Political Clout Pulls in Cash

By Robert Salladay

July 7, 2005 12 AM PT

Times Staff Writer

SACRAMENTO —

While raising millions of dollars from out-of-state companies doing business in California, Republican Gov. Arnold Schwarzenegger and Democratic state Treasurer Phil Angelides have made policy decisions favorable to some of the wealthy donors.

Schwarzenegger and Angelides, a candidate for governor, can influence billions of dollars in state spending and bond issues. No other current elected state officials have solicited and received as much money from lobbyists, corporations, law firms and investment houses outside California, state records show.

In one instance, Schwarzenegger collected contributions from 55 employees of a Texas computer firm that lobbied him to veto tougher regulations on its business in California. The governor killed the legislation. The firm’s chief executive officer hosted another fundraiser in Dallas for the governor last month.

Angelides has accepted contributions from East Coast law firms that do business with his office on billions of dollars in bond issues. In addition, the treasurer has received nearly $200,000 from national unions based in Washington, D.C., that are eager to protect benefits for organized labor in California.

Aides to the treasurer and the governor disputed any notion that donations sway their decisions on public policy. But campaign finance experts say the two have leveraged their powerful positions to fund their campaigns as out-of-state firms try to influence them with contributions.

Steven Weiss, of the Center for Responsive Politics in Washington, D.C., said candidates walk a fine line between courting special interests and “convincing voters they are making objective decisions on policy and thinking about the voters first and not the donors.”

Since his campaign for governor began nearly two years ago, Schwarzenegger has raised $9.2 million from companies and individual donors in 42 states and Washington, D.C. That is more than 16% of the total $56.3 million Schwarzenegger has collected since August 2003.

Angelides has raised $3.6 million from contributors in 37 states and Washington, D.C. -- nearly 17% of the $21.4 million he has raised since 2001, the start of his reelection campaign. Most of his out-of-state donors are from New York, the center of the U.S. financial markets; Washington, D.C.; and Boston.

Schwarzenegger has not announced if he is running for reelection next year, although he is collecting money in a reelection fund -- one of six campaign accounts he has established. Angelides has jumped into the governor’s race and become one of Schwarzenegger’s most barbed critics.

Angelides’ chief opponent in the Democratic primary is state Controller Steve Westly -- whose biggest donor is himself. An early executive of the online auction site eBay, Westly has donated $10 million to his gubernatorial campaign.

Six months ago, the governor said he would expand his fundraising nationwide because policy proposals he unveiled in January would have national implications. He has called a Nov. 8 special election, featuring ballot initiatives on some of his proposals -- state spending restrictions, teacher tenure changes and new legislative districts.

Hoping to collect $50 million to fund his campaign for those measures, he has held fundraisers in Ohio, Florida, Texas, New York, Illinois and Washington, D.C., recently. He raised $500,000 in a single night at a Manhattan fundraiser in March that featured Gov. George Pataki and New York City Mayor Michael Bloomberg.

Schwarzenegger’s out-of-state contributions this year have ranged from $5,000 from Club Paris LLC, the Orlando nightclub partly owned by hotel heiress Paris Hilton, to $1.67 million from reclusive billionaire William Robinson, founder of DHL delivery services, who lives in Idaho. Robinson has repeatedly declined to comment on his donations.

One of Schwarzenegger’s major contributors is Affiliated Computer Services, which is based in Dallas. Local governments throughout California, including Los Angeles, have hired the company to manage red-light camera and parking-ticket programs, student loan processing and other computer services.

Last year, the company lobbied Schwarzenegger to veto a bill that would have strengthened government audits of red-light programs in California. The measure passed the Assembly and the Senate, but Schwarzenegger vetoed it, saying that it would have unnecessarily slowed the processing of tickets.

The company also lobbied Schwarzenegger to veto a bill that would have prohibited local governments from hiring companies that “outsource” work to other countries. According to ACS, the company has more than 2,000 employees in India. Schwarzenegger vetoed three outsourcing bans last year, saying that they would have harmed the California economy and set up “artificial barriers.”

No other company has provided as many donors for Schwarzenegger as ACS. Chief executive Jeff Rich hosted a Dallas fundraiser for the governor last month. In total, the company and its employees have donated $252,000 to Schwarzenegger, including $127,000 from dozens of ACS executives across the country.

A spokesman for ACS Inc. said there was no coordination of employee contributions to Schwarzenegger. “ACS encourages participation in the political process through our” political action committee, said Joe M. Barrett, vice president for communications. “We have not been involved in encouraging individuals to contribute to specific candidates or committees.”

Margita Thompson, the governor’s spokeswoman, said Schwarzenegger frequently does not know who gives him money, and never links campaign money to policy decisions. “There is absolutely no connection,” she said about his veto of the red-light bill. “The governor has solid policy reasons for the position he took on this legislation.”

On May 23, Schwarzenegger attended a fundraiser at the Chicago Hilton that was co-hosted by Patrick G. Ryan, executive chairman of Aon, an Illinois insurance giant that has workers’ compensation business in California. Last year, Schwarzenegger approved an overhaul of the workers’ compensation system that generally favored the insurance industry but also reduced rates for many employers.

A Schwarzenegger event last March at the St. Regis hotel in Washington, D.C., was co-hosted by a top pharmaceutical lobbyist. The governor has been actively negotiating with drug companies on lowering their prices, but he favors voluntary programs promoted by the drug companies. Consumer groups, which want mandatory price reductions, say that voluntary programs will have little effect.

Marty Wilson, the governor’s chief fundraiser, said Schwarzenegger has a unique Rolodex of friends and associates from his years as a bodybuilder, businessman and movie star. Wilson said Schwarzenegger attracts “an entrepreneur class who are running companies” and like his government agenda.

“Whether their corporate headquarters is based here or not, California is an important market for them in terms of reaching consumers and being successful,” Wilson said.

Schwarzenegger’s ability to raise money outside California also is a function, in some cases, of his fame: Donors across the country appear to love hobnobbing with a global celebrity.

Angelides has a personal angle to his fundraising as well: He gets numerous contributions from fellow Greek Americans across the country, such as James A. Regas, a Chicago attorney and longtime friend, and Peter J. Pappas, who runs a commercial air-conditioning firm in New York.

Cathy Calfo, Angelides’ campaign manager, said it wasn’t surprising that the treasurer has raised money from across the country. She said “this has been a campaign of national interest” since Schwarzenegger spoke at the Republican National Convention and campaigned for President Bush last year.

“People give to Phil because he stood up to Arnold Schwarzenegger,” Calfo said.

Like Schwarzenegger, Angelides has received donations from firms with a direct interest in his public policy actions. Though Schwarzenegger’s portfolio covers nearly every aspect of government, Angelides is focused on state finance and public pensions. His office decides which Wall Street firms get lucrative contracts to underwrite and manage public bond sales.

Federal rules prohibit financial firms outside California from working with Angelides on bond deals if they have given him campaign money. But others hired by Angelides’ office to work on bond issues can contribute.

Angelides has taken donations from nearly two dozen law firms authorized to advise the state on California’s bond market. A spokesman for Angelides said the attorneys were hired based “on the advice from the professional staff” at the treasurer’s office.

Among out-of-state law firms, Nixon Peabody LLP of New York and its attorneys donated nearly $43,000 to Angelides between 2000 and 2003. This year, they consulted with the treasurer’s office on a University of California bond sale worth $344 million.

Calfo said Angelides has a wide donor base of more than 15,000 names, and contributors give to him “because he believes in change.... That is what they are going to get.”

In a few cases, the money from out-of-state sources has backfired. This month, Schwarzenegger returned $10,000 from Tom Noe, an Ohio coin dealer under investigation after losing track of millions of dollars from a $50 million rare coin fund.

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Where the money is from

Top out-of-state donors to Gov. Arnold Schwarzenegger, a Republican, and one of his chief Democratic critics, state Treasurer Phil Angelides:

Gov. Arnold Schwarzenegger

William A. Robinson, Idaho (founder, DHL): $1.67 million

Target Corp., Minnesota (department store): $330,000

Anheuser-Busch, Missouri (brewery): $271,200

Affiliated Computer Services, Texas (data outsourcing): $252,000

News America Corp., New York (media, Rupert Murdoch): $250,000

State Treasurer Phil Angelides

James and Georgia Regas, Illinois (attorney/homemaker): $78,549

SEIU PEA International, Washington, D.C. (union): $76,000