Mayoral Rivals Had Tapped Money Flow

Antonio Villaraigosa and Bob Hertzberg, rivals running for mayor of Los Angeles, roomed together when they were in the Assembly and tapped many of the same moneyed interests as they raised $28 million for Democratic campaigns.

As the two have emerged as the top challengers to Mayor James K. Hahn in next week’s election, their fundraising could open them to attack. The mayor’s campaign aides have circulated memos alleging the two former Assembly speakers made decisions to benefit donors.

Hertzberg, a lawyer, and Villaraigosa, a Los Angeles City Council member, said the money they raised did not influence them. And both have attacked Hahn for investigations into whether his administration gave his campaign donors preferential treatment in awarding city contracts.

The two politicians collected hundreds of thousands from moneyed interests with a stake in business before the Legislature. When gambling was a hot topic, campaign committees controlled by Villaraigosa and Hertzberg took five- and six-figure donations from casino interests. When energy issues came to the fore, power companies made hefty donations.

The two lawmakers mined some of the richest veins for Democrats, including trial lawyers and labor unions. And some of their political patrons provided them with paychecks after they left the Legislature.

But their fundraising also reflects differences in their political views. Villaraigosa, the more liberal of the two, brought in more from trial lawyers and teachers unions, while Hertzberg did better with business and Indian tribes pushing to expand gambling.

In the world of Sacramento politics, their fundraising was not unusual. It was, in fact, expected. As speakers, both were the top Democrats in the Assembly and were responsible for ensuring their party had the money to retain control of the 80-seat body.

To finance Democratic campaigns, Hertzberg raised $15.1 million and Villaraigosa $13.3 million. But what is normal in Sacramento is fodder for attack in Los Angeles.

“A significant amount of their fundraising from special interests was not in the interests of the people of Los Angeles,” said Kam Kuwata, an advisor to Hahn.

Villaraigosa and Hertzberg both defend their records.

“Over the years, I’ve raised funds from entities who I voted against -- sometimes repeatedly,” Villaraigosa said. “It is essential that a leader make decisions on public policy without regard to who has contributed.”

“When somebody contributes to my campaign,” Hertzberg said, “I don’t sign on to their agenda. They sign on to mine.”

Both men served six years in the Assembly, and each rose quickly. Villaraigosa was elected in 1994, became speaker in 1998 and held the post until 2000, when Hertzberg took the gavel. Hertzberg, who won his seat in 1996, stepped down as speaker in 2002.

Money was central to their relationship from the start.

Hertzberg was one of the first donors to candidate Villaraigosa -- $1,000 in October 1993, a year before he was elected -- and was Villaraigosa’s first campaign treasurer.

Later, as Villaraigosa ascended to the Assembly leadership, Hertzberg was one of his lieutenants.

And as fundraisers, they often complemented one another.

Villaraigosa took $832,000 from trial lawyers in a four-year period ending in 2000, according to the Civil Justice Assn., a lobbying group that seeks to limit litigation. He endeared himself to the lawyers by backing legislation in 1999 to lift the $250,000 cap on punitive damages in medical malpractice cases. The bill died in the Senate.

Trial lawyers gave Hertzberg a modest amount for a Democratic leader: $161,000. But Hertzberg made up for it elsewhere. He helped create the Democratic Business Political Action Committee, composed of moderates who sided with corporate interests by fighting trial lawyers over efforts to expand the right to sue.

“My view of public policy was to be sensitive to business interests because they produce the tax dollars to pay for all government services,” Hertzberg said.

During Hertzberg’s six years in office, the insurance industry, the main nemesis of trial attorneys, donated $625,000 to his accounts; it gave about $225,000 to Villaraigosa.

Hertzberg was speaker in 2000 when the Assembly held oversight hearings into Northridge earthquake claims. The inquiry pushed Insurance Commissioner Chuck Quackenbush to resign, but largely spared the insurance industry from scrutiny.

“Hertzberg took a balanced approach,” said Dan Dunmoyer, one of the top insurance industry lobbyists in Sacramento, who also said Villaraigosa saw “the world through the eyes of a trial lawyer.”

There were other differences too.

Teachers unions were among Villaraigosa’s major benefactors. United Teachers Los Angeles, which employed Villaraigosa before he won his Assembly seat, gave his campaigns $124,000. The California Teachers Assn., the largest statewide teachers union, donated $338,500.

Hertzberg received far less: $37,000 from Los Angeles teachers and $171,000 from the statewide union.

As a mayoral candidate, Hertzberg has called for breaking up the Los Angeles Unified School District -- an idea opposed by Villaraigosa and the Los Angeles teachers union.

In many instances, donors to both politicians had business before the Legislature.

The California Correctional Peace Officers Assn., which represents prison guards, gave $124,000 to Hertzberg-controlled fundraising committees and $134,000 to Villaraigosa.

Villaraigosa was speaker in 1998 when lawmakers approved an 11% pay increase for the guards. Hertzberg was speaker in 2002 when lawmakers approved a five-year contract, which authorized a raise of up to 37%.

Energy companies also gave to the politicians.

Like nearly all other legislators, Villaraigosa voted for the 1996 legislation that helped deregulate California’s energy market. Committees he controlled accepted $258,000 from power companies, including $18,000 from Enron Corp., the now-bankrupt energy trader blamed for market manipulation that led to shortages in 2000 and 2001.

Villaraigosa was no longer in the Assembly when the energy crisis became apparent. Hertzberg was in the middle of it and worked to keep utilities from going bankrupt. It was a role that angered some consumer activists, who said he was pushing to “bail out” the companies.

Hertzberg took no energy company money in 2001, at the height of the crisis. But earlier, energy firms gave his accounts $330,000. Enron donated $13,000 to his personal campaign accounts and a fund that he controlled.

Hertzberg gave $1,000 back to Enron in 2001 when the corporation began unraveling. “I returned the Enron money when the wrongdoing was discovered,” he said.

After being informed by a Times reporter that he had not returned all the Enron money, Hertzberg sent a check for the remaining $12,000 to a fund for former Enron employees, a campaign aide said.

Hertzberg and Villaraigosa also were in power during legislative and ballot measure battles over the future of gambling in California. Villaraigosa-controlled accounts took $934,000 from gambling sources, including $538,000 from Nevada corporations -- which initially opposed Indian gambling -- and $150,000 from tribes.

Villaraigosa aligned himself with labor, particularly the Hotel Employees and Restaurant Employees International, which hopes to unionize casino workers. The union donated $163,000 to Villaraigosa.

Hertzberg was more closely allied with tribes, including ones that oppose union organizing. Hertzberg and committees that he controlled accepted $418,000 from casino tribes and $187,000 from other gambling interests, including card rooms and racetracks. The hotel workers union gave him $13,500.

Both became entangled in controversy over their efforts on behalf of entrepreneur Horacio Vignali, who was crusading to free his son from prison. He gave $5,794 to Villaraigosa and $1,000 to Hertzberg.

Vignali’s donation became fodder for an attack in Villaraigosa’s 2001 campaign for mayor when it was revealed that he had urged President Clinton to review Vignali’s son’s federal drug conviction.

Hertzberg urged in a 2000 letter that Clinton commute the sentence.

Clinton did so in 2001.

After the attack on Villaraigosa, Hertzberg returned the $1,000. “I work too hard to have any questions about my integrity,” he said.

In some cases, donors who funded Villaraigosa and Hertzberg also paid them after they left the Legislature.

After leaving the Assembly, Hertzberg in 2003 found work as a $5,000-a-month consultant for Fleishman-Hillard, the public relations firm now under investigation over allegations that it overbilled the city of Los Angeles. Fleishman donated $13,500 to Hertzberg and $15,000 to Villaraigosa during their Assembly days.

Hertzberg said Fleishman hired him because he was a “hard worker” who could “marry the world of business and public policy.” He said he attended several Fleishman meetings; others said he did minimal work.

Ameriquest Capital Corp., a target of lawsuits and complaints over its mortgage lending practices, hired Villaraigosa in August 2001 after he left the Assembly.

From 1998 to 2000, Ameriquest gave $75,000 to a Villaraigosa-controlled committee and $53,000 to one run by Hertzberg.

The company paid Villaraigosa at least $10,000 while it worked to blunt proposed consumer legislation in Sacramento and at City Hall.

Villaraigosa said he gave Ameriquest no advice about dealing with the state lawmakers or the Los Angeles City Council.

“I assisted them in strategic thinking and problem solving,” Villaraigosa said. “My strength was not politics. My strength was problem solving.”

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(BEGIN TEXT OF INFOBOX)

Big donors

Bob Hertzberg and Antonio Villaraigosa, candidates for Los Angeles mayor and former assemblymen, raised $28 million primarily for Assembly campaign committees they controlled.

Major interest group donations to:

*--* Villaraigosa Hertzberg Organized labor $1,605,000 $2,014,000 Gambling 934,300 605,300 Trial attorneys 832,000 161,000 Insurance 225,000 625,000 Energy/oil 400,000 453,400 Health care 227,200 392,200 Entertainment 363,600 252,000

*--*

10 biggest donors to Villaraigosa:

1. California Teachers Assn.

Interest: Labor

Amount: $338,500

2. E&J; Gallo

Interest: Agriculture/wine

Amount: $335,000

3. Service Employees International Union

Interest: Labor

Amount: $258,500

4. Walt Disney

Interest: Entertainment

Amount: $190,100

5. California School Employees Assn.

Interest: Labor

Amount: $180,000

6. AT&T;

Interest: Telecommunications

Amount: $170,200

7. Consumer Attorneys of California

Interest: Litigation

Amount: $169,800

8. Hotel Employees & Restaurant Employees International Union

Interest: Labor

Amount: $163,600

9. Circus Circus

Interest: Gambling

Amount: $155,600

10. Ron Burkle

Interest: Investments/retail

Amount: $137,000

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10 biggest donors to Hertzberg:

1. AT&T;

Interest: Telecommunications

Amount: $226,000

2. Service Employees International Union

Interest: Labor

Amount: $217,500

3. California Teachers Assn.

Interest: Labor

Amount: $171,500

4. American Federation of State, County and Municipal Employees

Interest: Labor

Amount: $161,500

5. California Correctional Peace Officers Assn.

Interest: Labor$

Amount: 124,800

6. Mercury General Corp.

Interest: Insurance

Amount: $122,300

7. New Democratic Network

Interest: Ideological

Amount: $115,000

8. Barona Band of Mission Indians

Interest: Gambling

Amount: $111,000

9. Zenith Insurance

Interest: Insurance

Amount: $110,000

10. California State Employees Assn

Interest: Labor

Amount: $109,000

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Notes: Includes donations to the Assembly Democratic fund when each was speaker. The lists of the 10 biggest donors exclude donations from legislators. Time period covered is 1993-2000 for Villaraigosa and 1993-2002 for Hertzberg.

Sources: Campaign finance reports; Civil Justice Assn. of California