Phil Angelides' Record Is a Study in Contrasts

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Two distinct pictures of Phil Angelides, a Democrat running for governor, emerge from his record as state treasurer.

There is the Angelides who campaigned in Santa Barbara for coastal protection -- and the one who took $143,200 in campaign checks from developers who, over Sierra Club objections, bulldozed the Dana Point Headlands to build 118 oceanfront houses.

There is the Angelides who crusaded for higher ethical standards in corporate boardrooms -- and the one who said it was none of his business that a securities firm had hired friends as consultants to grease its way into state bond deals, a practice now banned by regulators.

There is the Angelides who mocked Gov. Arnold Schwarzenegger for treating the state like an "all-you-can-eat special-interest buffet" -- and the one whose campaign accepted $574,000 from law firms he hired to be state bond counsel.

Those contrasts illustrate the paradox of Angelides after seven years and four months as treasurer. He has wielded the immense power of his job to mold society to his liking, leaving clear signs of the direction he would take the state as governor. He has used his perch at public pension funds to needle corporate bosses on global warming and human rights and to fight poverty by pouring capital into urban renewal projects. He calls himself California's "most activist and progressive treasurer in a generation."

But with the same doggedness, Angelides has pursued his ambition to unseat Schwarzenegger, using his state job to fuel his collection of campaign money in a way that clashes with the image he has cultivated as a man guided by firm principles. And that, in turn, has opened the way for his rival in the June 6 Democratic primary, state Controller Steve Westly, to cast doubt on his ethics.

Angelides, whose opening gesture as treasurer was to prod state pension funds to dump $827 million in tobacco stocks, has made his name by hitting "virtue buttons," especially those that resonate with Democrats, said Jack Citrin, a professor of political science at UC Berkeley. But his pattern of steering public business to friends and relying heavily on state vendors for campaign cash, Citrin said, raises a "pot-calling-the-kettle-black" question.

"Is there a contradiction? Yes," Citrin said.

That contradiction is stark when it comes to Angelides' record on the environment.

As a key member of state pension boards that oversee $350 billion in assets for retired public workers, he has pressed an ambitious environmental agenda. He spurred the pension funds to invest up to $450 million in "clean technology," such as solar and wind energy, and up to $500 million in companies that meet a set of environmental standards. He goaded the pension funds to cut energy consumption at their vast real estate holdings.

In March, he campaigned in Santa Barbara for his plan to buy and preserve "key undeveloped portions of the coast," including scenic land "at risk of immediate development."

Yet he has taken $143,200 in campaign contributions from donors at IHP Capital Partners, an Irvine firm that is financing construction of a gated community across 121 acres of what it calls "the most impressive undeveloped coastal promontory in Southern California": the Dana Point Headlands.

For more than two decades, the Sierra Club fought -- to no avail -- to preserve the Orange County peninsula. Mark Massara, the group's director of California coastal programs, said he would be "hard-pressed to identify a more damaging project" to the shoreline than the Dana Point houses and hotel that a giant new seawall will buttress.

To Massara, "one of the more galling aspects" of the project is the money invested in it by the California Public Employees' Retirement System. Massara was dismayed to learn that Angelides, a CalPERS board member, had accepted IHP's campaign checks.

"If this is true, then he needs to take a serious look at those donations, and whatever relations he may have with those guys, because it's entirely inconsistent with everything he says about coastal protection," Massara said.

Angelides, a former Sacramento developer whose real estate income still far outstrips his annual $140,000 state salary, is well-acquainted with his IHP donors.

"I knew them well when I was a private citizen, and got to know them then, and they've been supporters of mine," he said.

CalPERS acquired a $2.5-million stake in the Dana Point project in 1997, before Angelides joined the board, and the amount was considered so small that it never went to the board for consideration, a CalPERS spokeswoman said. Since assuming his seat, Angelides has taken no steps to pull pension money from the project or pressure the builders to scale it back. The Sierra Club did not try to enlist him in its widely publicized battle to preserve the headlands.

"I'm not aware of the issue," Angelides said.

(IHP Capital donors have also given $77,500 in campaign contributions to Westly. Like Angelides, Westly is a CalPERS board member who took no action against the Dana Point project, but has backed the pension fund's environmental agenda and campaigned for coastal protection in Santa Barbara.)

The Sierra Club did not support Angelides in two of his three campaigns for treasurer, thanks largely to his history as a developer. But it has endorsed both him and Westly for governor, saying they have strong environmental records.

Beyond the environment, the contrast between the two sides of Angelides is sharpest in his approach to the corporate world, most notably the Wall Street firms that win no-bid contracts from the treasurer to sell state bonds.

Drawing on his clout as a board member at state pension funds that rank among America's biggest stockholders, Angelides has established himself as one of the nation's premier shareholder activists.

He has battled U.S. companies that set up overseas outposts to dodge taxes or bypass legal safeguards for investors. He has pushed the pension funds to stop investing in countries with repressive governments, corrupt financial markets or abusive labor practices. He has pressured companies to curb exorbitant pay for executives. All the while, he has stressed maximizing returns for retirees.

Combined with his environmental agenda, "this is very clearly something that was pushing boundaries," said Pietra Rivoli, a finance professor at Georgetown University's McDonough School of Business. Treasurers in other states have taken similar steps, but Angelides "has clearly got the biggest pot of money to play with, and he's also clearly a leader," she said.

In his campaign for governor, Angelides often compares himself to Eliot Spitzer, the New York attorney general known for fighting corporate misconduct. Angelides also accuses Westly of tolerating corporate abuses, faulting him for resisting a move by the pension funds to withhold shareholder votes for company boards that fail to hire independent auditors.

"We started casting our 'no' votes and corporate America howled," Angelides said in an interview. "When they howled, Mr. Westly's knees buckled, but mine didn't."

Westly said he had a "strong record of being a champion of social change" at the pension funds, and called Angelides' stance "knee-jerk anti-corporate-America." The move on auditors, Westly said, was irresponsible because it targeted many companies that posed no threat to investors.

Angelides also has demanded higher ethics from Wall Street. In the uproar over stockholder losses in the WorldCom and Enron scandals, he imposed new rules on investment banks hired by the state, insisting that they "clean up their conflicts" or get shut out of state bond deals.

"No one's been tougher as treasurer on investment banks than I have been," Angelides said.

Yet Angelides is far from the forefront of the struggle to curb "pay-to-play" political abuses in government bond deals. Scandals in the early 1990s led securities regulators to impose tight limits on campaign donations from bond dealers to state treasurers and other elected officials who hire them. Angelides is lukewarm about the 1994 rule that set those limits.

"I'm not sure whether it's necessary or not," he said. "But it's worked fine."

By cutting Wall Street's pipeline of campaign money to public officials, the rule was supposed to root corruption out of government debt, said Charles Fish, a former Municipal Securities Rulemaking Board chairman who pushed for the rule. But "one of the biggest holes in the fence," he said, was the temptation for firms to hire politically connected consultants to solicit public bond business.

The board barred the hiring of consultants in August, but Angelides saw no need for the ban.

"Firms are free to hire whoever they want," he said. "It's a free country."

One such consultant who secured bond business from Angelides before the ban took effect was his longtime friend Mike Roos, a Los Angeles lobbyist. When Roos was a state assemblyman in the early 1980s, Angelides was his chief of staff.

Stone & Youngberg, an investment bank, paid Roos $369,720 to obtain public bond business from 2003 to 2005. Using his pull with Angelides, Roos succeeded in getting the firm no-bid work selling bonds for the state in the first half of 2004, reports filed with regulators by Stone & Youngberg show.

About the same time, Roos was raising money for the treasurer's campaign for governor. "He held a luncheon for me one day," Angelides recalled, referring to a June 2004 event that Roos set up at the California Club in downtown Los Angeles. Roos did not return several calls. Roos got more bond work for Stone & Youngberg from Angelides last year, some in the final two months before the consulting ban took effect, the firm said.

Asked whether Roos had lobbied him personally, Angelides said: "Sure, many people have." Asked to elaborate, he said, "I can't remember a time over the last year where we've talked about anything of that sort."

Despite Roos' lobbying and fundraising, Angelides said he deserved credit for imposing "strict new limits on the ability of firms to contact the treasurer's office" for bond work.

Another consultant hired by Stone & Youngberg was former state Assembly Speaker Willie Brown, a close political ally of Angelides. But the firm did not report obtaining any state bond work through Brown.

Among the other investment banks often hired by Angelides for no-bid work selling state bonds is Lehman Brothers. Peter Taylor, a Lehman Brothers executive who oversees its California bond business, has long-standing political and personal ties to Angelides.

Taylor worked for Angelides in Roos' Assembly office. He worked for Angelides again in the early 1990s: Taylor was in charge of raising money for the California Democratic Party when Angelides was state party chairman.

Though Stone & Youngberg has obtained a relatively small slice of state bond business, Lehman Brothers has been in the top ranks of California's underwriters under Angelides. Only one other bond underwriter, Merrill Lynch, has won more no-bid work as lead underwriter on state bond sales from Angelides, according to Thomson Financial, which compiles financial information for companies.

The exact value of Lehman Brothers' commissions on state bond sales under Angelides could not be determined, but they total millions of dollars.

Angelides said he relied on recommendations of professional staff at the treasurer's office in hiring bond dealers.

"Just because people know me doesn't disqualify them from being involved in their businesses, or being involved in California," he said in an interview.

The most important factor in hiring investment banks, he said, is which can get the best deal for taxpayers.

Through a spokesman, Angelides refused to answer a dozen questions on how he farms out state bond work to investment banks. The spokesman, Mike Roth, would not say, for example, whether Angelides personally adjusts staff recommendations on how much business the state awards to each investment bank.

A Lehman Brothers spokeswoman said the firm had been obtaining state bond work for more than 20 years because of its strong record as an underwriter.

As for Taylor, Angelides said the Lehman Brothers managing director had not raised money for him since the rule limiting political donations by bond dealers took effect in 1994.

That rule, however, does not apply to bond lawyers. The treasurer, records show, has taken $249,900 in campaign contributions from donors at Orrick, Herrington & Sutcliffe, the law firm that has won more state bond counsel work from Angelides than any other firm. Since 2000, the state has paid $4.6 million to the firm -- which has served for decades as a California bond counsel -- under its contracts with the treasurer's office.

Times staff writers Evan Halper and Dan Morain and staff researcher Maloy Moore contributed to this report.

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