Pellicano calls it 'problem solving' Feds say it's a 'case of corruption'

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Former Hollywood private eye Anthony Pellicano walked to the podium in a federal courtroom Thursday in downtown Los Angeles, paused and smiled at prosecutors and proceeded to give a 10-minute opening statement designed to refute the racketeering and wiretapping charges he's facing.

Pellicano is acting as his own lawyer, and as he began addressing jurors, U.S. District Court Judge Dale Fischer had to remind him to refer to himself in the third person. He didn't always remember after that.

"Primarily, what I did was problem solving," Pellicano told jurors. "Because of that, I charged higher fees."

The former investigator, wearing prison-issued green jacket, pants and a gray T-shirt, was one of several who addressed jurors as the trial began against him and four others: a former client, a computer software engineer, a former phone company employee and a former Los Angeles Police Department sergeant.

Federal prosecutor Kevin Lally told jurors that Pellicano was the "architect" of a multimillion-dollar investigation agency that presented itself as a legitimate business but actually was engaged in spying on Hollywood's rich by bribing sources to dig up dirt.

"This is a case about corruption," Lally said. "At the center is Anthony Pellicano. He was not an investigator like you would read in pulp fiction. Not a gumshoe. His outside ambition to be a private investigator only matched his inside desire for fame and celebrity."

The case has been closely watched by Hollywood because of Pellicano's close and broad ties to the industry. The investigator hung a shingle on Sunset Boulevard, and his clients included Paramount Pictures president Brad Grey and CAA co-founder Michael Ovitz, who are among the 127 names listed on the government's witness list.

Among those are several who already have pleaded guilty to various federal charges for their dealings with Pellicano as well as witnesses who have been granted immunity. But the latter won't be revealed until they take the witness stand, according to a U.S. Attorney spokesman.

Pellicano admitted he was very secretive among his staff and clients and compared himself to a CIA operative.

"Gathering information. That's what Mr. Pellicano was paid for," he said.

Lally, who was first to give opening statements, painted a picture of a "criminal enterprise" run by Pellicano in which he was able to supply illegal and confidential information for the benefit of his clients and his firm. Among those he allegedly enlisted were former LAPD Sgt. Mark Arneson and retired telephone company employee Rayford Turner.

Pellicano struck up a friendship more than 20 years ago with Arneson and put him on his payroll from 1998-2002 in order to gain access to state and federal database searches, Lally said.

Turner was on Pellicano's payroll to get phone information on people, including cable carrier information, which pinpoints specific customer phone lines, he told the jury.

Arneson's attorney Chad Hummel told jurors to pay attention not only to the evidence they hear but to the evidence they won't hear.

"You won't hear my client knew these people. You won't hear my client knew anything about them. You won't hear that he knew why they hired Mr. Pellicano," Hummel said.

He added that Arneson and the LAPD looked at Pellicano as a valuable asset, "a gold mine" of information, because of his expertise in audio recordings and particularly in distinguishing whether taped recordings had been edited.

Pellicano also hired software engineer Kevin Kachikian, a co-defendant in the case, to create an encrypted eavesdropping software program called TeleSleuth, including a desktop version that could be used to record phone conversations. The software was "booby trapped" to erase any recordings if someone other than Pellicano attempted to access it, Lally told jurors.

And Pellicano used the desktop version to tape his own conversations with clients.

"He's the biggest government informant in this case," Lally said of Pellicano.

But Kachikian's defense attorney, Adam Braun, said his client was only hired to develop the software and was told by Pellicano that he planned to market it to law enforcement, not use it for illegal purposes. Additionally, Pellicano owned the rights to the software, not Kachikian, he said.

"He didn't know it was going to be misused on wiretaps," Braun said of his client.

The attorney for the fifth defendant, former Pellicano client Abner Nicherie, postponed his opening statements until after the prosecution presented its case.

The first witness called by the government was a former pro baseball player, ex-Arizona Diamondbacks slugger Matthew Williams, who testified he hired Pellicano to investigate his ex-wife, her husband and brother-in-law, because he feared his children were in danger around them because of alleged drug and alcohol use.

Later, Williams spoke with Pellicano in 2002 about checking out his then-wife, actress Michelle Johnson, best known for her role opposite Michael Caine in the film "Blame it on Rio."

Unbeknownst to Williams, Pellicano taped the phone conversation in which they allegedly discuss tapping Johnson's phone. Prosecutors played the tape for jurors, which included Pellicano offering to keep an eye on her and discussing how many phone lines are in their home in Los Angeles.

"Holy shit!" Pellicano is heard shouting when Williams told him there are five phone lines in the house.

Pellicano also can be heard reassuring Williams and telling him to take a long drive and think about what he wants to do.

But he also reminded Williams that whatever happens, it stays between them. "Nobody else in the fucking world, just you and I," he's heard saying.

Williams testified he never hired Pellicano to investigate Johnson.

"Why?" Lally asked. "It's an illegal act," Williams told the jury.

Several FBI agents involved in the searches of Pellicano's office and his computers are expected to testify during the next several days. The trial resumes this morning.
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