Convicted Paralegal Wove Tangled Web of Deceit : Crime: Authorities are investigating the former FBI informant’s operation of a clinic. He has a history of running scams.

It took a jury in Little Rock, Ark., an hour to convict Fred Celani of fraud recently, swiftly ending the latest scam by a baby-faced bear of a man described by authorities as among the nation’s most persuasive, inventive and irrepressible crooks.

But for the U.S. Justice Department officials who prosecuted him, the strange--and potentially embarrassing--saga of former FBI informant Frederick George Celani is far from over.

When Celani was arrested Oct. 14 on the fraud charges that led to his conviction last week, the blustery paralegal with the long criminal record was operating a legal center in North Hollywood representing hundreds of clients. Most were federal prison inmates and their families, who say they were victimized by Celani and his false promises of an overturned conviction or early release.

Federal authorities, responding to such complaints, are investigating in hopes of tracing what could be millions of dollars the defunct Center for Constitutional Law and Justice received from clients across the country. The State Bar of California also is investigating and has tried to help arrange counsel for the clients left in legal limbo when the center shut down with Celani’s arrest.

And, in a strange sidelight to the case, some elected officials and lawyers are wondering if Celani’s activities may have harmed the defense of Damian Monroe Williams, accused of beating trucker Reginald O. Denny in the Los Angeles riots last year. The legal center briefly represented Williams, whose trial began Wednesday in Los Angeles. After Celani’s arrest, he said he tried to sabotage Williams’ defense but a judge ruled that Celani and the center had not tainted the case beyond repair.

As disturbing as the allegations of defrauding inmates and their families are, some of Celani’s former associates and clients say they went to authorities as early as 1989 to allege that the ex-convict was masterminding a nationwide scam.

“What blows me away is, why didn’t anyone do anything?” asked paralegal Robert Richman, who complained to the FBI while working for a legal center Celani directed while imprisoned in Wisconsin in 1989. “They’ve been trailing him for years but letting him go about his business.”

Despite years of FBI investigations that followed him from state to state, federal authorities said Celani somehow continued a life of crime that appears to have escalated in scope and destructiveness even after he was imprisoned for fraud and racketeering in 1986.

Celani, 44, has an explanation for the freedom he enjoyed. After his arrest, and in his recent trial, he said he could not be prosecuted because he had been acting as a government operative. His Center for Constitutional Law and Justice was not a legal clinic for hapless inmates at all, he added, but a “secret intelligence group” controlled by Congress and the FBI.

Among other things, he told the judge and jury that he made sure the legal center represented Williams so he could help the government sabotage the defense.

Federal officials privately call such claims ridiculous. But they confirm that Celani was an informant for the FBI and a congressional watchdog subcommittee.

Now some people are wondering whether there really is something to Celani’s claims of government complicity. It’s either that, they suspect, or lack of interest or bumbling by authorities.

Or maybe, just like a lot of others, federal authorities have simply been outwitted by the dimple-chinned college dropout, who taught himself the law while in prison, and then devised ways to break it.

“It sounds like this guy not only was protected, but that some of his allegations may have truth to them,” said Rep. Maxine Waters (D-Los Angeles). “The circumstances are bizarre enough to raise some questions.”

FBI agents, federal prosecutors and Justice Department officials in Los Angeles and Washington have refused to comment on Celani’s activities and their investigations of him. Some government officials privately concede that Celani has repeatedly escaped prosecution because of the Byzantine web he has spun.

At 6 feet, 3 inches tall and 250 pounds, the imposing con man has a Svengali-like personality and a gift for involving so many unwitting associates in his alleged schemes that it is impossible to determine whom to prosecute, they say. Fond of using aliases, Celani became an expert at bending some laws without breaking them.

Celani’s criminal career began in the early 1970s, when he was convicted of conning investors in his hometown of Buffalo, N.Y., selling interests in a bogus $100-million waterfront development deal.

By 1981, Celani was out of prison and in Los Angeles setting up fraudulent business schemes, court records show. He played the role of a millionaire businessman, renting a $10,000-a-month house in Brentwood, collecting $345,000 worth of gold Krugerrands, buying sports cars, a speedboat and a Rolex watch.

In one scam, he and an associate went to Springfield, Ill., and took in $4 million by selling a “revolutionary” overnight package delivery service that didn’t exist, court records show.

“He is charismatic, charming, funny, brilliant--he sure overwhelmed me,” said his former crime partner, who served 42 months in prison. Now a Santa Monica retiree, he requested anonymity. “He became a major figure in that town. He could have run for mayor and won.”

Convicted in 1985 of racketeering and fraud, Celani was sentenced to 15 years in prison.

The federal prosecutor, in a court memo, described Celani as unrepentant, someone whose “frightening criminal boldness” would never cease.

Soon after he entered federal prison, authorities say, Celani approached government investigators to rat on a fellow inmate, Chicago mob boss Joseph (Joey the Clown) Lombardo, and to discuss his claims of corruption at a top-secret California military installation. Celani would later claim in court that his work as an informant gave him immunity from prosecution because he continued to participate in clandestine government conspiracies. But authorities say his role as an informant was limited to a handful of interviews between 1986 and 1988 that produced nothing of substance.

“My honest view of this guy is that he is a pathological liar with a grandiose view of the world and his place in it,” said one congressional investigator who asked not to be identified. “He just doesn’t know where to draw the line with his fabrications.”

While in prison, Celani launched, with the help of his wife, Mary, and others, the Wisconsin legal center known as the American Constitutional Coalition Foundation, which Celani helped direct even as he was transferred from prison to prison.

What Celani had been doing, according to former employees and alleged victims in complaints to authorities, was claim in newsletters and flyers sent throughout the federal prison system that his legal centers could use “unique civil rights legislation” to get inmates’ drug convictions thrown out or their sentences reduced. In reality, they allege, Celani’s magic formula was largely a series of baseless constitutional challenges.

Former attorneys at the various centers said they thought they were performing legitimate civil rights work by filing appeals for inmates, and that Celani handled all the financial details.

“He was a hope merchant,” said Alaleh Kamran, one of six lawyers Celani hired at the North Hollywood center. “He was selling hope to the hopeless.”

But after accepting fees of up to $50,000 each, little or no work was done on most cases, Celani’s former employees and clients say.

Celani would refer fellow inmates to the legal center, which his wife ran under an alias to hide Celani’s financial stake in it, former employees say. He would then stay in frequent contact with his wife and others on the outside, giving legal advice by phone and letter--to them and to clients, they add.

Classified FBI documents show Richman and his wife, who was also an employee, went to the Justice Department in 1989. They feared that the center was a front for illegal activities, including ripping off clients, and that Celani was connected to the mob.

“(Celani) claims he can do anything he wants to, call anybody he wants to, and do in anybody he wants to,” wrote an FBI agent of one interview with Richman on Nov. 8, 1989.

By late 1989, even a Wisconsin assistant attorney general formally alerted federal prosecutors in that state. They reported back that they and U.S. Postal Service inspectors already had Celani under investigation. The FBI also acknowledged receiving seven cassette tapes from Richman in 1989, in which Celani--who is not a lawyer--discussed cases with clients.

Meanwhile, the legal business flourished as Celani shuttled from prison to prison. Complaints followed--to Celani’s legal centers and to other agencies.

Then in July, 1990, officials at the federal prison at Terminal Island said Celani was “involved in a manipulation of inmates, wherein he bilked them of money for legal representation in the community,” according to a Bureau of Prisons memo. It indicates that an FBI investigation was under way and an indictment was expected “in the near future.”

Nothing happened.

So when Celani was paroled in 1991 after serving five years of his 15-year sentence, some could not believe it.

“I was stunned when I heard he got out,” said Keith Findley, who also complained to authorities about Celani while running a legitimate prisoner assistance program at the University of Wisconsin in the late 1980s. “I found it frustrating and somewhat odd that he apparently was doing so much stuff right under the government’s nose, and that for a while they’d seem upset and then let it die.”

While under the supposedly watchful eyes of federal authorities, Celani took on his latest of many aliases in 1991, this time with the approval of his parole officer.

Using the name Fred Sebastian, Celani started up his latest center in rented office space on Laurel Canyon Boulevard in North Hollywood, even taking to the airwaves to host a weekly radio show called “Civil Liberties.”

Job applications from lawyers flooded in, and so did the clients. And, as he did in Wisconsin, he dispatched idealistic associates to go after the most notorious defendant in the area for publicity’s sake.

In the Midwest, it was mass murderer John Wayne Gacy, Richman said. In post-riot Los Angeles, it was Damian Monroe Williams.

With all the publicity, the center moved into more spacious quarters and expanded. Celani acted as spokesman, once making headlines for suggesting that Reginald O. Denny deserved the near fatal-beating he suffered at one of the riots’ flash points: “If anyone, including Jesus Christ, went into that intersection and shouted these things,” he told a reporter, “they would have gotten beaten up too.”

By July, 1992, seven FBI agents from Los Angeles were investigating Celani. On July 15, two of them visited the center with Judy Glasco, an Arkansas housewife, and two FBI agents from Little Rock. Glasco told them a disturbing story unrelated to the investigation in Los Angeles.

Glasco, the wife of a convicted drug dealer who had retained the center, told the FBI that Celani had offered to bribe a federal prosecutor into letting her husband out of prison for $50,000. Agents taped Glasco discussing the bribe payment with Celani.

Even before the FBI visit, authorities acknowledge, Celani’s parole officer confronted him about his role at the center. Although he had been on national television as the center’s driving force, Celani said he was just an office manager, and the matter was dropped, said Robert Latta, chief federal probation officer.

Asked why Celani’s legal center was not kept away from the Denny case and hundreds of other legal cases, Latta said: “He’s very hard to pin down. Certainly, it looks fishy. But the FBI needs to go to a U.S. attorney and say: ‘Here’s what we have. Can we file charges?’ I can’t speak for them, but I guess they didn’t feel they had enough.”

Soon, however, things began to unravel on their own.

Complaints from inmates continued. And Celani fired a lawyer he had representing Williams. Dennis Palmieri said he was fired in part because he objected when Celani ordered him last August not to prevent prosecutors from playing in court taped incriminating statements Williams made to police.

By October, Celani fired four of the center’s five remaining lawyers, saying they were incompetent. The lawyers, including Kamran, say they were fired because they were asking Celani questions about the center’s activities.

That fall, just days after firing his staff, Celani flew first class to Little Rock to meet Glasco and collect $25,000 to make the bribe he promised. He was arrested by the FBI. Convicted last Thursday on eight counts of fraud and a related charge, Celani faces six to eight years in prison.

But the varied repercussions of his activities may last for years:

Carolyn Chapman, a San Diego lawyer trying to help some center clients recover money, suggests that Celani was not a top priority for law enforcement because many of his alleged victims were inmates. “But it’s not the convicts who are being taken,” she said. “I’ve got women and children left behind, starving to death . . . to pay for all this.”

Many alleged victims have written complaints that have been forwarded to the FBI. One Florida woman flew to Los Angeles to give Celani $10,000 in cash to help her husband. Dennis See, an Oregon inmate, said he borrowed his daughter’s life savings of $5,000 and sent it to the center the week before it closed. No work on his case was ever done, he said.

According to Chapman, who has been interviewed by the FBI, more alleged victims are turning up daily. The scam, she told authorities, “was in the millions. It was nationwide.”

The California State Bar says it cannot pay back center clients out of its fund to protect against fraudulent lawyers because Celani was not a lawyer.

A Rocky Road From early adulthood, Fred Celani has been in and out of federal prisons. Here, based on interviews and public records, are milestones along the way:

* Early 1970s: Celani leaves Canisius College in Buffalo, N.Y., without graduating. Later pays $710 for a fake diploma from “University of England, Oxford,” which does not exist.

* 1974: Poses as a real estate mogul in his hometown of Buffalo and swindles investors out of more than $100,000 in a bogus $100-million waterfront development deal. Convicted of fraud and serves time in Attica federal prison.

* Late 1970s: Works short stint in a Buffalo sandwich shop while on parole before heading west to the San Fernando Valley. One federal prosecutor calls it the only legitimate job Celani ever had.

* 1981-1982: Sets up dozens of paper corporations in Los Angeles, including Celani, Celani & Associates, offering opportunities to invest in tax shelters and limited partnerships.

* 1985: Convicted of racketeering and fraud in Springfield, Ill., with an associate for bilking $3.8 million out of clients who invested in the tax shelters and limited partnerships, some of which were fraudulent. Also convicted of stealing at least $100,000 by setting up a bogus overnight package delivery company and then shutting it down three days later. Prosecutors also determine that he ran an unrelated real estate scam during the trial. Sentenced to 15 years in prison.

* 1986-1991: Transferred from one federal prison to another, along the way referring inmates to a legal center, run by his wife, that authorities suspect was engaging in fraudulent activities. The center, the American Constitutional Coalition Foundation, operated out of Wisconsin but was directed by Celani while in prisons in Wisconsin, Arizona and California.

* 1991: Celani is released from prison, moves to North Hollywood and renames the legal center the Center for Constitutional Law and Justice. He begins soliciting inmates who want to have their sentences reduced or their convictions overturned.

* 1992: The North Hollywood center shuts down after Celani is arrested in October on suspicion of trying to defraud a Little Rock, Ark., homemaker--one of the center’s clients--out of $50,000. Celani told her he could bribe prosecutors to release her husband from prison early.

* 1993: Celani is convicted July 22 of eight counts of fraud for the Little Rock case. He faces up to eight years in prison.