melanie Shelby, has paid Nick Perata's company, Exit Strategies, $59,212 for political consulting, campaign literature and mailings, and polling and research, according to campaign finance records.

As reported previously in the Oakland Tribune, campaign funds steered toward Exit Strategies has sparked concerns that some of the money really ends up in the state senator's pocket.

That's because Exit Strategies rents Alameda office space from Don Perata, Nick Perata purchased two homes from his father in the past two years and until 2003, the younger Perata paid his father rent for the use of another Perata family home on the Island, according to public records and the senator's annual state-ments of economic interests.

Perata, D-Oakland, also handed $379,338 worth of campaign consulting work to Exit Strategies since 2000, averaging more than $90,000 annually, even during years the senator was not running for office, records show. Exit Strategies also was paid at least $105,000 from statewide initiatives and local measures backed by Perata since 2000.

Other than Chang and measures Don Perata supported, Exit Strategies had no other local clients the past few years, according to campaign records reviewed by the Tribune.

"It's nepotism," said Jim Knox, executive director of California Common Cause, on Perata's political and financial relationship with his son. "But it's not uncommon for politicians."

Chang on Thursday said he hired Nick Perata because "he does good work. I've used him before and I'll continue to use him."

Chang said the senator did not request that he employ his son. He also said he does not believe hiring Exit Strategies represents a payment to Perata nor does he think it will put him in the senator's good graces.

"He's already a good friend of mine," Chang said.

Perata spokesman Jayson Kinney also said Perata did not ask Chang to hire Exit Strategies.

Kinney said the amount of money Perata pays each year to his son, including $86,206 last year, is "fair market value" for the work Exit Strategies performs for such things as voter and fund-raising database management and fund-raising activities.

Kinney also said there is nothing wrong with Perata collecting rent from this son. Kinney said he did not know how much the younger Perata paid each month, but said he was sure "it's fair market value."

On his statements of economic interest filed with the Fair Political Practices Commission, Perata reported the rent he collected from 2000 to 2002 from his son and Exit Strategies for two Alameda properties was between$20,000 and $200,000 annually. The law does not require him to be more specific.

Last year, Exit Strategies stopped paying rent on one of the properties after Nick Perata purchased an Oakland home from his father for $472,000, public records show.

It was the second home Nick Perata bought from the senator in two years. Records show the younger Perata purchased in 2001 an Alameda home he used to rent from his father, using two loans his father signed, totaling $376,000. Don Perata reported in June 2003 that the loans were repaid, according to public records.

Chang's opponent for his At-Large seat, Melanie Shelby, said she was unaware of Chang's payments to Exit Strategies, and she declined to speak at length about them, saying only that she "always knew" she was running "against (Perata's) machine."

But one of Shelby's leading proponents, City Council-member Desley Brooks (Eastmont-Seminary), said Chang's decision to hire Nick Perata provides further evidence of his close ties with the senator.

"Henry (Chang) has done nothing more than be a vote for the machine (during his eight years on the council)," Brooks said.

Chang and Perata's allies are increasingly worried, Brooks said, that Shelby might win on Tuesday and thus further erode Perata's influence on the eight-member City Council.

Nick Perata did not return two phone calls Thursday seeking comment. In a 2001 interview, he said he was Exit Strategies' only employee. The company is not listed in the phone book.

The senator's financial relationship with Exit Strategies bears similarities to the business ties he has with another political consultant for which he received recent criticism.

Perata, the state Senate majority leader, has come under fire for steering more than $300,000 in consulting work to longtime friend Timothy Staples and then taking political consulting jobs from Staples in the past few years.

While acknowledging no wrongdoing, Perata said last week he was severing his business dealings with Staples following a series of articles in the San Francisco Chronicle.

Staples was involved in at least two bills written by Per-ata last year -- one designed to benefit car insurance companies and one that would have helped a company that claims it can recycle used diapers.

Both the insurance companies -- predominantly Mercury Insurance -- and the diaper company, Knowaste, pumped thousands of dollars into Perata's campaign coffers.

Mercury Insurance, as reported in the Tribune, also donated $75,000 to a statewide committee based in Oakland known as Community Leaders for Neighborhood Preservation. The committee was set-up last summer by local developer Phil Tagami, who is a Perata ally.

Perata killed the diaper bill after stories in the Tribune, and a judge threw out the insurance law in January, calling it illegal.

Finance records show Chang also has hired Staples in his campaign against Shelby, paying his companies $12,275.

Kinney said Thursday "no law was broken" and "no ethical standards" were violated in either the Staples case or with Exit Strategies.

According to the FPPC, there are no regulations governing business dealings, such as rental properties, between a political consultant and candidate.

Though it is illegal for a politician to enrich himself with campaign funds, using such funds to pay a family member to be a consultant and then collecting rent from, loaning money to or selling homes to that same family member also is not a conflict of interest -- unless that person does not provide bonafide services, according to Common Cause.

In addition to his son, Perata has assisted his daughter, Rebecca Perata-Rosati, with her political consulting company, Vox Populi. Perata's campaign paid Vox Populi $9,661.67 last year, records show. She lists her company's address as the Alameda home Nick Perata bought from his father in 2001.

Don Perata is seeking to become state Senate president next year, which would make him the second most powerful politician in the state after the governor.

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