Simon Lends $4 Million to Campaign

SACRAMENTO — With almost no money left to buy television ads, Republican Bill Simon Jr. this week lent $4 million to his campaign for governor, according to the candidate and finance reports filed by his campaign.

The loan could help Simon revive a campaign that has struggled to raise enough to counter a three-month onslaught of attack ads by his Democratic rival, Gov. Gray Davis.

But the money also drew criticism from government ethics watchdogs, who questioned Simon’s decision to supply the $4 million in the form of a loan. If Simon is elected governor, they said, his campaign would probably repay him with money given by donors whose contributions would go directly into the personal fortune of the governor.

“That’s money that goes right into the candidate’s pocket,” said Jim Knox, executive director of California Common Cause. Moreover, Knox said, voters would learn some donors’ names only after the election, when they could contribute to the incumbent to help him pay off his debt to himself.

Simon explained why he lent the money instead of donating it after a speech on energy Wednesday in Sacramento. “It just preserves the possibility of repayment,” he said.

Simon is also awaiting repayment of $5 million that he lent his campaign during the GOP primary. When asked if he might wind up collecting personal loan repayments from donors with an interest in state policy, Simon shifted the focus to Davis.

“When you raise money, you’ve got to be careful, whether it’s a loan or some other capacity, and Gray Davis has shown definitively that there’s a pattern between his fund-raising and his public policy,” Simon said. “I don’t think it has anything to do with whether or not it’s a loan. It has to do with the type of leader you are.”

Nearly every day on the stump, Simon accuses Davis of trading state favors for donations. On Wednesday, he called Davis “shameless” for accepting $25,000 last week from Mercury Insurance Group at a time when the company is seeking his signature on an auto-policy bill passed by the Legislature.

“Is there no end to the brazenness?” Simon asked in a Modesto radio interview.

The decision to lend his campaign the money needed to revitalize its advertising budget subjected Simon to similar criticism, however, as campaign finance experts questioned how and when Simon might be repaid.

“If Simon wins, we won’t know who the contributors are until after the election--and then he puts it in his pocket,” said Robert M. Stern, one of the authors of California’s 1974 Political Reform Act and president of the Center for Governmental Studies, a nonpartisan group that advocates campaign finance reform. “That’s an even worse form of campaign money. He’s benefiting personally.”

A new California law would have capped Simon’s loans at $100,000, but it will not take effect until after the election, Stern said.

Since Simon’s surprise victory in the March 5 primary, he has faced staff turmoil, a fraud verdict against his family investment firm and other stumbles. Although the campaign benefited last week from a judge’s decision to overturn the fraud verdict, it continues to face troubles raising money.

On Wednesday, Simon told reporters that he has been “swamped with calls” from donors since a judge overturned the fraud verdict last week.

Over the weekend, Simon ran a new TV spot with testimonials from President Bush and former New York City Mayor Rudolph W. Giuliani. But the Davis campaign, which has tracked Simon’s ads, found that Simon’s advertising came to an abrupt halt Sunday night--a report undisputed by the Simon campaign.

Davis campaign spokesman Roger Salazar dismissed Simon’s $4-million loan as “enough to keep his campaign on life support for the time being.” Simon, however, described it as “a very significant investment.”

“I think it sends a message to people: we’re going to run a good, strong, credible campaign, from now to Nov. 5,” Simon said.

Simon hammered Davis for his handling of the state energy crisis.

“His reaction was typical of a failed career politician,” said Simon, a first-time candidate. “He sought to blame others for his mistakes.”

Simon said Davis had used out-of-state power suppliers, Bush and federal regulators as “boogeymen” on energy.

Salazar said the governor had stabilized energy markets, brought new power plants on line, fostered conservation and largely avoided blackouts.

“Bill Simon has absolutely no idea what he’s talking about when it comes to energy,” Salazar said.

In his speech to a Sacramento business group, Simon said that reports of market manipulation by power suppliers tell just “a small part of the story.”

“Yeah,” he continued, “it does appear that maybe some power companies may have gamed the system, and I have a strong message for those companies that did: I am a former federal prosecutor who took on corporate wrongdoers. And if you try to rip off California on my watch, you’ll be punished to the fullest extent of the law.”

Simon and his aides also expanded on his earlier proposals to increase the state’s supply of electricity. Aides said he would encourage utilities to sell their power transmission lines to companies more likely to expand capacity.

Simon also proposed creating a nonprofit corporation to oversee the expenditure of roughly $62 million in state money for energy research and development.

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Times staff writer Jeffrey L. Rabin contributed to this report.