Garamendi’s Campaign Running on Lean Funding : Politics: Although he lacks Kathleen Brown’s base, the candidate for governor is not without resources.

These are lean days for John Garamendi, the insurance commissioner who is running for governor.

What insiders call “smart money” has been going to Treasurer Kathleen Brown, his main opponent in the Democratic primary. She had more than $3 million in mid-March. Garamendi had only $50,000 on hand and $450,000 of his total fund raising was from loans.

With the primary campaign in its final two months, Garamendi knows he will not match Brown’s money. Garamendi’s family, though wealthy, does not come with fund-raising connections. He does not attract big bucks from Hollywood, Wall Street or a nationwide network of politically active women. All have been fat sources of cash for Brown.

In politics, however, lean is relative.

Since he took office as insurance commissioner in 1991, Garamendi has raised $3.5 million. He used much of the money to pay off campaign debts. Now, he is spending it as fast as he raises it to air television spots.

Although he lacks Brown’s fund-raising base, Garamendi is not without resources. He raised $340,000 from labor unions since last year. He also has tapped into several wealthy entrepreneurs who have given him more than $100,000, and he has the potential to raise much more.

He and his wife, Patty, have put their own considerable wealth behind their previous campaigns, although nothing yet to this one. Other Garamendi supporters have the capacity to dump huge sums into races.

One is Robert M. Bass, a billionaire from Ft. Worth, Tex. Bass and his associates have given Garamendi $54,000 since 1991. Garamendi had lunch with Bass during a fund-raising swing through Texas last week. The amount he came back with will not be known until he files his next campaign finance report.

“He’s hard-working, pragmatic and the kind of guy who is dedicated to economic growth in California. We’ve got business interests, so we’re looking for that kind of leadership,” said Owen Blicksilver, the Bass organization spokesman.

Some actions by a California governor could bear on the Bass group. The governor has five appointees to the Bay Conservation and Development Commission, which oversees development on the shores of San Francisco Bay. The Bass’ California holdings include a stake in Pier 39, a tourist stop at Fisherman’s Wharf in San Francisco. The partnership has been seeking approval from the bay commission to build an underwater aquarium at the site.

Garamendi, 49, took office as California’s first elected insurance commissioner in 1991 and became among the most high-profile statewide officials with his news conferences attacking insurance companies.

The insurance commissioner oversees virtually every aspect of the insurance industry. He rules on requests for rate increases, seizes insolvent insurance companies, handles consumer complaints and cajoles insurers into granting rebates ordered by Proposition 103, the 1988 initiative that made the office of insurance commissioner elective.

Garamendi makes a point of refusing money from the industry he regulates, although given the contempt insurance companies have for him, they would be unlikely to donate much anyway. He has criticized Brown for taking more than $800,000 from investment houses, law firms and other corporations with which she does business as treasurer.

But even as Garamendi refuses insurance company money, he has accepted more than $200,000 from other firms with which his Department of Insurance has dealt, a Times analysis of his campaign finances shows. They include law firms, investment houses, accountants and others over whom he had jurisdiction.

“It’s typical John Garamendi. He says one thing and does another,” said Michael Reese, spokesman for Brown. “That is inconsistent at best, hypocritical at worst.”

Garamendi said his policy is to turn down money from entities he regulates, but added: “The application is hard.”

“I don’t know everyone with whom we may be doing business,” said Garamendi, who agreed to an interview with The Times about his fund raising. “I don’t manage the day-to-day (contribution) policy. It is the general policy, but I’m not going to say it is ironclad.”

(Brown would not discuss her fund raising, referring questions about it to her campaign aides.)

Garamendi recently strengthened the policy. He decided that he would no longer take money from one of his longtime benefactors, the San Francisco-based law firm of Orrick, Herrington & Sutcliffe.

Orrick and its lawyers have given Garamendi at least $33,500 since he took office, and $22,000 to Patty Garamendi during her unsuccessful runs for the Assembly in 1991 and Congress in 1992.

Since 1991, Orrick, Herrington has represented the Department of Insurance in litigation involving the seizure of First Capital Life Insurance Co. Orrick has received $8.7 million in fees for the work.

“I didn’t want the hassle, the questions,” Garamendi said, explaining why he will no longer take Orrick money.

Orrick lawyers say there is no connection between their donations and the work. The firm and its lawyers have given more than $50,000 to Brown, who also has hired the firm to do bond work.

As California state treasurer, Brown oversees billions of dollars in state money. She hires investment houses and outside attorneys to sell state bonds and manage state money.

As insurance commissioner, Garamendi’s portfolio is more modest. Still, it amounts to $242 million, which comes from assets of insolvent insurance firms seized by the Department of Insurance.

Garamendi divides his portfolio among five investment houses, which must bid for the business. One is Wertheim, Schroeder & Co. The New York firm manages $56 million in insurance department money.

Wertheim, Schroeder has given Garamendi $11,000 in campaign contributions since 1992, the year after it began managing insurance department money. One of the firm’s partners is former California Rep. Tony Coelho, whose former San Joaquin Valley district overlapped Garamendi’s when Garamendi was a state senator.

Coelho, who resigned from Congress and relocated to Wall Street in 1989, said he and Garamendi have been “good friends politically for a long time.” When Garamendi appeared in New York at a fund-raiser last April, the former congressman was among the hosts. Garamendi has raised more than $100,000 from his East Coast fund raising, but Coelho takes little credit.

“I didn’t twist any arms,” said Coelho, who was a prodigious fund-raiser when he was in Congress. “He didn’t want me to beat the bushes for him because we are a manager of money of his. He doesn’t want the appearance of conflict.”

Garamendi’s ability to raise money in his race for governor is intertwined in other ways with his work as insurance commissioner. His donors include business people and activists who laud his work as commissioner.

“He has worked and delivered and been there for the AIDS community,” said David Mixner, a gay businessman and influential Democratic activist from West Hollywood.

Mixner, who has given Garamendi at least $1,000 and is trying to raise more, credited Garamendi for being the nation’s first insurance commissioner to set up a task force that focuses on AIDS-related insurance issues.

Garamendi has received $200,000 from physicians and the health care industry since 1991. He and his doctor-donors say the money is a tribute to his plans for health care reform. Reese, Brown’s spokesman, says that they give because they depend on insurance for payment and Garamendi oversees insurance.

It also was as insurance commissioner that Garamendi met one of his biggest benefactors, Maurice Marciano, chairman of Guess? Inc. of Los Angeles.

Marciano was distressed at the runaway cost of workers’ compensation. Concluding that he was a victim of fraudulent claims by some employees, Marciano met with Garamendi in 1991.

Garamendi, who has authority to investigate workers’ compensation fraud, formed an anti-fraud unit. Now, Marciano said, his workers’ compensation costs have been cut by half, and he gives Garamendi much of the credit.

“He showed us he could do something, he could achieve something,” Marciano said. “He understood there was a problem and he really went after it.”

Marciano has shown his appreciation. Since 1991, Guess? has donated $95,000 to Garamendi. When Garamendi asked for more money last year, Marciano wrote out a check for $50,000. It is a loan. If he loses the primary, Garamendi must repay it. If he wins the primary, Marciano said, he will convert it to a donation.

Marciano said he is not looking for favors from the next governor. He said the biggest issue is crime and he is convinced that Garamendi is the candidate who could do the most to make neighborhoods safer.

Guess? also has issues pending before the labor commissioner, an appointee of the governor, over alleged violations of wage and labor laws by its subcontractors. Labor inspectors recently seized a load of jeans because of problems with a subcontractor. Marciano said such actions, coupled with worsening crime, have prompted him to consider moving his operation from California.

In the mathematics of political fund raising, contributions tend to follow a candidate’s standing in the polls.

“A lot of people say that if the race begins to close, I’ll give (Garamendi) some money,” said San Francisco lawyer Duane Garrett, a Democratic activist and a radio talk show host who supports Garamendi.

The gap between Brown and Garamendi remains wide. Garamendi trailed Brown, 39% to 25% in the most recent Times poll. In his private fund-raising pitches, Garamendi talks about other polls that show he would fare better than Brown against incumbent Gov. Pete Wilson--though both Democrats lead Wilson, polls show.

The pitch appealed to Democratic donor Herbert Hafif of Claremont, but not at first. When Garamendi first called last year, Hafif was blunt: “You’re wasting your time, and I don’t think you’re eloquent enough to change me.”

But, Hafif said, Garamendi “hounded” him until he agreed to meet for dinner. The meal was supposed to last an hour. Hafif, an attorney and property manager, stayed until 1 a.m.

Convinced that Garamendi would be a terrific governor, Hafif decided to “send a message” to other would-be donors. The code was fairly simple: a dollar sign followed by six digits. He lent Garamendi $200,000. Hafif said he is uncertain whether he will forgive the loan.

“I size up jurors and witnesses all the time. He has credibility. He can do it,” said Hafif, who once ran for governor as a Democrat against Brown’s brother, Edmund G. (Jerry) Brown. “Ideals without moxie just makes bad plumbing. Here’s a guy who wants to do it and has the moxie.”

With less than two months before the June primary, Garamendi is running hard, volunteering at various jobs around the state for publicity and raising money full time. His aides say he needs another $2 million to $3 million to win--roughly $50,000 a day until June 8.

Garamendi--taking a cue from state Sen. Tom Hayden (D-Santa Monica), who is seeking the nomination on a platform of political reform--vows to make campaign finance reform a “big-time priority” if he wins.

“The system has got to change,” Garamendi said. “How many articles do the newspapers need to write? It is a bankrupt system and it has got to change.”

Garamendi Contributors

John Garamendi has raised less than some of the other major candidates for governor, but some of his contributors have given him large amounts. Following are major donors since 1991 when Garamendi became insurance commissioner:

* Herbert Hafif, a Claremont lawyer and property developer, $203,000, including a $200,000 loan.

* Guess? Inc., Los Angeles garment manufacturer, $145,000, including $50,000 loan.

* Dame Construction, San Ramon-based housing developer, $116,500, including $100,000 loan.

* Martin Harmon, Sacramento-area nursing home developer: $108,000, including $100,000 loan.

* Ron and Janet Burkle, owners of Food 4 Less stores, and employees: $95,500, including $50,000 loan.

* George Marcus, Marcus & Millichap, Palo Alto investment and land company, $93,000, including $70,000 in loans.

* Robert Abernethy, Los Angeles industrial property developer, former adviser to former Mayor Tom Bradley, $75,000, including $50,000 loan.

* Robert M. Bass, Texas oil and investment billionaire with various holdings in California including American Savings Bank, and associates: $54,000.

* Robert Gumbiner, director of Foundation Health Plan, a California health maintenance organization, and various associates of FHP: $44,000.