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Feb 03, 2004 - 12:55 PM

Accounting Fraud

by Doug Heller and Jamie Court
"As Governor I will propose legislation to punish willful and knowing violations of the campaign finance laws as a felony [such as] intentional and knowing money laundering to hide the true source of a contribution," Arnold pledged to voters.

The Gov's various campaign reports filed yesterday are rife with accounting deceptions geared toward hiding the true source of money and evading the state's campaign rules. Those laws are designed to make certain donors know to whom they are giving, the public understands where money comes from, and that committees subject to restrictions are limited in how much money they receive from each donor.

Particularly shady are a series of transfers that emanate from "Arnold Schwarzenegger's Total Recall Committee, Vote Yes to Recall Gray Davis," which received six figure contributions because the committee was not subject to the normal campaign finance limits. From September 2 to November 10, Arnold transferred $1,310,394.33 from this "Total Recall Committee" to the "Californians for Schwarzenegger" campaign fund -- which is subject to a $21,200 per donor limit. Arnold bills these transfers as "Reimbursement of Allocated Expenses," which sounds a lot more like Enron-style accounting than the transparency that he promised. The laundering seems particularly pronounced when you consider that on November 10 insurance giant AIG gave $100K to the "Total Recall" committee -- even though the recall was over a month earlier -- and that same day "Total Recall" transferred $78,766.66 to the "Californians for Schwarzenegger" committee.

Then there's $100,000 paid by "Total Recall" to "California Recovery Team." This transfer is listed as a "civic donation." But the Secretary of State labels the Recovery Team as a "Payment to Influence" entity, meaning it's a lobbying committee. "Total Recall" later gave another $200K to a group called "Schwarzenegger's California Recovery Team," which is primarily organized to work on ballot initiative campaigns. That committee then transferred a million dollars to Governor Schwarzenegger's "Yes on 57 & 58" committee.

Donors to the "Total Recall Committee" -- who were contributing to recall Gray Davis not to fund Arnold's lobbying and pet ballot measures -- were defrauded. Arnold's movement of large sums of campaign cash also undermines voter-approved campaign finance restrictions and the Governor's own promise to do away with money laundering. At very least, Arnold owes the public a better accounting of these transfers. For example, what specific advertisements or other activities did the $1.3 million from Total Recall to Californians for Schwarzenegger "reimburse?" Without such transparency the Governor's office will never get the Gray out.

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