Ferguson’s Campaign Units Paid His Own Firm $31,000

Five campaign committees controlled by Assemblyman Gil Ferguson paid his private public relations and political consulting firm more than $31,000 in 1986, campaign statements show.

Of that amount, all of which is included in statements filed with the secretary of state, about $8,500 is not explained in detail.

Such payments have raised questions about financial dealings between Ferguson’s private firm and his campaign committees. The central question is whether Ferguson might have benefited beyond what is allowed by law in those dealings, either through excessive profits or his firm’s use of space, staff or equipment paid for with campaign funds.

Ferguson, a Newport Beach Republican, declined in an interview to provide details about the services his firm, Corporate Communications, provided in exchange for the $8,500 and would not say how much, if any, profit he made from the transactions. But he insisted that the payments did not violate California’s 5-year-old law prohibiting personal use of campaign funds.

He also said his company’s practice of sharing space, equipment and employees with his campaign office was within the law, but he would not provide details about how salaries and expenses are paid.

Ferguson is not the only legislator to profit personally from expenditures by his campaign committees. Public records show that Assemblyman Steve Peace (D-Chula Vista) hired a corporation he partially owns for campaign media and polling work. Assemblyman Bill Jones (R-Fresno) retained his firm, also a corporation, to handle direct mail to the voters. And Sen. H. L. Richardson (R-Glendora) uses his own company, a corporation, to perform a variety of campaign-related jobs.

Unlike those three firms, however, Corporate Communications is an unincorporated sole proprietorship controlled completely by Ferguson. And none of the other three legislators’ companies share space and equipment with their campaign offices, as Ferguson’s does.

Newport Beach slow-growth activist John Gardner submitted a complaint to the Orange County district attorney’s office in March accusing Ferguson of, in effect, funneling campaign contributions into his own pocket through his firm. The two-inch-thick file of documents, which has been forwarded to the Fair Political Practices Commission in Sacramento, also includes:

- Allegations that Ferguson may have acted improperly by undercharging political allies for services and then failing to report the subsidy as a campaign contribution.

- Questions about the circumstances under which Ferguson failed to properly report an estimated $30,000 he was paid as a public relations consultant to two developers in 1986.

In a letter accompanying the documents, Gardner alleges that “Ferguson, his political consulting proprietorship, Corporate Communications, and his controlled committees are applying political contributions to personal use.”

Ferguson has strongly denied Gardner’s allegations.

The California Elections Code provides that campaign funds, “including funds of political action committees, shall not be used for personal use. A payment from campaign funds is for personal use if the payment creates a substantial personal benefit and does not have more than a negligible political, legislative or governmental purpose.”

May Do Business

Even though a legislator is personally profiting, his campaign committee may do business with the legislator’s private company without violating the law if the transaction is carried out just as it would be with any other company, according to a senior official with the attorney general’s office.

“Our assumption has been . . . that the committee should deal with campaign funds as it would other types of funds for commercial activity,” Assistant Atty. Gen. N. Eugene Hill said, without commenting specifically on Ferguson’s case. “If it loans money, it should obtain interest, obtain security. If you’re going to invest funds, you should do so under some kind of prudent guidelines.

“Our expectation has been that the committee would function in relation to the candidate and other people involved with the committee as it would on a supportable commercial basis.”

But the lines that separate the political and thus acceptable use of campaign funds from the prohibited personal use of such money are not always clear, Hill said. Such distinctions are especially difficult to draw, he said, when a legislator pays his own firm for a service as opposed to a tangible product with a value that is easily measured.

Not to Benefit Personally

“The Legislature has said the officeholder is not to benefit personally from expenditures of campaign funds and has set up guidelines under which the legislator may benefit,” Hill said. “The question is, ‘Do we step over that line?’ Frankly, we have not drawn those kinds of lines because no one has brought them (possible violations) to our attention.”

Hill said his office is not looking into Ferguson’s financial dealings and has not been asked to do so.

Many details surrounding Ferguson’s business relationship with his own firm are unclear. Although the lawmaker at first granted The Times access to his key staff members and answered several questions about his company, he later blocked that access and refused to answer a list of specific queries. Ferguson said all the information The Times needed to know could be found in public records.

According to those records, five campaign committees controlled by Ferguson paid his firm more than $31,000 in 1986. Much of that money was reported in campaign statements as reimbursements to Corporate Communications for expenses, such as printing and postage, that were itemized in the statements. Ferguson has said other payments that were not itemized in the statements were for the same purpose.

$8,500 Not Explained

But there remains another $8,500 in campaign funds paid to Ferguson’s firm that is not explained in detail on his campaign statements.

Ferguson used Corporate Communications to help stage a 1986 fund-raiser featuring conservative columnist William F. Buckley. The proceeds from the event were split between the Free Market Political Action Committee, which Ferguson controls, and the campaign committee of Assemblyman William P. Baker (R-Danville).

Ferguson said a payment of $5,000 between March and June of 1986 to Corporate Communications from a fund-raising committee set up to organize two events featuring Buckley was reimbursement for a portion of Buckley’s speaking fee paid by Ferguson’s firm. But the legislator would not say why the Buckley Dinner Committee, as it is known, paid Corporate Communications another $2,259 in October, as reported on a campaign statement filed last October.

Similarly, Ferguson refused to explain what services his firm performed in exchange for $500 from Friends of Gil Ferguson, $1,921 from the Free Market Political Action Committee and $3,900 from the Nofziger Reception Committee, which coordinated a fund-raiser featuring Lyn Nofziger, a former aide to President Reagan.

Should Have Documentation

The fifth Ferguson campaign committee involved in financial dealings with Corporate Communications was the Oust Tom Hayden Political Action Committee, which paid Ferguson’s firm more than $1,000 for expenses last year.

A legislator who allows his private company to share office space, equipment and staff with his campaign committees should have documentation to show that the lawmaker is not using campaign contributions to subsidize his private business, said Hill, the assistant attorney general.

Ferguson has said his firm has no permanent employees.

The books for Corporate Communications are done by Beverly Evans, who works full time as a $34,000-a-year administrative assistant for Ferguson’s legislative office in Newport Beach. Evans said she does the work for Ferguson’s private business without pay on weekends or at night, sometimes at home.

“That’s my contribution (to Ferguson),” Evans said. “I can’t afford to contribute to his campaign, so that’s my contribution. I’ve worked for him for 15 years. I admire him greatly.”

Campaign Work Done

Other government employees also work part time for Ferguson’s company.

Evans said Peter Calagna, whom Ferguson described as a writer, works four days a week for Ferguson’s district office and one day for Corporate Communications. Another employee, Russ Taylor, worked half time for the government and half time for Ferguson’s company last year before moving onto the government payroll full time in March. Both men also have done work for Ferguson’s campaign committees.

Ferguson said another part-time, government-paid assistant, Dorothy Hughes, handles most of the chores associated with the fund-raising work done by Corporate Communications, such as updating computerized mailing lists and ensuring that invitations go out on time.

But Hughes, who was paid more than $5,000 in campaign funds last year by Friends of Gil Ferguson, said she received no pay from Corporate Communications for the work Ferguson said she did for his company.

Ferguson’s campaign committees and his company share expenses that include rent, telephones and computers, but the lawmaker declined to divulge detailed information to show that these committees were not subsidizing his firm.

How Expenses Split

How Ferguson’s campaign committees and Corporate Communications split expenses also could be important in determining the legitimacy of allegations that the lawmaker has used his company to secretly apply his campaign contributions to local races.

The complaint submitted to the district attorney’s office in March alleged that Ferguson had failed to report income from two Orange County developers and was applying that money to the campaigns of candidates for the Costa Mesa City Council.

After The Times began investigating Gardner’s complaint, Ferguson conceded that he had failed to report, in economic-interest statements required by state law, at least $30,000 in public relations consulting fees from C. J. Segerstrom & Sons and Arnel Development Co.

Ferguson said that he did not know he was required to report the sources of the money because it was paid to Corporate Communications rather than to him personally. He did disclose properly in economic-interest statements that he had earned at least $10,000 from Corporate Communications.

Ferguson conceded in an interview with The Times that he may not have charged Citizens for a Better Costa Mesa, a pro-growth group involved in the Costa Mesa City Council races, the full value of his consulting services.

‘They’re Friends’

“I may not have charged them enough,” Ferguson said. “That may be true. They’re friends, and maybe I didn’t charge them enough. Maybe I should go back and charge them some more money.”

Although Citizens for a Better Costa Mesa reported owing Ferguson’s firm $6,800 for a mailer he produced for them, Ferguson said that was the actual cost of the mailer and he didn’t know if he had charged the group a separate fee, above expenses, for his effort in putting the mailer together.

“Normally I would charge a fee for something like that,” Ferguson said. “In that case I may not have charged a very big fee. But I sure as hell didn’t pay for it myself. I may not charge as much as other people but I’m not giving away my services. Although in that case I may have.”