Wilson Seeks Relief From Ban on Securities Donations : Politics: In quest for the presidency, governor asks to be exempt from federal rule. He cites ‘unlevel playing field.’

As he scrambles to raise the more than $20 million he will need to fuel his presidential campaign, Gov. Pete Wilson has asked regulators to declare him exempt from a rule designed to prevent conflicts of interest and favoritism in the awarding of state and municipal bond contracts.

The rule generally would prohibit securities dealers from handling much of California’s lucrative bond work for two years if they donate to Wilson’s campaign. It was adopted last year amid intense controversy over securities industry campaign contributions to state and local officials and fear that the largess could corrupt the multibillion-dollar municipal bond business.

One major bond industry player, Thomas Weisel, chief executive officer of Montgomery Securities in San Francisco, already is a charter member of Wilson’s fund-raising team.

Now, as it gears up ahead of the governor’s formal announcement, Wilson’s campaign has sought relief from the ban.

“The rule creates an unlevel playing field,” because Wilson, a governor, is restricted in raising money from bond houses while his rivals--senators, members of Congress and private citizens--are allowed to do so, Benjamin Ginsberg, counsel to Wilson’s presidential campaign, said Tuesday. “There were a number of potential supporters of the governor who said, ‘Gee, we’d love to help but our counsel tells us we can’t because of this rule.’ ”

Wilson’s campaign spelled out its request in a letter Monday to the federal Municipal Securities Rulemaking Board, a self-regulating group overseen by the Securities and Exchange Commission. Campaign officials refused to release a copy of their six-page letter but Ginsberg discussed its contents in a lengthy interview.

Before enacting the rule last year, the securities rulemaking board considered precisely the argument that Wilson is now raising--that a state official running for a federal office would be at a disadvantage--and decided that such officials should be covered by the ban anyway. The concern behind the regulation was that if a state official, Wilson in this case, were to fail in his quest for federal office, he would remain in his current job and be in position to favor those who had given him contributions.

There is no evidence that Wilson has favored campaign contributors in that manner in the past. But the issue of potential corruption in the bond business has been a serious concern nationwide. Recently, for example, investigators have been examining whether campaign contributions might have influenced financing decisions that contributed to Orange County’s disastrous bankruptcy late last year.

Wilson’s lawyers made three major arguments in their letter: First, that Wilson should not be covered because he does not have substantial influence over state bond business. Second, that a President has some influence over District of Columbia bond business and, therefore, any presidential candidate should be covered. And third, that federal law regulates campaign finance so thoroughly that the possibility for corruption is minimal and no presidential candidate should be covered.

The politically active securities industry represents potentially fertile fund-raising turf, particularly for the governor of a state as large as California. President George Bush took in nearly $1 million from securities and investment banking firms in 1992. Bill Clinton, then governor of Arkansas, raised $700,000 from these sources.

“These are high-stakes money-in-politics players,” said Ellen Miller, executive director of the Center for Responsive Politics, which tracks the role of money in national politics. “It’s a heavily regulated industry and there’s no question that they (officials in the industry) see this (contributions) as an investment to keep the regulators off their backs or to get what they want.”

The so-called “pay to play” rule stipulates that banks, securities firms and individuals that give or raise more than $250 for any state or local official with influence over municipal bond decisions may not sell bonds from that state or city for two years unless they are bid competitively. Firms or individuals outside the jurisdiction issuing the bonds would face a two-year bar if they contributed or raised any money at all.

In their effort to lift the restrictions applied to them, Wilson campaign officials asked for a series of interpretations that would permit securities firms or individuals to give to the Wilson presidential bid without those consequences.

Wilson’s letter maintains that the rule should not apply to him because the independently elected California state treasurer has most of the authority for awarding bond work. Ginsberg acknowledged that the governor appoints six of 11 members to the California Housing Finance Authority, which issues bonds, but insisted that the chief executive’s clout over who receives these underwriting contracts is “nonexistent.”

“It is a rule designed to deal with the people who have some say over the bond process,” Ginsberg said. “The governor of California really doesn’t have any say over the bond process, at least certainly not in the way envisioned by the rule.”

At the same time, he argued that the President has just as much authority over bond contracts as the governor under a measure signed by President Clinton last month creating a presidentially appointed financial control board to oversee the nearly bankrupt District of Columbia government. The board has the authority to approve bond contracts, Ginsberg said.

Since the rule applies to candidates for offices as well as officeholders, the attorney said that it should cover all presidential hopefuls.

“Gov. Wilson is under something of a handicap because of this rule,” Ginsberg said. “The President of the United States is in the same position. . . . So we have asked the (rulemaking board) to be consistent, essentially.”

The Securities and Exchange Commission, which approved the rule, previously rejected arguments that federal officeholders should be covered “because federal officeholders do not influence the underwriter-selection process.”

Dan Schnur, Wilson’s campaign press secretary, sought to downplay the effect of the rule on the governor’s financial prospects.

“This isn’t the kind of thing that’s going to have a significant impact on our fund raising one way or another but it is a matter that is of concern to some of our supporters,” he said.

Regarding Weisel, who gave $120,800 to Wilson’s 1994 gubernatorial campaign, Schnur said: “Tom Weisel is very well known in California and national political circles. His ability to help the campaign goes well beyond individuals who travel in his professional circles.”

Regulators said that most of the concerns raised in the Wilson campaign letter are not new.

Christopher A. Taylor, executive director of the rule-making board said that the group would “thoroughly review all the issues raised in the letter” at a meeting next week. “But, at first blush, it appears that many of the issues that have been raised have been previously addressed by the board.”

Times staff writers Ronald Brownstein in Washington and Dave Lesher in Sacramento contributed to this story.