11:16 PM PST on Friday, February 4, 2011

By RICHARD K. DE ATLEY and DUG BEGLEY
The Press-Enterprise

Special Section: San Jacinto Corruption Probe

A judge Friday tentatively dismissed conspiracy charges against seven of the nine defendants named in a sweeping 2009 political corruption indictment involving San Jacinto politicians and developers.

Riverside County Superior Court Judge Michele Levine said it appeared there was insufficient evidence to show a plot among the seven to engage in illegal acts such as hiding repayments of illicit political contributions.

The 155-count indictment named four then-members of the San Jacinto City Council, plus developers, business associates and a former member of the San Jacinto Unified School District board.

While the seven defendants know each other, “mere association does not a conspiracy make,” the judge said. She said some of the accused may have faced “a hodgepodge of acts and statements by others” unknown to them.

But she said it was a different matter when it came to developer Stephen Holgate and former San Jacinto city councilman and state Assembly candidate Jim Ayres.

Prosecutors say Ayres and Holgate illegally diverted money to Ayres’ 2006 state Assembly campaign by claiming it came from other donors, when it in fact came from Holgate.

Levine said there was grand jury testimony of communication and coordination between the two. “They are liable as co-conspirators in this court’s mind,” Levine ruled.

A final ruling will come in May.

If it stands, the dismissal of the conspiracy count may have a ripple effect throughout the other charges, attorneys said.

“I understand the implications of pulling away from the framework (of the case) a mainstay of the prosecution….and what it would mean to the other counts,” Levine said.

The indictment includes 56 felonies and 99 misdemeanors including money laundering, tax fraud, bribery, perjury and filing false government documents.

The seven defendants who may be affected by Levine’s tentative ruling are three other former San Jacinto councilmen: John Mansperger, Dale Stubblefield and James Potts.

They were indicted in November 2009 along with former school board member Nancy Ayres and businessmen Robert Osborne, Byron Ellison and Scott Shaull. Nancy Ayres is the wife of Jim Ayres.

The defendants are accused of a complex scheme of kickbacks to campaign contributors or outright deception on campaign forms.

Holgate and Osborne are accused of conspiring with Jim and Nancy Ayres and the other council members to hide the fact that Holgate and Osborne were the true source of campaign contributions.

More than a dozen residents and businesses made contributions ranging from $800 to $3,300 to Jim Ayres’ unsuccessful 2006 bid for the state Assembly’s 65th District.

Holgate, Osborne and others included in the indictment would then reimburse those residents and businesses for the amount.

In two other instances, the indictment alleges, Holgate was the true source of more than $81,000 in loans that Ayres claimed he made to his own campaign in May and June 2006 and another $21,000 in August, September and October of the same year.

Investigators also claim Ayres sold Shaull a home for an above-market price, resulting in an almost $90,000 “gift” to Ayres. Prosecutors said Holgate secretly bankrolled the home purchase by Shaull.

Prosecution and defense attorneys, as well as the judge, said they could not immediately tell which charges might be affected by the tentative decision.

Levine told supervising deputy district attorney Deborah Lucky to file papers that line up each count, each defendant, and each alleged act to clarify the matter.

Levine said she made her own attempt but “it was like wrestling with Jell-O.”

Lucky would not speculate on what she would present to Levine to comply with the judge’s order.

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