Democrats File Complaint Over Wilson’s L.A. Condo : Politics: Rental by nonprofit group violates law, opponents charge. Foundation officials say deal is legal and has saved taxpayers money.


Gov. Pete Wilson’s Democratic opposition is calling it “condo-gate.”

For two years, a private charitable foundation set up by the governor’s friends and supporters has been leasing a $4,000-a-month Century City condominium for Wilson and his wife to use whenever they are in Los Angeles.

Now, in an election year, the California Democratic Party is charging that the deal violates state law--an allegation vehemently denied by foundation officials and the governor’s staff.

The Democrats have filed a complaint with the Fair Political Practices Commission charging that the Wilsons’ use of the condo is a gift from private corporations and violates a $270 limit on gifts to state officials.


Among the donors identified in the foundation’s public filings are Hollywood Park, Bank of America and Southern California Edison--all of which have an interest in legislation that could come before the governor and are regulated by his appointees.

Wilson does not report the free housing on his personal income tax return or on his annual statement of economic interest, which the Democrats contend is required by law. The Democrats also argue that Wilson’s campaign committee illegally transferred more than $20,000 to the foundation despite a prohibition on spending campaign funds for personal use.

State Democratic Party Chairman Bill Press accuses Wilson of being “an outlaw governor” and he calls the two-bedroom, one-story condo in a gated community “a special interest Shangri-La.”

“He deliberately . . . set up this foundation as a means of violating the laws of the state,” Press said in a recent interview.


But officials of the California Governor’s Foundation, which leases the condominium, argue that the lease is a gift to California taxpayers and is legally neither a gift nor income to the Wilsons.

The real beneficiaries of the foundation are the state’s taxpayers, said foundation Chairman John Davies, a San Diego attorney who is a longtime Wilson friend and contributor.

“If we don’t pay for (the governor’s housing in Los Angeles), the state will,” Davies said. “There’s no personal benefit to the governor. . . . The foundation is relieving the taxpayers of payments that they otherwise would have to make.”

Davies, whom Wilson appointed to the University of California Board of Regents, describes the condominium as comfortable rather than posh.

“I would not describe it as plush by any means,” Davies said. “I don’t think it’s excessive at all for a governor of 32 million people. It isn’t Bel-Air and it isn’t Brentwood and it’s not palatial.”

In its complaint, the Democratic Party notes that Davies is also the sole trustee of a blind trust set up by the Wilsons to manage their investments and avoid conflicts of interest. The Democrats say “this cozy, multifaceted relationship” between Davies and Wilson is further proof that the free use of the condominium is a gift to the governor.

The foundation’s lawyer, Vigo G. (Chip) Nielsen Jr., who is also treasurer of a Wilson campaign committee, said he is confident that Press will lose the lawsuit.

“I think he knows that and doesn’t care,” Nielsen said recently. “He got exactly what he wants from this interview and others.”


Nielsen noted that the state Fair Political Practices Commission last year dismissed a Democratic Party complaint against Wilson for using private funds to pay for an official state trade mission to Asia.

However, there are other critics of the leasing arrangement who are not party to the Democrats’ complaints.

California Common Cause has urged the foundation to release the names of all of its donors--not just those of a handful of corporations who contributed $5,000 or more.

“There’s the potential for conflict of interest,” Common Cause lobbyist Melissa Gamer said. The nonprofit group would like to see the state provide living quarters for its governor to avoid the problem, she said.

Nielsen said the foundation board decided voluntarily to publicly identify all contributors of $5,000 or more--information that must also be included on the group’s tax returns but that need not be made public.

To quell criticism that it has kept the complete list of donors secret, the foundation’s board, after a request from The Times, has decided to release the full list of donors.

Davies said that as soon as he has the permission of contributors, he will release the names of about 20 donors who contributed a total of $57,750 to the foundation.

Meanwhile, because of a flurry of news stories this month, the state attorney general’s charitable trust office is reviewing the foundation’s papers looking for any improper spending.


“We screen the newspapers and other services for stories about nonprofit corporations and when we find one, we look at it when it’s in California,” Assistant Atty. Gen. Carole Ann Kornblum said. “This is a very routine review.”

The governor’s defenders say the root of the controversy is that the state’s taxpayers no longer provide the state’s chief executive with a governor’s mansion--forcing a succession of governors to either buy or rent their own lodgings or depend on the kindness of charitable foundations.

The proud Victorian house in downtown Sacramento that was once the official residence of California’s governors became a museum after Nancy Reagan declared it a firetrap and refused to live there.

Instead, then-Gov. Ronald Reagan and his family rented a house a few miles from the Capitol. Some of Reagan’s top political supporters eventually bought the house so it would not be sold from under the state’s first couple, and the same group also raised enough money to buy an 11-acre site in suburban Carmichael to build a mansion.

But by the time the state completed work on the $1.3-million, 17-room official residence, bachelor Edmund G. (Jerry) Brown Jr. had become governor. He dubbed the mansion “a Taj Mahal” and refused to move in, preferring a sparse apartment near the Capitol.

Before Brown left office, the Legislature agreed with the then-governor, and approved legislation selling the Carmichael house.

The incoming governor, George Deukmejian, who owned a home in Long Beach, found himself renting a small apartment in a downtown Sacramento high-rise. Deukmejian’s chief fund-raiser, Los Angeles attorney Karl Samuelian, formed a nonprofit foundation using a sizable surplus from the Deukmejian inauguration to buy the governor a $400,000 house.

Called the Governor’s Residence Foundation, the group promised to make the house available to any governor who wished to use it.

When Wilson was elected governor in 1990, he and his wife sold their Washington home and a Los Angeles condominium and moved into the Sacramento house vacated by the Deukmejians.

Wilson’s supporters set up their own charitable foundation to pay for the upkeep and furnishing of the house and for entertaining dignitaries.

The largest source of income for the foundation was $353,000 in surplus money raised from corporate interests for the Wilson inauguration, records show.

Nielsen said the new Wilson-formed foundation was modeled on the Deukmejian one. Both groups were established as charitable organizations, and contributions could be deducted from donors’ income taxes.

In his second year in office, the governor and his wife, Gayle, found that they were spending a considerable amount of time in Los Angeles--living in hotel rooms for two or three days a week. “They found the condominium and asked the foundation to see if it was willing to pick up expenses (for it) as well, including lease payments,” foundation Chairman Davies said.

The group amended its statement of purpose to provide explicitly for “a leased gubernatorial residence in Southern California.”

Nielsen said the foundation continues to qualify as a charitable foundation and the leased condominium is a gift to the state.

The Internal Revenue Service has ruled that “the fair rental value of the official residence furnished a governor by the state is excludable from the governor’s gross income.”

And in 1983, Gov. Deukmejian obtained an opinion from the IRS saying it did not matter whether the house was owned by a foundation or the state as long as it was an official residence. Nielsen said he relied on that opinion when advising Wilson that he did not have to treat the condominium rent payments as income.

However, the Democrats contend that the condo is not the same as the 3,300-square-foot house in Sacramento. “The mansion is permanent,” Press said. “The condo is only for Wilson’s term.” Wilson’s staff, as well as Davies and Nielsen, deny there is any such distinction.

The foundation has reported receiving $21,312 from the governor’s campaign committee. The Democrats contend that the payment violates a prohibition on the personal use of campaign funds.

But Nielsen said the money represented a repayment of funds inadvertently charged to the foundation that should have been charged instead to the campaign.

He said he is dismayed by the leasing controversy--saying the foundation has saved the taxpayers money for the governor’s legitimate, business-related living expenses.

“You’re damned if you do and damned if you don’t,” he said. “There’s no decision anymore that seems to work.”