Simon Unveils Tax Returns, Limits Access

Bowing to political pressure, Republican Bill Simon Jr. furnished 11 years’ worth of tax returns for limited viewing Monday, hoping to quell a controversy that has come to consume his gubernatorial campaign.

The decision marked an abrupt reversal for Simon, who insisted for months that he had paid a hefty share of taxes but was entitled to keep the details private, even in the high-profile role of GOP standard-bearer.

“I changed my mind because I believe that ... this issue has become a distraction,” Simon, an investment banker and first-time political candidate, said at a news conference in Burbank. “I think for the people of California, it’s necessary to focus the attention on what the issues really ought to be.”

From 1990 to 2000, Simon reported $36 million in income, an average of nearly $3.3 million annually. He paid about $8.6 million in federal income taxes in that period--an average of about $777,000 a year, or just shy of 24% of his income.

The full picture of Simon’s state income tax record was unclear because his California return for 1995 was missing. But from 1990 to 2000--apart from the missing year--Simon paid about $2.4 million in California taxes, an average of 6.7% of his income. In addition, Simon paid about $366,000 in income taxes to other states, about 1% of his income.

A look at Simon’s tax return for 2000--the most recent year available--showed that he paid nearly $2 million in state and federal taxes on a total income of $7.1 million.

Simon requested an extension to file this year’s return but paid $1.5 million in estimated state and federal taxes in April, according to his campaign.

An independent unraveling of the candidate’s convoluted finances was virtually impossible, however, given the time strictures and other limits imposed by the Simon campaign. Shortly after 3 p.m., aides pushing a luggage cart trundled a voluminous collection of documents into a hotel conference room, then handed out a stack of tax returns the size of a thick phone directory.

News organizations wanting to peruse Simon’s tax records were limited to a single reporter each before the campaign lost track and others were allowed into the viewing area. Reporters had to finish their work by 9 p.m.

Professional accountants and others with a more experienced eye were forbidden from seeing the documents, and no copies were allowed to leave the room where they were laid out. “We’re not going to play accountant versus accountant,” said Jeff Flint, a campaign spokesman.

At one point, a reporter was reprimanded for failing to use the blank sheets of paper provided by the Simon campaign, choosing instead to use his own paper.

Despite the restrictions, many Republicans expressed relief at Simon’s agreement to open his tax history to outside scrutiny. The returns went as far back as 1990, the year Simon and his family relocated to California.

Strategists for the Simon campaign had worked behind the scenes for weeks to bring the reluctant candidate around to releasing the documents, increasing the pressure last week as fellow Republicans started publicly voicing their concerns.

It was unclear, however, whether Monday’s disclosure and the viewing restrictions that were placed on reporters would lay the matter to rest.

Over the years, Simon also has filed tax returns in New Mexico, Georgia, Hawaii, Massachusetts, New York and New Jersey, where his family’s investment banking firm is headquartered.

“The campaign has engaged in a self-inflicted slow water torture,” said Arnold Steinberg, a longtime GOP strategist who is unaffiliated with the Simon campaign. “It has backed and filled, seemingly to be dragged kicking and screaming into disclosure.

“Hopefully, they have a strategy and plan to move on,” Steinberg said. “The campaign can no longer afford to wing it.”

The tax issue has plagued Simon for months, ever since Democratic Gov. Gray Davis released his income tax returns and demanded that Simon do the same. “Part of running for governor is making available your tax return so people can see you’re paying your fair share,” Davis said in April.

But Simon rejected the governor’s demand, saying that even public figures deserve “a certain amount of privacy.” Angered by the demand for the release of his returns, Simon compared Davis to Karl Marx and Big Brother.

The matter had largely died down until earlier this month, when the Internal Revenue Service identified Simon as the beneficiary of a possibly illegal tax shelter. Simon said the matter was a dispute between the IRS and his accountants at KPMG. He defended efforts to reduce his tax bill and, as recently as last week, vigorously stated his refusal to make public his tax returns.

Then, about an hour before his campaign opened the viewing window, Simon held a news conference to explain his decision to allow the selective scrutiny. He said he had held back releasing the records mainly to protect the privacy of his brother and five sisters, his partners in the family’s investment banking firm, William E. Simon and Sons.

“In revealing detailed financial information about myself, I’m also actually revealing personal and private detail about my brother and my sisters, as well,” Simon told reporters. “It has troubled me that my decision to run for office has led to the disclosure of much of their personal, private information.”

But Simon said he grew convinced over the weekend that the controversy about his tax history had become “an unnecessary distraction” from more substantive issues that he wished to discuss in the final stretch of the campaign.

“Over the past few months, the issue of my personal tax returns has been the curtain that Gray Davis has hid behind to avoid answering questions about his financial mismanagement of the state,” Simon said. “By revealing my tax records today, we will also clear the way to reveal the record, the failed record, of Gov. Gray Davis.”

Despite his reluctance to release the personal materials, Simon maintained a steadfast smile throughout most of the news conference, held in a hotel ballroom festooned with California and American flags.

But Simon grew testy when asked about the limitations his campaign had imposed on reporters. He gripped the lectern with both hands, his brow furrowing with frustration. “You’ve got plenty of time to take a look at it,” Simon said of the mass of material.

When asked how reporters were supposed to interpret the tax records without the assistance of a tax expert, the candidate snapped: “Well, take notes.”

Asked for details, Simon deferred questions to his financial advisors or, in other instances, said his tax returns would speak for him. He would not name the investment that is the subject of the dispute between KPMG and the IRS, although he denied that it was a tax shelter. He declined to take questions once his tax forms were released.

Court records in the IRS case show that Simon received a confidential legal opinion from KPMG in October 1998. His returns for the tax years 1998, 1999 and 2000 show that Simon reported more than $5.7 million in investment losses that substantially reduced his taxable income.

Since 1990, the returns made available Monday show, Simon has given $2.86 million in donations to charities, both directly and through a private foundation he and his wife, Cynthia, established in 1995. Among the major recipients were Williams College, his alma mater in Williamstown, Mass. He also has been a major donor to United Way in Los Angeles and various Catholic charities, including Saint Monica Parish, where he worships in Santa Monica.

In addition, Simon has given several thousand dollars to foundations that deal with autism and child development, to the Simon Wiesenthal Center in Los Angeles and to organizations that promote the game of squash. He has given lesser amounts to such conservative organizations as the Western Center for Journalism in Sacramento and the Criminal Justice Legal Foundation.

Like Simon, the Davis campaign held its own preemptive news conference. Garry South, chief strategist for the governor, dismissed the tax records sight unseen, calling their release “basically a farce.”

Noting that Simon had sought an extension of the filing deadline for his 2001 tax return, South said it was unlikely that political reporters could “make heads or tails” of the candidate’s tax returns when Simon required a 120-day extension--”with all his accountants”--to have them prepared.

For his part, Davis has made public 15 years’ worth of tax returns and supporting documentation, going back to 1987, the first year he served as state controller.

No law requires candidates or elected officials to release their private tax returns, but it has become a common practice for most seeking high positions. Davis and his wife, Sharon, reported paying more than $55,000 in state and federal taxes on 2001 income of $200,351.

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Times staff writers Matea Gold in Burbank, Jeffrey Rabin in Los Angeles and Dan Morain in Sacramento contributed to this story.