Huffington Can’t Dodge Tax Questions

A day after California’s recall ballot was set, TV commentator Arianna Huffington attacked rival candidate Arnold Schwarzenegger on Thursday as a “Bush Republican” with ties to the Enron scandal as she juggled questions about her own tax returns.

Schwarzenegger attended commencement ceremonies for an after-school program in Woodland Hills, saying that George Shultz, the secretary of State under President Reagan, will join his campaign team as an economic advisor.

Bill Simon Jr. took his campaign to Palm Springs.

A group of broadcasters announced a Sept. 17 debate in Sacramento in which all of the top-polling candidates will be invited. The roundtable debate will be held on the campus of Cal State Sacramento and broadcast on radio and television.

The California Broadcasters Assn. said that any candidate who receives 10% support or more in the Field Poll, the Public Policy Institute of California poll or the Los Angeles Times Poll before Sept. 5 can participate.

On the legal front, a Sacramento County judge denied a request to delay the vote on Proposition 54, which will appear on the same Oct. 7 ballot as the recall. The initiative would prevent public agencies from collecting and using most kinds of racial and ethnic data.

Lawyers for the Mexican American Legal Defense and Educational Fund argued that rushing the initiative onto the ballot violates state election laws requiring voter information pamphlets to be prepared 100 days before the election.

But Superior Court Judge Lloyd G. Connelly ruled that the state Constitution mandates that the initiative go on the next statewide ballot, even though it violates the election code. The pamphlets will be prepared just 57 days early.

Arianna Huffington

Huffington appeared in a sun-drenched park across the street from the Beverly Hills Hotel on Thursday to raise questions about Schwarzenegger’s connections to former Enron Corp. Chairman Kenneth Lay.

She said Schwarzenegger and the onetime energy titan had met at the hotel in May 2001, in the midst of a California energy crisis fueled by Enron and other companies’ market manipulation.

“Arnold Schwarzenegger has positioned himself as the people’s governor, who is not going to be driven by political interests on either side of the aisle,” she said. “Then what was he doing cozying up with Ken Lay, Mr. Special Interest himself?”

But reporters covering Huffington’s news conference seemed more interested in her tax returns, which showed that she paid just $771 in federal taxes during the last two years. Huffington, a well-known author and TV commentator who lives in a $7-million Brentwood home, has blamed California’s budget crisis partly on special interest groups helping “corporate fat cats get away with not paying their fair share of taxes.”

The Times reported Thursday that Huffington paid so little in taxes because her income was more than offset by large losses she reported from her private corporation, Christabella Inc., which manages her writing and lecturing business.

“Do you have a problem with hypocrisy?” one television reporter shouted.

Responding to the questions, Huffington said: “I have absolutely no problem with my taxes. I’m sure you know there’s a difference between loopholes and tax deductions. They’re a part of our system, they’re perfectly legal and perfectly normal.”

Huffington said Thursday that she also paid $98,000 in property taxes during the same period, as well as more than $50,000 in payroll taxes as an employer.

She insisted the real outrage is Schwarzenegger’s close ties to the Bush White House and his contacts with Lay.

Some consumer advocates said Thursday that they have long been curious about the meeting two years ago between Lay, then-Los Angeles Mayor Richard Riordan, junk bond czar turned philanthropist Michael Milken, Schwarzenegger, and other California business and political leaders.

According to media accounts at the time, Lay presented a four-page plan detailing his solution to California’s energy crisis: more deregulation. He called for consumers to pay the billions of dollars in debt racked up by the state’s public utilities and claimed that the federal investigation into price-gouging by Enron and other firms was worsening the problem.

Two of Enron’s top California electricity traders have since pleaded guilty to federal wire-fraud conspiracy charges, and another trader faces the same charges.

Doug Heller, senior consumer advocate for the Foundation for Taxpayer and Consumer Rights, called on Schwarzenegger to explain his views on energy regulation.

“Deregulation was an unmitigated disaster for California,” Heller said.

Schwarzenegger said later in the day that he did not remember the meeting, but refused to otherwise respond to Huffington’s accusations.

“The important thing is to move forward in a positive way,” he said. “My campaign is a positive campaign that will bring the economy back, that will reduce the budget, that will teach politicians in Sacramento that they can’t spend money we don’t have.”

Arnold Schwarzenegger

Schwarzenegger emerged Thursday afternoon at a graduation ceremony for Arnold’s All-Stars after-school program at Mulholland Middle School in Woodland Hills.

Schwarzenegger praised the sixth-graders for giving up their summer vacations to participate in the program, which offers homework, tutoring in academic subjects, sports, arts, dance, fitness and life skills.

Just hours before the appearance, Schwarzenegger’s press aides distributed a schedule saying that he had no public events Thursday. One press aide told The Times he “had no information” about any Schwarzenegger event -- just minutes before the candidate arrived at the school. But selected media outlets were called early Thursday afternoon and invited to the event.

“We made every attempt to notify the media at the last minute,” Schwarzenegger campaign spokesman Rob Stutzman said later. “This obviously is not a campaign event. It has to do with Arnold’s After-School All Stars.”

While at the school, the actor announced the addition of Shultz to his campaign. It came a day after he said financier Warren Buffett would become an economic advisor.

“Both of them, Secretary Shultz and Warren Buffett, will help me pick a team,” Schwarzenegger said. “We want to put together the best, the greatest and the brightest.... I need as much input as I can from the business leaders, so I can hear what the real problems are out there.”

Bill Simon Jr.

In scorching Palm Desert, where the temperature hovered around 113 degrees Thursday, Simon visited the Sun City retirement community, telling about 50 seniors that the state cannot afford to keep Gov. Gray Davis in office.

“Quite frankly, it’s costing us money to run the state the way Gray Davis is running it,” Simon said.

Reiterating themes he hammered on during his unsuccessful gubernatorial bid last year, the Republican businessman vowed to cut fraud and waste out of government and rein in spending.

He called his message during the 2002 campaign “kind of a harbinger” of the state’s fiscal crisis, saying he warned voters that Davis was mismanaging state finances. “The ideas we talked about turned out to be right,” Simon said.

The Pacific Palisades resident has had back-to-back campaign events since he announced his candidacy last week, trekking up the spine of the Central Valley and hopscotching to the far reaches of the state.

“It’s great to be back out on the campaign trail,” he told the seniors.

“Well, good luck to you, if that’s what you want,” said resident Jill Ruggles, 71.

“I know,” he said with a chuckle, “some people question my sanity.”

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Times staff writers Andrew Blankstein, Michael Finnegan, Jean Guccione, Allison Hoffman, Karima Haynes and Joel Rubin contributed to this report.