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The San Jose Mercury News
Apr 05, 2004 - 01:00 AM

by Dion Nissenbaum, Mercury News Sacramento Bureau

Governor's evolving rules on donors

SOME OK, OTHERS NOT: SCHWARZENEGGER INSISTS HE CAN'T BE BOUGHT
SACRAMENTO - Gov. Arnold Schwarzenegger says he is a new breed of politician, a man who rejects money from special-interest groups and won't let powerful lobbyists run roughshod over Sacramento.

Despite that pledge, the Republican governor has collected millions of dollars from friends, allies and companies with some of the biggest political interests in California.

In the eight months since he declared his candidacy on "The Tonight Show With Jay Leno,'' Schwarzenegger has raised a record-breaking $27 million for himself and his political causes, with nearly one-third of the money coming from 37 individuals or companies that have written six-figure checks.

State records show that money is flowing in from businessmen embroiled in protracted development disputes with the state, insurance companies working to water down consumer-protection laws, a major health maintenance organization regulated by the Schwarzenegger administration and the world's largest pharmaceutical company as it battles proposed laws that would eat into its profits.

Some of the key players -- 11 of whom rank among Forbes magazine's list of the nation's 400 richest individuals -- have helped Schwarzenegger put together his administration and lead the governor's economic-recovery team. Two donors are part of his Cabinet.

They are people with a keen interest in pushing their agenda in Sacramento. The top six-figure Schwarzenegger contributors spent $6.9 million last year on lobbying in the capital -- almost as much as their $7.9 million backing the governor and his causes.

The quiet and growing influence of Schwarzenegger's donors has begun to undermine the governor's image as a principled outsider who has created an impenetrable financial fire wall between himself and the powerful forces looking to steer state policy.

"I don't think that he can argue that he doesn't take special-interest money,'' said Larry Noble, executive director of the Center for Responsive Politics in Washington, D.C. "Politicians always want to appear that they're not coddling up to special interests, but the reason that many of these people are giving is that they want to have their phone calls returned. They want to have a seat at the table when regulation of their industry is discussed.''

Evolving policy
- Some groups OK, others are not


Schwarzenegger has laid out a still-evolving policy in which he rejects money from public-employee unions, Indian tribes, tobacco companies and advocacy groups he defines as special interests, but collects donations from insurance giants, oil companies and developers.

Schwarzenegger concedes that his decision to reject money from some groups but not others is confusing. But the bottom line, he says, is that he is not swayed by donations and that no one -- not friends like Dole Food Co. chairman David H. Murdock, developer Donald Bren or real estate mogul Alex Spanos -- has asked him for a favor.

"In the end I have to feel: Do I feel squeezed now by somebody? Is somebody trying to pay me here? Because everyone in principle knows that I can't be bought,'' said Schwarzenegger.

"You would assume from the stories that you hear that, you know, people pay you and they ask you for favors,'' said the governor. "I've been sitting in with David Murdock at events and Donald Bren going skiing, or with Alex Spanos and those guys, no one yet has come to me and said 'Hey, I need you to help me.' Nothing. Nothing.''

That is not to say that the well-connected executives have been denied a role in shaping Schwarzenegger's campaign and administration.

Schwarzenegger tapped Murdock as an economic adviser during his campaign and lent his celebrity last month to the Dole chairman by appearing at the groundbreaking for his company's new five-star resort near Los Angeles.

As his new agriculture secretary, Schwarzenegger picked Orange County farmer A.G. Kawamura, a member of the New Majority, a political action committee that supports moderate Republicans and has donated nearly $450,000 to Schwarzenegger's campaigns. Schwarzenegger also named friend and financial backer Richard Riordan, the former Los Angeles mayor, as his education secretary.

Another member of the New Majority, high-tech executive Paul Folino, whose firm and its executives are Schwarzenegger's second-largest donor, is on the governor's new job-creation advisory committee.

And Hewlett-Packard's Carly Fiorina, whose company has given Schwarzenegger just over $270,000, helped the governor shape his new administration as a member of his transition team.

Political agendas
- Most donors have specific interests


While the donors might support Schwarzenegger's overarching policies, most of them have specific agendas in -- or special beefs with -- Sacramento:

- Spanos, owner of the San Diego Chargers, has sued San Diego and proposed building a new stadium -- a complex project that could require the state to rewrite redevelopment laws, bless environmental impact reports and build a new freeway off-ramp. Spanos, his companies and their executives top the governor's donor list.

- Spanish-language television owner Jerry Perenchio, a longtime supporter of former Democratic Gov. Gray Davis, has been fighting a long-running battle with the state Coastal Commission over an unauthorized Malibu golf course he built near one of his homes.

- Kaiser Foundation Health Plan, the state's largest managed health care plan, is regulated by the state's pioneering Department of Managed Health Care. The department slapped Kaiser with a record $1 million fine in 2000 for the death of an elderly patient. Kaiser challenged California's right to regulate its patient care, but eventually agreed to pay the fine. Last month, Schwarzenegger appointed a new director to head the 4-year-old department.

- Rancho Mirage developer Tim Blixseth tried for several years to acquire a swath of state property that overlooks his private golf course. His proposal was rejected by state regulators in 2002 because the land is part of a preserve for endangered Bighorn sheep. Blixseth sought to revive the deal last year, but said that he has now given up on the idea.

- Pharmaceutical giant Pfizer is challenging proposed state laws that would allow California to import low-cost prescription drugs from Canada.

- Toyota, Ameriquest, Kaiser and American International Group are all funding a proposed ballot measure that would water down California consumer-protection laws.

In a bid to uphold his image as a clean-cut reformer, Schwarzenegger has created a policy that has created its own set of questions.

Under the rules, Schwarzenegger's committees have accepted money from a trade association representing 135,000 Realtors, but rejected a donation from the advocacy group for 30,000 doctors.

The governor rebuffs contributions from big tobacco firms, but not from alcohol companies. He returned money from a power company looking to revamp its state energy contracts, but cashed a six-figure check from Pacific Gas and Electric Corp., parent company of the bankrupt state-regulated public utility.

Donations from businessmen embroiled in battles with the state Coastal Commission are fine, but not contributions from unions representing state workers facing budget cuts. Checks from workers' compensation insurance companies received before March 2 are OK, while those that came in after the election are not.

By the governor's definition, union firefighters are a special interest, but the world's largest pharmaceutical company is not. The Los Angeles County deputy sheriffs are a special interest, but not ChevronTexaco, America's second-largest oil company.

Special committees
- Unlimited funds are acceptable


Under state campaign-finance laws, donors can give no more than $21,200 to the governor's personal campaign fund. But the governor has created special ballot measure committees that can accept unlimited donations.

And, while Schwarzenegger imposes rules on his main campaign funds, he loosened them to accept money from some of the groups he considers special interests for his successful campaign to pass Propositions 57 and 58, the March 2 bond and budget measures.

Marty Wilson, the governor's chief fundraiser, said the initiative committee co-controlled by Schwarzenegger accepted special-interest money because the governor did not have total oversight. (Democratic Controller Steve Westly was co-chair of the committee.)

That allowed groups like Kaiser, a non-profit barred from supporting partisan agendas, to donate to the governor's ballot measure crusade without running afoul of campaign-finance laws.

Kathleen McKenna, public affairs director for Kaiser, said the health plan supported the initiatives because they were backed by a bipartisan coalition looking to help the state through its budget crisis.

The shifting standards underscore the image problem Schwarzenegger faces as he tries to raise money for his political causes.

Noble, former general counsel for the Federal Election Commission, said Schwarzenegger's rules suggest that the governor recognizes that some money is tainted.

"He tries to get the public to believe that those who give to him want good government and those who gave to his opponent are evil,'' said Noble.

"What he's asking the public to accept is that the alcohol industry is better than the tobacco industry. The reality is that if he was to be consistent and he was going to argue that none of this money affects him -- why not accept money from them all? By making these distinctions, he is saying that some money is good, some money is bad.''

While the policy might be tortured, Schwarzenegger said he is trying to send a message that his door will be open -- whether you have given him money or not.

Schwarzenegger said he wants to make it clear that he does not grant special access to his donors, a charge that bedeviled and derailed his Democratic predecessor. The governor pointed to his decision to return $100,000 from New West Petroleum after he was asked to speak with the company president at a fundraiser about his policy concerns -- an account vehemently denied by the owner.

"I want to make sure that I sit down with everyone, but unconditionally,'' he said. "If someone has not voted for me, if someone has never endorsed me for anything... I still want to be able to sit down with that person the same way as someone who gives you money.''

The economy
- Some donors' goal is turnaround


For some donors backing Schwarzenegger, their stated agenda is to jump-start California's stalled economy -- not curry favor.

Emulex CEO Folino, whose company unsuccessfully sought a state tax break in 2001, said his position as an adviser to the governor on job creation is a chance to help California get back on track.

"I think Arnold is giving myself and others an opportunity to give back to the state just like he's giving back to the state -- all with a common goal of turning this state around,'' he said. "I've never asked Arnold for anything and don't intend to ask Arnold for anything.''
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Mercury News Database Editor Griff Palmer contributed to this report.
Contact Dion Nissenbaum at dnissenbaum@mercurynews.com or (916) 441-4603




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