Jones’ Stock Spurs Questions

Republican U.S. Senate candidate Bill Jones owns 4.8 million shares in a private Central Valley ethanol company he founded last year that could reap financial benefits under a key element of his campaign platform: increased federal support for alternative fuels.

Jones listed the investment as required in federal financial disclosure forms, but until Thursday did not mention his role as founder and former chairman of Pacific Ethanol Inc. when asking voters to support him and his alternative-energy agenda.

Jones included details of his ethanol investment in a speech Thursday after the Los Angeles Times raised questions about why he did not tell voters of his personal stake in the issue. Senior strategist Sean Walsh said the details had not been included because the campaign did not think it necessary.

The details were added, he said, because “we want to be as upfront as possible regarding his activities.”

Walsh said reporters knew of Jones’ business interests, “but we decided to go the extra step ... and keep everything transparent. We felt it was good to let the audience know.”

Jones told about 70 members of Orange County Republican Women Federated in Garden Grove on Thursday that if elected, he would place his ethanol investments in a blind trust. That would mean, in theory, that he would be unaware of the content of his investments. His son-in-law, however, has a primary role in the ethanol firm.

Walsh said Jones also probably would abstain from votes on ethanol in the Senate and on bills that could affect his farming operations outside Fresno. Omnibus bills on energy and agriculture would be dealt with on a bill-by-bill basis.

Jones, who served 12 years in the state Assembly before his two terms as secretary of state, equated his stance on ethanol with his call for more water for agricultural uses -- even though he is part of a successful Fresno farming family.

“I worked in the ethanol arena last year when I was retired,” said Jones, who began the company three weeks after leaving state government in January 2003. “I’m vested, but I’m no longer involved. But I am proposing and pushing for all alternative fuels ... that will allow us to get loose from this dependence on oil.”

Because Jones does not hold elected office, the overlap of the personal and the political does not yet pose a conflict of interest, political ethics experts said. But it does raise questions about openness.

“He ought to disclose when he gives speeches on it,” said Tracy Westen, vice chairperson of the Center for Governmental Studies, a Los Angeles think tank. “Clearly, his political platform supports his commercial interests.”

Rose Kapolczynski, campaign manager for incumbent Democratic Sen. Barbara Boxer, whom Jones is challenging in November, said Boxer also supports ethanol production as “one answer” to the nation’s reliance on petroleum. But she said Jones’ ethanol investment raises a critical question for voters.

“Whose interest is he looking out for?” Kapolczynski said. “Voters need to consider whether he’s putting personal profit ahead of what’s best for California consumers.”

Kapolczynski said the Bush administration’s energy bill, which Jones supports and Boxer opposes, would be a boon for ethanol producers. The bill would mandate that a minimum of 5 billion gallons of ethanol -- double the current amount -- be added to the nation’s gasoline supply annually by 2012. It also would grant ethanol producers a legal waiver if ethanol had unforeseen environmental effects.

Ethanol, currently derived primarily from corn, can be mixed with gasoline to help it burn more completely, reducing emissions. It is being touted as a replacement for MTBE, which was banned in January as a gasoline additive after it was linked to groundwater contamination.

Critics, though, say ethanol-laced gasoline adds to some emissions that exacerbate ozone creation -- a key component of California’s infamous smog.

Currently, ethanol added to California-sold gasoline is shipped in from the Midwest. Jones’ company hopes to capture most of that market by creating ethanol in the state, reducing transportation costs, and selling the grain byproduct as animal feed.

Jones resigned as the firm’s chairman when he won the Republican primary in March, but held on to his shares in the company.

Westen said personal investments should not preclude a candidate from promoting “a political reform program that would be good for the state.” But, he said, the personal investments should be made clear to voters.

“Otherwise, you don’t know if you’re hearing a pro-ethanol platform for political reasons or commercial reasons,” Westen said.

When asked for details about Jones’ holdings, strategist Walsh pointed out that incumbent Boxer profited on energy stock trades as California was heading into the 2001 energy crisis.

But that scenario differed from what Jones faces because Boxer was not accused of advocating policies that could have rewarded her financially.

She benefited from more than 66 trades in shares of such companies as Duke Energy Corp., Diamond Offshore Drilling Inc., El Paso Energy Corp. and Halliburton, making thousands of dollars in a portfolio her staff estimated then was worth about $1.73 million.

Boxer, who owns the portfolio with her husband, Oakland workers’ compensation lawyer Stewart Boxer, said at the time that an investment advisor made the trades without her knowledge -- and as she was speaking out against the companies in which she had invested. She has since placed the portfolio -- now valued between $1 million and $5 million -- in a blind trust.

Jones’ partnerships in several family farm ventures are worth $650,000 to $1.5 million, according to the broad financial categories included in federal disclosure forms. But most of his wealth -- at least on paper -- comes from his stake in the ethanol business.

Jones began Pacific Ethanol with several Central Valley co-investors after he was termed out of his job as secretary of state in January 2003.

Three weeks later, the firm bought two other ethanol-related companies -- Kinergy Marketing and Re-Energy -- and took in their owners as executives in Pacific Ethanol. The firm bought a grain mill in Madera from the bankrupt Coast Grain Co. processor for $5.1 million and announced that it would begin construction this summer on a $50-million ethanol plant.

Last month, Pacific Ethanol agreed to merge with Accessity Corp., a Florida-based company that is traded on the National Assn. of Securities Dealers Automated Quotations and that operates healthcare services and collects royalties from an auto-collision repair management program.

If the merger is approved by shareholders as anticipated in late July, Accessity’s existing operations will be spun off as part of the severance package for current chief executive Barry Siegel. Accessity then will reincorporate under the Pacific Ethanol name, with Jones’ business partners -- including his son-in-law Ryan Turner -- in charge.

Siegel described the deal as an avenue for the now-private Pacific Ethanol to become a publicly traded company -- essentially buying a corporate structure -- without going through the expense and uncertainty of a public stock offering.

Under the deal, Jones’ 4.8 million shares in Pacific Ethanol would be exchanged for the same number of shares in the new company. Amounting to slightly more than 20% of the new company, the shares would have been worth $28.1 million at the end of trading Thursday.